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https://www.courtlistener.com/api/rest/v3/opinions/1617518/ | 623 So. 2d 1156 (1993)
Ganus GRAY
v.
LIBERTY NATIONAL LIFE INSURANCE COMPANY.
1911246.
Supreme Court of Alabama.
July 30, 1993.
*1158 Edward F. Morgan, Tuscaloosa, for appellant.
Scott Donaldson of Donald, Randall, Donald & Hamner, Tuscaloosa, for appellee.
Jack Drake of Drake & Pierce, Tuscaloosa, for amicus curiae Alabama Trial Lawyers Ass'n.
ON APPLICATION FOR REHEARING
STEAGALL, Justice.
This Court's opinion of December 18, 1992, is hereby withdrawn and the following is substituted therefor.
Ganus Gray sued Liberty National Life Insurance Company ("Liberty National"), alleging that the company had fraudulently withdrawn money from his bank account to pay the premiums on a life insurance policy he had not purchased.[1] Gray also alleged claims for conversion, trespass to a bank account, and the tort of outrage. Liberty National filed a motion for summary judgment. After a hearing on the motion, the trial court determined that the fraud claim was barred by the statute of limitations and that Gray had failed to support his conversion and outrage claims with substantial evidence. The court entered a summary judgment for Liberty National on those three claims. The court did not resolve the issue of trespass, but made the summary judgment final pursuant to Rule 54(b), Ala.R.Civ.P. Gray appeals.
A summary judgment is proper and must be affirmed on appeal if there is no genuine issue of material fact and that moving party is entitled to a judgment as a matter of law. Rule 56, Ala.R.Civ.P; Lee v. City of Gadsden, 592 So. 2d 1036 (Ala.1992). If the moving party makes a prima facie showing that no genuine issue of material fact exists, then the burden shifts to the nonmovant to present substantial evidence in support of his position. Lee.
We begin by noting these facts from the record: Gray began buying various insurance policies from Liberty National in 1944. In 1963, Gray authorized Liberty National to draft his bank account in order to pay itself for premiums due on the policies. Gray executed an "Authorization to Honor Checks Drawn By Liberty National Life Insurance Company, Birmingham, Alabama," as well as a "Request for Bank Budget Premium Check Plan." Liberty National thereafter sent a letter to Gray and his bank, notifying them that the company would begin drafting the account for the amount of the premiums. Gray bought additional policies at different times and re-executed the automatic bank draft forms. Liberty National then sent him notice letters to inform him that the authorized drafts would begin. Liberty National thereafter withdrew the amount of the premiums from his account each month by executing a draft instrument for the proper amount. The bank recorded the withdrawal on Gray's bank statement and sent him the separate draft instrument along with his other canceled checks each month.
In 1977, Gray's son Jeffery graduated from high school and began college. During a Christmas vacation, a Liberty National agent talked to Jeffery about life insurance. Jeffery *1159 signed an application for a policy and paid the initial premium to the agent. The agent's report, which he filed along with Jeffery's application, stated that a "Bank Budget Card will be forwarded later."
Neither Jeffery nor his father ever received any documents from Liberty National concerning the policy. In January 1978, however, Liberty National began to withdraw $10.86 from Ganus Gray's bank account each month to pay for Jeffery's policy. Jeffery did not authorize this action, and his father did not know the policy existed. Liberty National did not send a letter of notice to Gray, but continued to withdraw $10.86 per month from his account for the next 12 years, adding this amount to Gray's existing monthly premium of $18.75. Liberty National did not issue a separate draft instrument for the new policy; rather, it merely increased the amount on the single draft instrument by $10.86.
In March 1990, Gray retired from work and stopped all automatic drafts on his bank account. Thereafter, Liberty National sent a letter of notice addressed to Jeffery, informing him that his policy was about to lapse for delinquent premiums and that Liberty National itself had been paying the premiums each month since March under an "automatic loan receipt" provision contained in the policy. In July 1990, Jeffery sent a letter to Liberty National, stating that he had never received the policy he applied for and that he had not authorized payment for the policy through his father's bank account. In response, Liberty National returned his initial premium of $10.86 that he had paid with his application in 1977. The company sent a check to Ganus Gray in the amount of $1,681.35, which represented $1,585.56 in premiums and $95.79 in interest (6%). Gray requested another 6% interest, and Liberty National complied. He thereafter filed this action.
Gray first argues that the trial court erred in determining that his claim for fraudulent misrepresentation was barred by the statute of limitations. At the time the alleged misrepresentation began in 1978, a claim for fraud was subject to a one-year statute of limitations. Ala.Code 1975, former § 6-2-39. Effective January 9, 1985, the Alabama legislature amended § 6-2-3 and repealed § 6-2-39. Lader v. Lowder Realty Better Homes & Gardens, 512 So. 2d 1331 (Ala.1987). This change placed fraud actions within § 6-2-38, which provides for a two-year period of limitations; actions that had been barred as of January 9, 1985, by the one-year statute of limitations were not revived by the transfer of fraud actions to the two-year statute or by the corresponding amendment to § 6-2-3. Lader.
Under § 6-2-3, a fraud claim accrues at the time of the discovery by the aggrieved party of the fact constituting the fraud. Lader. The time of discovery of a fraud claim is the time when the party actually discovered the fraud or had facts that, upon closer examination, would have led to the discovery of the fraud. Lader. "[F]raud is discovered as a matter of law ... when one receives documents that would put one on such notice that the fraud reasonably should be discovered." Hickox v. Stover, 551 So. 2d 259, 262 (Ala.1989).
It is undisputed that Gray received bank statements as early as January 1978 that clearly showed that Liberty National was withdrawing an additional $10.86 per month. He also received copies of the actual draft instrument, showing the increase in the amount of premiums and the number of policies. In March 1978, the increased Liberty National withdrawal actually caused an overdraft of Gray's account, for which he paid a fee to the bank. For the next 12 years, Gray continued to receive detailed bank statements that, upon a cursory examination, would have revealed that Liberty National was withdrawing premiums for an additional policy. He also continued to receive canceled drafts for this amount. The record shows that Gray is literate and that he was capable of managing his affairs throughout this 12-year period. Based on these facts, we must conclude that a reasonable person of ordinary prudence would have discovered the alleged fraud in 1978 or within one year thereafter. Accordingly, we find no error in the trial court's entry of the summary judgment as to this claim, based upon the statute of limitations.
*1160 The next issue raised is whether the trial court erred in entering the summary judgment as to Gray's claim of conversion. To constitute conversion, there must be a wrongful taking, an illegal assumption of ownership, or an illegal use or misuse of another's property. Gillis v. Benefit Trust Life Ins. Co., 601 So. 2d 951 (Ala.1992). An action alleging conversion of cash lies only where the money involved is "earmarked" or is specific money capable of identification, e.g., money in a bag, coins or notes that have been entrusted to the defendant's care, or funds that have otherwise been sequestered, and where there is an obligation to keep intact and deliver this specific money rather than to merely deliver a certain sum. Gillis. In Gillis, this Court determined that money received by use of pre-authorized checks drawn monthly by an insurer against the insured's checking account to cover premiums for a specific insurance policy is "identifiable" for purposes of maintaining a claim for conversion. In view of Gillis, we hold that the money paid on the pre-authorized checks Liberty National drew monthly against Gray's bank account was "identifiable" money; thus, Gray may maintain an action for conversion here. The record reveals substantial evidence to establish the elements of the claim; accordingly, the summary judgment is reversed as to the conversion claim and the cause is remanded for further proceedings on that claim.
Gray next argues that the trial court erred in entering the summary judgment for Liberty National on his claim alleging the tort of outrage. In order to sustain this claim, Gray must establish by substantial evidence that Liberty National, by extreme and outrageous conduct, intentionally or recklessly caused him severe emotional distress. American Road Service Co. v. Inmon, 394 So. 2d 361 (Ala.1980). "Extreme conduct" is defined as "conduct so outrageous in character and so extreme in degree as to go beyond all possible bounds of decency, and to be regarded as atrocious and utterly intolerable in a civilized society." Inmon, 394 So.2d at 365. The extreme conduct must result in emotional distress "so severe that no reasonable person could be expected to endure it." Id. Mere annoyances or indignities are not enough to make a defendant liable for extreme and outrageous conduct. Barrett v. Farmers & Merchants Bank, 451 So. 2d 257 (Ala.1984).
In deposition testimony, representatives of Liberty National testified that the company's withdrawals for Jeffery's policy were made because of an inadvertent mistake and that the company repaid the amount with interest as soon as it discovered the error. Gray produced no substantial evidence to rebut this testimony and to establish that Liberty National's conduct went beyond the bounds of decency. Moreover, Gray did not present substantial evidence to establish that Liberty National's error caused him any extreme emotional distress. In view of this, the trial court properly concluded that Liberty National was entitled to a judgment as a matter of law on the outrage claim.
ORIGINAL OPINION WITHDRAWN; OPINION SUBSTITUTED; APPLICATION GRANTED; AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
MADDOX, ADAMS, HOUSTON, KENNEDY and INGRAM, JJ., concur.
HORNSBY, C.J., and ALMON, J., concur in part and dissent in part.
SHORES, J., recused.
HORNSBY, Chief Justice (concurring in part; dissenting in part).
I concur with the majority's holding that the summary judgment is due to be affirmed as to Gray's outrage claim and reversed as to his conversion claim. However, for two reasons, I must respectfully dissent from the majority's holding affirming the summary judgment as to Gray's fraud claim.
The majority holds that, as a matter of law, Gray's fraud claim is barred by the statute of limitations because "a reasonable person of ordinary prudence would have discovered" Liberty National's allegedly fraudulent acts "in 1978 or within one year thereafter." 623 So.2d at 1159. My initial concern with the majority's analysis is that it ignores *1161 the fact that Liberty National made a separate and distinct unauthorized draft against Gray's checking account each month from February 1978 until March 1990; each of those unauthorized drafts would have given rise to a separate fraud claim. Cf. King Homes, Inc. v. Roberts, 46 Ala.App. 257, 240 So. 2d 679, cert. denied, 286 Ala. 736, 240 So. 2d 689 (1970) (court held that each act of repair gave rise to a separate negligence cause of action). Thus, even if a reasonable person in Gray's position would have discovered the first unauthorized draft, Gray's failure to bring an action within one year of that draft has no effect on his right to commence a fraud action to recover based on unauthorized drafts after February 1978. Section 6-2-38 grants Gray two years from the date of each unauthorized draft made after January 9, 1985, to commence a fraud action thereon. Section 6-2-3, upon which the majority's analysis focuses, is only a "saving clause," serving no purpose when the claimant has commenced his action within two years from the date of the fraud. See Williams v. Mertz, 549 So. 2d 87 (Ala.1989). Therefore, regardless of when Gray discovered, or should have discovered, each unauthorized draft, he is entitled, at the least, to have a jury consider his fraud claim as to those unauthorized drafts that Liberty National made within the two-year period before Gray filed this action on November 14, 1990. See Garrett v. Raytheon Co., 368 So. 2d 516, 521 (Ala.1979) (limiting recovery to the those acts that occurred within the limitations period); see also American Mutual Liability Ins. Co. v. Agricola Furnace Co., 236 Ala. 535, 183 So. 677 (1938); Howell v. City of Dothan, 234 Ala. 158, 174 So. 624 (1937).
Also, in light of the fact that Gray alleges, and supports by evidence, that he had no actual knowledge until August 1990 that a portion of Liberty National's monthly drafts over a 12-year period were unauthorized, I disagree with the majority's determination that, as a matter of law, a reasonable person in Gray's position would have discovered the first unauthorized draft. I believe this determination is a question of fact for the jury.
Section 6-2-3 operates when a fraud action would otherwise be barred under § 6-2-38 and grants that party two years from the time of the discovery of the fact constituting fraud to commence an action. The issue of when a fraud is discovered, for the purpose of the running of the limitations period under § 6-2-3 was discussed at length in the context of a review of a summary judgment in Hicks v. Globe Life & Accident Ins. Co., 584 So. 2d 458 (Ala.1991). Essentially, "the law in Alabama has long been that `[t]he question of when a party discovered or should have discovered fraud which would toll the statute of limitations is for the jury.'" Thompson v. National Health Ins. Co., 549 So. 2d 12, 14 (Ala.1989) (quoting Vandegrift v. Lagrone, 477 So. 2d 292, 295 (Ala.1985)); see Hickox v. Stover, 551 So. 2d 259 (Ala.1989); Deupree v. Butner, 522 So. 2d 242 (Ala.1988); Davis v. Brown, 513 So. 2d 1001 (Ala.1987); Myers v. Geneva Life Ins. Co., 495 So. 2d 532 (Ala. 1986); Elrod v. Ford, 489 So. 2d 534 (Ala. 1986); American Pioneer Life Ins. Co. v. Sandlin, 470 So. 2d 657 (Ala.1985); Thomaston v. Thomaston, 468 So. 2d 116 (Ala.1985); Osborn v. Johns, 468 So. 2d 103 (Ala.1985); Ratledge v. H & W, Inc., 435 So. 2d 7 (Ala. 1983); Ryan v. Charles Townsend Ford, Inc., 409 So. 2d 784 (Ala.1981); Sims v. Lewis, 374 So. 2d 298 (Ala.1979); Cities Service Oil Co. v. Griffin, 357 So. 2d 333 (Ala.1978); Mitchell Homes, Inc. v. Tew, 294 Ala. 515, 319 So. 2d 258 (1975); Loch Ridge Construction Co. v. Barra, 291 Ala. 312, 280 So. 2d 745 (1973); State Security Life Ins. Co. v. Henson, 288 Ala. 497, 262 So. 2d 745 (1972); and Central of Georgia Ry. v. Ramsey, 275 Ala. 7, 151 So. 2d 725 (1962). See, also, Independent Life & Acc. Ins. Co. v. Parker, 470 So. 2d 1289 (Ala.Civ.App.1985); Wilson v. Draper, 406 So. 2d 429 (Ala.Civ.App.1981); Jackson Co. v. Faulkner, 55 Ala.App. 354, 315 So. 2d 591 (1975). Further, "[t]he question of when a plaintiff should have discovered fraud should be taken away from the jury and decided as a matter of law only in cases where the plaintiff actually knew of facts that would put a reasonable person on notice of fraud." Hicks, 584 So.2d at 462. These legal principles support Gray's contention that, under the facts of this case, a jury should determine whether an ordinary person of reasonable prudence in Gray's position should have discovered that Liberty National *1162 was making unauthorized drafts from his checking account.
Gray had 12 policies of insurance with Liberty National over the period 1944 to 1978. In 1963, he executed the first of five agreements with Liberty National authorizing it to automatically draft, by pre-authorized check, money from Gray's checking account to pay itself insurance premiums. Gray had three checking accounts at the same bank, and he alleges that over the years Liberty National's automatic draft power had been transferred from one account to another. On August 29, 1972, Gray executed the last agreement authorizing Liberty National to draft premiums for three different policies of up to $30.00 per month.
For some time before February 1978, Liberty National had drafted $18.75 from Gray's checking account, and Gray had received in his monthly bank statement a canceled pre-authorized check payable to Liberty National for that amount. In February 1978, when Liberty National began drafting $10.86 per month from Gray's account to pay premiums for his son Jeffery Gray's insurance, it did not use a separate pre-authorized check. It merely increased the amount of the draft it was already drawing against Gray's account. Although the majority emphasizes the significance of that $10.86 increase, a jury could find that a reasonably prudent person in Gray's position would have concluded that the increase was authorized.
Liberty National contends that its unauthorized drafts from Gray's account were the result of an inadvertent mistake that it failed to discover for 12 years. I do not understand how the majority can, as a matter of law, charge Gray with discovery of a fact that Liberty National, an insurance company in the business of record keeping, overlooked for 12 years.
For the foregoing reasons, Gray's fraud claim should be submitted to a jury.
ALMON, Justice (concurring in part and dissenting in part).
I agree that the summary judgment is due to be affirmed as to the outrage claim and reversed as to the conversion claim. I dissent from the affirmance of the summary judgment as to the fraud claim. The complaint alleged that Liberty National had fraudulently misrepresented that it was authorized to withdraw funds from Gray's account in March 1990 and in every preceding month for approximately 12 years. This action was filed on November 14, 1990, long before the two-year period of limitations had expired on the last fraudulent acts alleged to have been committed by Liberty National. If for no other reason, the summary judgment on the fraud count should be reversed because of the allegation, supported by the plaintiff's evidence, that Liberty National committed fraudulent acts within the period of limitations.
NOTES
[1] Gray did not sue the bank. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1689957/ | 786 So. 2d 501 (2000)
Joel COBB
v.
UNION CAMP CORPORATION.
2981432.
Court of Civil Appeals of Alabama.
May 19, 2000.
Rehearing Applications Denied July 28, 2000.
Certiorari Denied November 22, 2000[*].
*502 William S. Hereford of Burr & Forman, L.L.P., Birmingham; and P. Richard Hartley of Hartley & Hickman, Greenville, for appellant.
James A. Byram, Jr., Donald R. Jones, Jr., and Marc J. Ayers of Balch & Bingham, L.L.P., Montgomery, for appellee.
Alabama Supreme Court 1992126.
PER CURIAM.
Joel Cobb sued Evergreen Forest Products, Inc. ("Evergreen"); its president, Lanier Edwards; and its vice-president, Charles Thomas, Jr., on December 19, 1996, alleging various theories of recovery, including breach of contract, fraudulent inducement, fraudulent suppression, and promissory fraud. Cobb also sued Union Camp Corporation, asserting claims of conspiracy and tortious interference with a contractual/business relation. He amended his complaint on October 17, 1997, to allege that Evergreen, Edwards, and Thomas were the agents of Union Camp and that Union Camp was liable to him on the claims he asserted against those other parties, under the theory of respondeat superior.
On November 20, 1997, all of the defendants moved for a summary judgment. On November 26, 1997, Cobb amended his *503 complaint, for a second time, to allege an additional claim of conversion against Evergreen. On March 18, 1998, the court set the pending summary-judgment motions for a hearing on May 7, 1998. On June 12, 1998, following the hearing on the motions, Cobb moved, pursuant to Rule 15(a), Ala. R. Civ. P., for leave to amend his complaint for a third time to allege additional claims of breach of contract and fraud against Evergreen and to allege a claim of fraudulent suppression against Union Camp; the court never ruled upon this motion. On February 9, 1999, the court granted Union Camp's motion for a summary judgment and denied the summary-judgment motions of Evergreen, Edwards, and Thomas. Thereafter, on Cobb's motion, the court, pursuant to Rule 54(b), Ala. R. Civ. P., certified as final its judgment as to Union Camp. Cobb appeals. This case was transferred to this court by the supreme court, pursuant to § 12-2-7(6), Ala. Code 1975.
Before April 1993, Rocky Creek Logging Company ("Rocky Creek"), a wholly owned subsidiary of Union Camp, had been responsible for harvesting the 240,000 acres of timber owned by Union Camp in and around Butler County known as "Chapman Forest." Rocky Creek both harvested the timber and transported it to the Union Camp mills. In October 1992, Union Camp decided to close Rocky Creek and offer its assets for sale. Edwards received notice of Union Camp's intent to sell Rocky Creek's assets, and he began negotiating with Union Camp. On April 2, 1993, Evergreen purchased Rocky Creek's assets, including its harvesting and hauling equipment. Evergreen's purchase of the assets involved three written contracts.[1] A "Purchase and Sale Agreement" evidenced Evergreen's purchase from Union Camp of the Rocky Creek assets and equipment. A "Memorandum of Agreement" evidenced Union Camp's agreement to provide Evergreen with at least 60,000 tons of "fee wood" to harvest for a term of one year.[2] A "Wood Supplier and Transportation Agreement" evidenced Evergreen's agreement to sell to Union Camp 60,000 tons of "market wood" and to transport 400,000 tons of wood chips and 60,000 tons of other wood products to various locations designated by Union Camp.[3] The contracts stated that Evergreen is an independent contractor and not an employee or agent of Union Camp. Rocky Creek ceased its operations on April 2, 1993, and Evergreen began its operations on April 3, 1993. The transport and accounting divisions of Evergreen moved into the same building that had been occupied by Rocky Creek on Union Camp property and paid no rent for the use of this building. The harvesting and procurement division of Evergreen moved into a separate building that was not located on Union Camp property. A number of the Rocky Creek employees became employees of Evergreen.
Cobb is an independent professional logger who has been in the logging business for a number of years. In early 1993, Edwards, in anticipation of Evergreen's purchase, approached Cobb about forming a new logging crew to harvest for Evergreen. *504 Cobb claims that he and Edwards ultimately reached an agreement whereby Cobb was to form a new logging crew and purchase new equipment to harvest the Union Camp fee wood. Cobb contends that the agreement he reached with Edwards guaranteed the new logging crew the right to harvest at least 30,000 tons of Union Camp fee wood and an equal amount of quality outside market wood each year for a minimum of four years. Cobb also contends that he specifically told Edwards that he would have to receive that amount of wood for that period in order to finance and pay for the new equipment. Cobb seems to contend that his agreement with Edwards, on behalf of Evergreen, was an oral agreement that had never been reduced to writing. Despite the alleged oral agreement with Edwards, Cobb and Evergreen entered into a number of written agreements executed on May 21, 1993, June 14, 1993, and June 21, 1993, which provided for a one-year term and provided that Evergreen could terminate Cobb's services with 20-day written notice. The agreements also state that Cobb is an independent contractor.
In May 1993, Cobb began harvesting Union Camp fee wood, pursuant to the agreement he had reached with Edwards on behalf of Evergreen. Cobb's logging crew continued to harvest Union Camp fee wood until February 1995, when Paul Schrantz, Union Camp's district manager for Chapman Forest, told Tommy Mosley, an Evergreen forester and procurement officer, to stop using Cobb to cut on Union Camp property. Cobb contends that Union Camp wanted to replace him with another logger who had previously worked for Rocky Creek and Union Camp. Union Camp contends that it was not satisfied with the quality of Cobb's logging. Mosley initially gave Cobb other assignments. Thereafter, Cobb ceased working for Evergreen. The evidence is disputed as to whether Cobb voluntarily ceased working for Evergreen or Evergreen ceased giving Cobb assignments altogether.
In reviewing the disposition of a motion for summary judgment, we use the same standard the trial court used in determining whether the evidence before it presented a genuine issue of material fact and whether the movant was entitled to a judgment as a matter of law. Bussey v. John Deere Co., 531 So. 2d 860, 862 (Ala.1988); Rule 56(c), Ala. R. Civ. P. When the movant makes a prima facie showing that no genuine issue of material fact exists, the burden shifts to the nonmovant to present substantial evidence creating such an issue. Bass v. SouthTrust Bank of Baldwin County, 538 So. 2d 794 (Ala.1989). Evidence is "substantial" if it is of "such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So. 2d 870, 871 (Ala.1989). This court must review the record in a light most favorable to the nonmovant and must resolve all reasonable doubts against the movant. Hanners v. Balfour Guthrie, Inc., 564 So. 2d 412 (Ala.1990).
Cobb argues that the court erred in entering a summary judgment in favor of Union Camp on his claims pursuant to the theory of respondeat superior. Our supreme court has stated that the test to be used to determine whether a defendant may be held liable under the doctrine of respondeat superior
"is whether the alleged employer has reserved the right of control over the means by which the work is done; the test is not the actual exercise of such control. In other words, the defendant must have reserved the right to direct *505 not only what shall be done, but also how it shall be done."
Lankford v. Gulf Lumber Co., 597 So. 2d 1340, 1343 (Ala.1992) (citations omitted); see also Parr v. Champion Int'l Corp., 667 So. 2d 36, 38 (Ala.1995); Wood v. Shell Oil Co., 495 So. 2d 1034 (Ala.1986); Williams v. Tennessee River Pulp & Paper Co., 442 So. 2d 20 (Ala.1983). We note that our supreme court has held:
"`[T]he mere retention of the right to supervise or inspect the work of an independent contractor as the work progresses to ensure compliance with the terms of an agreement does not operate to create a master-servant relationship. There must be a retention of control over the manner in which the work is done, before an agency relationship is created.'"
Lankford, 597 So.2d at 1343, quoting Pugh v. Butler Tel. Co., 512 So. 2d 1317, 1318 (Ala.1987); see also Parr, 667 So.2d at 36; Williams, 442 So.2d at 21. When the evidence is disputed, the question whether there has been a reservation of control is for the trier of fact. City of Birmingham v. Benson, 631 So. 2d 902 (Ala.1993).
In support of his argument that the trial court erred in entering a summary judgment on his claims pursuant to the theory of respondeat superior, Cobb contends that he presented evidence tending to prove that Union Camp controlled the manner in which Evergreen and its loggers worked. The evidence is undisputed that Evergreen's agreements with Union Camp identified Evergreen as an independent contractor and that the agreements that Cobb executed with Evergreen identified Cobb as an independent contractor. However, it is well settled that an agency relationship is determined by the facts of the case and not how the particular parties characterize their relationship. Curry v. Welborn Transport, 678 So. 2d 158 (Ala.Civ.App.1996).
Edwards testified that Union Camp accounts for approximately 90% of Evergreen's revenues and that Evergreen's continued existence is "highly dependent" upon Union Camp. Edwards further stated that Evergreen would do everything that it could within reason to please Union Camp and that he could not think of an instance in which Evergreen had not done anything asked of it by Union Camp. He said that when Evergreen is cutting wood on Union Camp property, Union Camp representatives "are out there every day" directing the details of what is to be done. Edwards testified that Union Camp instructs Evergreen what to do and then Evergreen relays the instructions to the loggers.
It is undisputed that while Cobb was performing logging operations for Evergreen, he cut wood primarily from property owned by Union Camp. Cobb testified that shortly after the logging operation began Shrantz visited him in the woods to provide him with the specifications on how to cut the wood, the size of the wood to cut, how the wood was to be cleaned, and how the wood was to be loaded on the trucks. Shrantz testified that he had visited Cobb in the woods after he began harvesting the wood to provide him with the specifications and to make "sure [Cobb] didn't have any questions about how the wood was supposed to be cut to be delivered to each facility." Cobb stated in his affidavit that on various occasions Mosley would direct him to move his logging operation from tract to tract, to cut in wet weather, and to do other actions inconsistent with normal logging operations. Cobb stated that when he would question Mosley about these directions Mosley would respond that "Union Camp wanted it done this way."
*506 Rhonda Bees, Evergreen's general manager and a former employee of Rocky Creek, testified that Evergreen performs the same function for Union Camp that Rocky Creek performed. Bees testified that Union Camp provides the specifications and instructions on how the wood is to be cut, how the land is to be left, what tract of land is to be cut, what type of wood to cut, and when it is too wet to cut.
Mosley testified that a Union Camp representative is in the woods monitoring the logging operation "all the time" and at least "several times a week." He stated that Union Camp is involved in the whole process of harvesting the wood and that it monitors such things as the loading of the logs onto the trucks, stump height, and stream crossings, and that it directs Evergreen where to build permanent roads, if necessary. Mosley further testified that on one occasion Union Camp requested that Evergreen and Cobb work on a Sunday.
Union Camp relies upon Lankford, supra, and Williams, supra, to argue that it merely retained the right to supervise or inspect the work of Evergreen and Cobb to ensure that the logging was being completed according to specifications and that its land and timber were not being damaged or wasted. The evidence does, in fact, indicate that Union Camp retained the right to supervise and inspect the logging operation to ensure compliance with the specifications. However, when the evidence is taken as a whole and viewed in a light most favorable to Cobb, we conclude that one could infer that Union Camp had reserved a right of control over the manner in which Evergreen and Cobb performed their work. Further, because the evidence was disputed, the question whether there had been a reservation of control was for the jury. Benson, supra. Accordingly, we conclude that the court erred in entering a summary judgment in favor of Union Camp on Cobb's claims pursuant to the doctrine of respondeat superior.
Cobb next argues that the trial court erred in entering a summary judgment in favor of Union Camp on his claim of intentional interference with business relations. The evidence in the record indicates that in February 1995 Schrantz told Mosley not to allow Cobb to cut wood any longer on Union Camp property. Recovery on a claim alleging intentional interference with business relations requires proof of four elements: 1) the existence of a contract or business relation; 2) the defendant's knowledge of the contract or business relation; 3) the defendant's intentional interference with the contract or business relation; and 4) damage to the plaintiff occurring as a result of the defendant's interference. Pakruda v. Cross, 669 So. 2d 907 (Ala.Civ.App.1995). A party to a business relation cannot be held liable for interference with that relation. Bama Budweiser of Montgomery, Inc. v. Anheuser-Busch, Inc., 611 So. 2d 238 (Ala.1992); Williams v. A.L. Williams & Assocs., Inc., 555 So. 2d 121 (Ala.1989).
Although Cobb had contracted with Evergreen, the object of their contract, i.e., the wood to be cut, was provided by and located on Union Camp property. We conclude that Union Camp was an essential party to the business relationship between Evergreen and Cobb and, therefore, cannot be held liable for Cobb's claim of intentional interference with a business relationship. Accordingly, the summary judgment in favor of Union Camp was proper as to Cobb's claim alleging intentional interference with his business relationship with Evergreen.
Cobb next argues that the summary judgment in favor of Union Camp was improper as to his claims alleging *507 fraudulent suppression. The record reflects that the court originally set this case for trial on January 12, 1998. On June 12, 1998, and after the hearing on the summary-judgment motions, Cobb filed his motion for leave to amend the complaint to add a claim alleging fraudulent suppression against Union Camp. Rule 15(a), Ala. R. Civ. P., addresses amendments that are made more than 42 days prior to the date of the initial trial setting. Rule 15(a) provides that parties seeking to amend pleadings after that time must obtain leave of court before filing the amendments, and provides that the court will grant leave to file amendments after that time only upon a showing of good cause. Cobb sought to amend his complaint a full six months after the date of the initial trial setting. The trial court never ruled upon his motion for leave to amend his complaint, and from our review of Cobb's motion for leave to amend his complaint and our review of the record, we conclude that no good cause was established to compel the trial court to grant his motion for leave. See Ex parte Golden, 628 So. 2d 496 (Ala.1993).
Finally, Cobb contends that the trial court erred in entering a summary judgment on his claims alleging conspiracy. Cobb argues that Union Camp and Evergreen conspired to defraud and fire him. "A civil conspiracy requires a combination of two or more individuals to accomplish an unlawful purpose or to accomplish a lawful end by unlawful means." McLemore v. Ford Motor Co., 628 So. 2d 548, 550 (Ala.1993). A conspiracy requires an agreement or meeting of the minds between the conspirators. First Bank of Childersburg v. Florey, 676 So. 2d 324 (Ala. Civ.App.1996). One cannot inadvertently become a member of a conspiracy. Id. Further, the "plaintiff must allege and prove that the claimed conspirators had actual knowledge of, and the intent to bring about, the object of the claimed conspiracy." Id., at 327.
After carefully reviewing the record, we conclude that Cobb failed to present substantial evidence from which one could infer that Union Camp and Evergreen had an agreement or a meeting of the minds to defraud or fire Cobb. Id. Accordingly, we conclude that the court properly entered the summary judgment in favor of Union Camp on Cobb's conspiracy claim.
The judgment, insofar as it related to Cobb's claims on which he sought to hold Union Camp liable under the doctrine of respondeat superior, is reversed. The judgment for Union Camp is otherwise affirmed. The case is remanded for further proceedings.
AFFIRMED IN PART; REVERSED IN PART; AND REMANDED FOR FURTHER PROCEEDINGS.
ROBERTSON, P.J., and YATES and MONROE, JJ., concur.
CRAWLEY and THOMPSON, JJ., concur in part and dissent in part.
CRAWLEY, Judge, concurring in part and dissenting in part.
I agree that the summary judgments on the claims alleging intentional interference with a business relationship, fraudulent suppression, and conspiracy are due to be affirmed. I dissent, however, and I join Judge Thompson's special writing, as to the reversal of two of the three "claims pursuant to the doctrine of respondeat superior": the claim alleging fraudulent inducement and the claim alleging promissory fraud.
On the claim alleging breach of contract, I conclude that the summary judgment was also correct. Cobb could not prevail on the claim alleging a breach of his written contract with Evergreen because that contract contains a termination clause. Cobb could not prevail on a claim alleging *508 a breach of an oral contract with Evergreen because that contract was void under the Statute of Frauds. See § 8-9-2(1), Ala.Code 1975.
THOMPSON, Judge, concurring in part and dissenting in part.
I concur with the majority in its affirmance of the summary judgment on Cobb's claims alleging intentional interference with a business relationship, fraudulent suppression, and conspiracy, but I dissent from its reversal of the summary judgment in favor of Union Camp on Cobb's claims pursuant to the doctrine of respondeat superior.
The record indicates that Union Camp did not compensate Cobb, did not supervise his hours, and did not involve itself in Cobb's hiring and firing of his crew members. Union Camp did not furnish Cobb's equipment or reimburse him for any of his expenses. The only evidence in the record indicating Union Camp had control over Cobb was evidence indicating that it supervised the logging operation to ensure compliance with the terms of its contract with Evergreen.
Although the majority states that the evidence pertaining to Union Camp's control over Cobb was "disputed," the only evidence I could find in the record indicating that Union Camp had reserved a right of control over the manner in which Evergreen and Cobb performed their work was the following statement in Cobb's nine-page affidavit:
"[W]hen Evergreen hired Tommy Mosley, Evergreen's Forester and Procurement Officer, on various occasions he directed me and my crew to change our operations, move around from tract to tract, cut in wet weather and do other actions inconsistent with usual logging operations. When my crew and I questioned Mosley as to why we were required to do these things, he repeatedly told us that Union Camp wanted it done that way. One time, Mosley directed my crew to work on a Sunday which we did despite the fact that we normally did not work on Sundays. Mosley told us that it was Union Camp that wanted us to work on Sunday."
The only facts Cobb alleges to demonstrate that Union Camp had reserved a right of control over Evergreen and Cobb was that Mosley had instructed him not to "cut in wet weather and do other actions inconsistent with usual logging operations" and that once Mosley had directed his crew to work on Sunday. In light of existing precedent, I do not view such vague and conclusory statements sufficient to defeat a properly supported motion for summary judgment. See Riggs v. Bell, 564 So. 2d 882 (Ala.1990).
In Williams v. Tennessee River Pulp & Paper Co., 442 So. 2d 20 (Ala.1983), our supreme court affirmed a summary judgment in favor of the property owner on a claim based on the theory of respondeat superior, holding that evidence that a property owner inspected the tracts being cut and monitored how the trees were cut was insufficient to support an inference that the property owner was controlling the logger's manner of performance. The Williams court pointed out that the property owner had a vested interest in how the timberland was harvested. The Williams court held that the property owner had a right to monitor the timber harvest to ensure that young trees were protected from injury while the mature trees were harvested. 442 So.2d at 21-22. In a more recent decision, the supreme court reached the same conclusion in determining whether a property owner was controlling the manner of the loggers' work when the owner specified the trees to be cut, the height of the stumps remaining after harvest, and the clean-up of the logging site. See Lankford v. Gulf Lumber Co., 597 So. 2d 1340, 1344 (Ala.1992). Affirming *509 the trial court's summary judgment in favor of the property owner on the claim based on the theory of respondeat superior, the Lankford court held the property owner's supervision of the logging to ensure that the operation was being performed in compliance with the terms of its contract did not constitute control of the manner in which the logger performed his job and thus did not give rise to a claim under the theory of respondeat superior. Specifically the Lankford court noted that the property owner did not set the hours for the logger's crews or supervise the hiring and firing of members of those crews; did not provide or maintain the logger's equipment; and did not advise the logger on how to load his truck or haul the wood. 597 So.2d at 1343, 1344.
I conclude that Cobb failed to present sufficient evidence to create a genuine issue of material fact on the question whether Union Camp had reserved a right of control over the manner in which he and Evergreen performed their work. Therefore, I would affirm the judgment of the trial court in its entirety.
CRAWLEY, J., concurs.
NOTES
[*] Note from the reporter of decisions: When this case was released for publication, upon the denial of Cobb's certiorari petition, Union Camp's petition for certiorari review was pending in the Supreme Court. That certiorari petition was granted, and on June 1, 2001 (docket no. 1992122), the Supreme Court reversed the judgment of the Court of Civil Appeals and remanded the case for the Court of Civil Appeals to affirm the summary judgment in favor of Union Camp. As of August 21, 2001, case no. 1992122 was pending on application for rehearing in the Supreme Court.
[1] Evergreen is a "sister" company of Timberland Harvesters Corporation. Timberland Harvesters is a wood dealer that supplies wood to various forest-product companies. Evergreen was formed in order to purchase the assets of Rocky Creek and to service the contracts entered into with Union Camp. Edwards is Evergreen's president and owns 50% of its stock. Thomas is the vice-president of Evergreen and, along with members of his family, owns the remaining 50% of the Evergreen stock. Evergreen did not purchase Rocky Creek as an ongoing concern and did not purchase its stock.
[2] "Fee wood" is wood owned by Union Camp.
[3] "Market wood" is wood from other properties not owned by Union Camp. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1794722/ | 814 So. 2d 203 (2001)
BellSOUTH MOBILITY, INC.
v.
CELLULINK, INC.
Cellulink, Inc., and Eugene Ogletree
v.
BellSouth Mobility, Inc., and BellSouth Cellular National Marketing, Inc.
1990082 and 1990224.
Supreme Court of Alabama.
May 25, 2001.
Rehearing Denied September 7, 2001.
*205 D. Owen Blake, Jr., general counsel, BellSouth Telecommunications, Inc., Birmingham; *206 and John D. Clements, F.A. Flowers III, James E. Fleenor, Jr., and Rebecca W. Block of Burr & Forman, L.L.P., Birmingham, for appellants/cross appellees BellSouth Mobility, Inc., and BellSouth Cellular National Marketing, Inc.
Jere F. White, Jr., Madeline H. Haikala, Ivan B. Cooper, and Kevin E. Clark of Lightfoot, Franklin & White, L.L.C., Birmingham; and Richard A. Freese and Leslie E. McFall of Langston, Frazer, Sweet & Freese, P.A., Birmingham, for appellees/cross appellants Cellulink, Inc., and Eugene Ogletree.
WOODALL, Justice.
BellSouth Mobility, Inc. ("BellSouth"), appeals from a judgment entered on a jury verdict in favor of Cellulink, Inc. (appeal no. 1990082). Cellulink and Eugene Ogletree cross appeal from a judgment entered on that jury verdict and from a summary judgment entered in favor of BellSouth Mobility, Inc. (appeal no. 1990224). As to case 1990224, we affirm, but as to case 1990082, we reverse and remand.[1]
Most of the pertinent facts are undisputed. BellSouth provides cellular telephone service to customers in the southeastern United States. On January 2, 1994, Eugene Ogletree, the owner of Cellulink, executed a document entitled "Authorized Agency Agreement Between BellSouth Mobility, Inc. and Cellulink" (the "Agency Agreement"). Under this agreement, which was to terminate on December 31, 1998, BellSouth appointed Cellulink a "nonexclusive agent of BellSouth to solicit and contract on behalf of BellSouth with Subscribers for [cellular telephone service] in the Area [serviced by BellSouth]."
Pursuant to the Agency Agreement, Ogletree purchased telephone equipment from BellSouth for resale to potential subscribers of BellSouth's cellular telephone service. However, the income that Ogletree received from BellSouth principally consisted of "activation" commissions and "residual compensation." Specifically, BellSouth paid Cellulink a commission for every customer Cellulink persuaded to subscribe to BellSouth's telephone service. Furthermore, for every such subscription that remained active for 150 days, BellSouth paid Cellulink "residual compensation," defined as a percentage "of the amount [BellSouth] bill[ed] that Subscriber for monthly access, airtime usage and service options, excluding insurance, roamer and Equipment charges, taxes and tolls." (Emphasis omitted.)
The Agency Agreement also contained the following pertinent provisions:
*207 "ARTICLE IX QUOTAS
". . . .
"9.2 Establishment and Adjustment of Quotas. [Cellulink's] quota under this Agreement is the enrollment of 875 new [cellular telephone service] Subscribers within any consecutive ninety (90) day period. Established quota represents the minimum acceptable performance level for [Cellulink], but is not intended to be a ceiling on the number of Subscribers that Cellulink can solicit for [BellSouth's cellular telephone service].
". . . .
"9.3. Failure to Meet Quota. If Cellulink fails to meet the quota set forth in Paragraph 9.2 above, as such quota may be adjusted from time to time ..., [BellSouth] may, at its option,
"A. terminate this Agreement pursuant to Subparagraph 22.3(A)(iv); or
"B. (i) issue a warning after the first 90 day violation in any consecutive 365 day period;
"(ii) reduce Cellulink's residual compensation by fifty percent (50%) after the second 90 day violation in any consecutive 365 day period, and
"(iii) terminate the Agreement after the third 90 day violation in any consecutive 365 day period.
"Cellulink's full residual compensation shall be resumed at the beginning of the first full billing cycle after Cellulink attains its quota.
". . . .
"ARTICLE X "AGENT'S SALES FACILITIES
"[Cellulink] agrees that it will sell [cellular telephone service] and Equipment at sales facilities in the [service area] and at such additional or substitute sales facilities which [BellSouth] approves in writing from time to time during the term of this Agreement. Each of [Cellulink's]... sales facilities shall comply at all times during the term thereof with reasonable requirements which may be established by [BellSouth] for showroom and display capacity, appearance, accessibility, and efficiency and shall, at [Cellulink's] expense, display such signage identifying [Cellulink's] ... business as [BellSouth] may reasonably prescribe. [Cellulink] shall submit for approval by [BellSouth] such sales facilities, specifications and renderings of the business facility (or part thereof to be utilized for [Cellulink's] ... business) as [BellSouth] designates, approval of which will not be unreasonably withheld or withdrawn. At a minimum, each sales facility must: be a local facility which is open to the public at least eight (8) hours per day during normal business hours; be leased or owned in [Cellulink's] name; have a telephone with a number listed in the local directory and with directory assistance in [Cellulink's] name; and have at least one full-time cellular sales representative and a full-time support employee.
". . . .
"15.1 Compliance with [BellSouth] Criteria, Laws and Regulations.
". . . .
[Cellulink] shall maintain its business on a sound financial basis and comply with all legal obligations to [BellSouth], to [Cellulink's] employees, suppliers, lenders, lessors, and to federal, state and municipal authorities....
". . . .
"22.3 Termination for Cause.
*208 "A. In addition to other rights of termination set forth in this Agreement, [BellSouth] shall have the right to terminate this Agreement for cause effective upon delivery of notice of termination to [Cellulink], if [Cellulink]...
". . . .
"(iv) fails to meet the quota specified in Article IX hereof, as such quota may be adjusted.
"B. [BellSouth] shall also have the right to terminate this Agreement if [Cellulink]:
"(i) fails to comply with any material provision of this Agreement... and does not correct such failure within thirty (30) days after written notice of such failure ...; or
"(ii) fails on two or more separate occasions within any period of six (6) consecutive months to comply with any material provision of this Agreement, ... whether or not such failures to comply are corrected after notice thereof is delivered to [Cellulink]."
The Agency Agreement also specifically referenced an appended document, described as Appendix B. Appendix B provided in pertinent part: "If [Cellulink] receives Equipment under any [BellSouth] program and invoices are not timely paid, or if [Cellulink] owes [BellSouth] amounts for any other reason, ... [BellSouth] reserves the right to deduct such unpaid amounts from [Cellulink's] compensation."[2]
Additionally, the Agency Agreement provided:
"31.4 Impossibility of Performance. Neither [BellSouth] nor [Cellulink] shall be liable for loss or damage or deemed to be in breach of this Agreement if its failure to perform its obligations results from (1) compliance with any law, ruling, order, regulation, requirement or instruction of any federal, state or municipal government or any department or agency thereof or court of competent jurisdiction; (2) acts of God; (3) acts or omissions of the other party; or (4) fires, strikes, embargoes, war, insurrection or riot. [BellSouth] shall not be liable for loss or damage or be deemed to be in breach of this Agreement if technological changes occur which prohibit [BellSouth] from issuing numbers to Subscribers. Any delay resulting from any of said causes shall extend performance accordingly or excuse performance, in whole or in part, as may be reasonable."
Under the Agency Agreement, Ogletree operated Cellulink stores in the Birmingham area. In doing so, he confined his equipment sales to telephones and related equipment that he purchased from BellSouth.
In 1994, Ogletree began discussing with BellSouth officials a proposal that involved the operation of booths, or "kiosks," in Wal-Mart stores within BellSouth's servicing area for the sale of BellSouth equipment *209 and the solicitation of BellSouth's air-time subscriptions. Those discussions led to the execution of a "Letter Agreement" between Cellulink and BellSouth, dated October 12, 1994. The Letter Agreement evidenced the intent of the parties "with respect to the activation by Cellulink of subscribers to the radio-telephone service of BellSouth Mobility," but, specifically, with respect to "activations of subscribers in the Inverness Wal-Mart,... and up to three other Wal-Mart ... stores to be mutually agreed upon by Cellulink and BellSouth Mobility." (Emphasis added.)
The Letter Agreement expressly authorized Ogletree to sign leases with Wal-Mart. Under the Letter Agreement, BellSouth agreed to supply the "furniture and fixtures" of the kiosk at the Wal-Mart store in Inverness (the "Inverness Wal-Mart"). In an addendum to the Letter Agreement, the furniture and fixtures were valued at $9,750.00. BellSouth was to retain ownership of the furniture and fixtures, which it agreed to lease to Cellulink for $1.00 per year. Additionally, BellSouth agreed to "be responsible for the monthly lease space rental charges owed to the respective Wal-Mart ... in the amount of $1,000.00 per month." Cellulink agreed to execute the lease with Wal-Mart and to "assign the lease to [BellSouth] in the event that Cellulink cease[d] operation at a particular location." BellSouth also agreed to pay Cellulink $28,945.00 for "market development," which included (1) $2,250.00 for "signage," that is, outdoor and indoor banners; (2) a telephone deposit of $600.00; and (3) $3,470.00 in "miscellaneous start-up" expenses, including advertising and stationery. Finally, BellSouth agreed to pay Wal-Mart "10% of the monthly cellular telephone sales activated through BellSouth." The Letter Agreement also specifically noted that it was subject to all the terms and conditions of the Agency Agreement, and that residual compensation would be paid Cellulink "in accordance with the Agency Agreement."
Ogletree did, indeed, execute a lease agreement (the "Lease Agreement") with the Inverness Wal-Mart. The Lease Agreement provided in pertinent part:
"BellSouth Mobility will pay Wal-Mart $1000.00 per month for rent plus 10% commission on cellular telephone retail sales and $5.00 per pager sold. [Cellulink] will need a 60-day grace period from the first day the kiosk is actually operating before implementing this payment structure in order to get the store up and running.
". . . .
"Wal-Mart will agree to a lease term of one year. Either party can cancel this lease agreement with 90 days written notification to the other."
Subsequently, Ogletree installed and operated the kiosk in the Inverness Wal-Mart. Indeed, he eventually executed similar leases for kiosks in three other Wal-Mart stores in the Birmingham area, as contemplated in the Letter Agreement. However, he never installed or operated kiosks in those stores.
Between February 1995 and July 1995, Wal-Mart and ALLTEL Mobile Communications, Inc. ("ALLTEL"), concluded an agreement giving ALLTEL the right to sell cellular telephones and air time in Wal-Mart stores throughout the nation. On July 10, 1995, ALLTEL and BellSouth executed a "Program Facilitator Agreement," whereby BellSouth would "coordinate" the Wal-Mart/ALLTEL agreement in the southeastern United States. Also, to that end, Wal-Mart and BellSouth executed a "Wireless Communication Retail Distribution Agreement" (the "Distribution Agreement") on July 10, 1995, giving *210 BellSouth the right to sell cellular telephone equipment and solicit air-time subscriptions at kiosks in Wal-Mart stores throughout the southeastern United States. The Distribution Agreement required BellSouth to staff the kiosks with its own employees.
Meanwhile, the relationship between BellSouth and Cellulink was becoming strained. In April 1995, the outstanding balance of Cellulink's equipment account with BellSouth exceeded $500,000. That month, BellSouth "froze Cellulink's line of credit," and, for the next few months, deducted from its periodic payments to Cellulink portions of the commissions and residual compensation. In September 1995, after some negotiation between Ogletree and Dan Smith, BellSouth's "Regional Vice-President," BellSouth lifted the credit restrictions and ceased withholding the commissions and residuals.
Two months later, by a letter dated November 14, 1995, Dan Smith, the manager of the Inverness Wal-Mart,[3] served Ogletree, "[u]pon instruction from [ALLTEL]," a "90 day termination notice" of the Lease Agreement. Consequently, Cellulink vacated the kiosk at the Inverness Wal-Mart. BellSouth subsequently staffed the kiosk with its own employees.
On April 2, 1996, Cellulink and Ogletree, individually, sued BellSouth. The complaint as ultimately amended contained counts of (1) breach of contract, (2) fraud, (3) "tortious interference with business or contractual relations," and (4) breach of fiduciary duty. BellSouth's answer to the complaint contained a breach-of-contract counterclaim, seeking payment in the amount of $433,871.00 allegedly due from Cellulink for equipment.
On May 16, 1997, BellSouth addressed a letter to Cellulink, stating: "In accordance with Paragraphs 9.3(A) and 22.3(A)(iv) of the Authorized Agency Agreement between our companies effective January 2, 1994, BellSouth ... hereby elects to terminate the referenced Agreement as of May 16, 1997 due to your company's failure to meet quota." (Emphasis added.)
BellSouth moved for a summary judgment on Cellulink's claims of fraud and breach of fiduciary duty. The trial court granted that motion on November 30, 1998. The summary judgment also eliminated Ogletree's individual claims.
The cause proceeded to trial. At the conclusion of all the evidence, BellSouth challenged the sufficiency of the evidence as to Cellulink's claims of breach of contract and tortious interference in a motion for a judgment as a matter of law, pursuant to Ala.R.Civ.P. 50(a) ("JML"). Cellulink, in turn, moved for a JML on BellSouth's breach-of-contract counterclaim. The trial court denied the motions.
The jury awarded BellSouth $206,909.00 on its counterclaim. However, it awarded Cellulink $34,073.00 on its breach-of-contract claim, and $8,127,500.00 on its tortious-interference claim. Both parties filed post-trial motions. As to the verdict against BellSouth on the tortious-interference claim, BellSouth filed a motion for "Judgment as a Matter of Law; to Alter or Amend the Judgment; or, in the Alternative, for a New Trial, or Remittitur."[4] As to BellSouth's counterclaim, Cellulink renewed its motion for a JML, and moved, in the alternative, for a remittitur or a new trial.
*211 The trial court overruled Cellulink's motion, and overruled BellSouth's motion in part. It separated the general damages award of $8,127,500.00 into compensatory and punitive damages and ordered a remittitur. More specifically, it conditioned the denial of a new trial on Cellulink's agreement to accept a judgment on the tortious interference claim in the amount of $220,000.00 in compensatory damages, and $3,300,000.00 in punitive damages, for a total judgment of $3,554,073.00 ($220,000.00 + $34,073 + $3,300,000 = $3,554,073). Cellulink agreed to the remittitur, while reserving its rightin the event BellSouth appealedto seek reinstatement of the original verdict. BellSouth and Cellulink appealed (appeal no. 1990082) and cross appealed (appeal no. 1990224), respectively. We shall first address BellSouth's appeal.
I. Appeal No. 1990082
BellSouth argues that the trial court erred in denying its motions for a JML on the tortious-interference claim. Cellulink based this claim on the termination of the Lease Agreement it had with Wal-Mart, pursuant to which Cellulink operated its kiosk in the Inverness Wal-Mart store. Cellulink contends that BellSouth interfered, not only with its relationship with the Inverness Wal-Mart store, but with its potential to operate kiosks in some 40 other Wal-Mart stores in BellSouth's service area, including the three Wal-Mart stores with which it had definite lease agreements.
BellSouth presents two arguments in response to these contentions. First, it argues that Wal-Martnot BellSouthterminated the relationship between Cellulink and Wal-Mart. Cellulink concedes that the Lease Agreement was formally terminated by Dan Smith, the manager of the Inverness Wal-Mart, in his November 14, 1995, letter. It contends, however, that BellSouth actually "tricked Wal-Mart into helping BellSouth remove Cellulink from Alabama Wal-Mart stores." Brief of Appellee, at 15 (emphasis added). It did this, Cellulink argues, in order to "eliminate the middle man." By using its own employees rather than Cellulink, Cellulink insists, BellSouth saved for itself the commissions and residual compensation it was paying Cellulink.
In support of this theory, Cellulink directs us to letters and various communications that transpired between representatives of BellSouth and Wal-Mart during the sophisticated negotiations culminating in the nationwide Wal-Mart/ALLTEL contract, and the "Distribution Agreement," which gave BellSouth the right to use its own employees to operate kiosks in Wal-Mart stores. Assuming, arguendo, that Cellulink is correct in this respect, that is, that BellSouth deliberately eliminated Cellulink by proxy, we, nevertheless, cannot conclude that the jury was entitled to consider the tortious interference claim. This is so for the reasons on which BellSouth's second argument is based.
BellSouth argues that it was a party, if not to the Lease Agreement itself, at least to the Cellulink/Wal-Mart business relationship, and, therefore, that it cannot, as a matter of law, be liable for interference with that relationship. Cellulink contends that BellSouth failed to preserve this argument for appellate review. Cellulink bases its "waiver" theory on the assertion that "BellSouth did not suggest that it was a party to Cellulink's relationship with Wal-Mart until after the jury returned a verdict in favor of Cellulink on Cellulink's interference claim." Opening Brief of Cellulink, at 47 (emphasis in original). Further, Cellulink argues:
"Although this Court never has addressed this specific issue, Cellulink respectfully submits that, like the competitor's *212 privilege and the defense of justification, BellSouth's contention that it was a party to Cellulink's relationship with Wal-Mart is an affirmative defense. An affirmative defense is `a matter asserted by the defendant which, assuming the complaint to be true, constitutes a defense to it.' ... When a defendant fails to plead an affirmative defense, `the defense is generally deemed to have been waived.'"
Id. at n. 22 (emphasis added). Because BellSouth's party-to-the-relationship argument was an affirmative defense, Cellulink insists, it was not sufficiently pleaded and proven. We disagree with Cellulink's basic premise, because the fact that a defendant is not a party to the relationship is an element of the plaintiff's tortious-interference claim.
"After proving the existence of a contract, it is essential to a claim of tortious interference with contractual relations that the plaintiff establish that the defendant is a `third party,' i.e., a `stranger' to the contract with which the defendant allegedly interfered." Atlanta Market Ctr. Management Co. v. McLane, 269 Ga. 604, 608, 503 S.E.2d 278, 282 (1998); see also Alcazar Amusement Co. v. Mudd & Colley Amusement Co., 204 Ala. 509, 86 So. 209 (1920). This is so, because "a party to a contract cannot, as a matter of law, be liable for tortious interference with the contract." Lolley v. Howell, 504 So. 2d 253, 255 (Ala.1987).
"One is not a stranger to the contract just because one is not a party to the contract...." McLane, 269 Ga. at 608, 503 S.E.2d at 282 (emphasis added). As we recently stated in Colonial Bank v. Patterson, 788 So. 2d 134 (Ala.2000): "[W]hen tripartite relationships exist and disputes arise between two of the three parties, then a claim alleging interference by the third party that arises from conduct by the third party that is appropriate under its contract with the other two parties is not recognized." See also Electronics Store, Inc. v. Cellco Partnership, 127 Md. App. 385, 732 A.2d 980, 991 (Spec.App.) ("[Plaintiff agent] has not pointed to any factual evidence to show that an independent contract or other legally protected relationship existed" with potential subscribers of the cellular telephone service of the defendant, its principal), cert. denied, 356 Md. 495, 740 A.2d 613 (1999). Because the absence of the defendant's involvement in the business relationship is an element of the plaintiff's tortious-interference claim, we reject Cellulink's contention that BellSouth may not assert that argument on appeal.[5]
"The denial of a defendant's motion for a JML is proper only when the plaintiff has presented substantial evidence to support each element of the plaintiffs claim." Kmart Corp. v. Bassett, 769 So. 2d 282, 284 (Ala.2000); Jefferson County v. *213 Thompson, 766 So. 2d 138, 142 (Ala.1999); Alfa Mut. Ins. Co. v. Roush, 723 So. 2d 1250, 1252 (Ala.1998); Looney v. Davis, 721 So. 2d 152 (Ala.1998). Moreover, "[t]echnical precision is not necessary in stating grounds for the motion so long as the trial court is aware of the movant's position." Pruitt v. Pruitt, 343 So. 2d 495, 500 (Ala.1976) (internal quotations omitted). See also Rockport Pharmacy, Inc. v. Digital Simplistics, Inc., 53 F.3d 195, 197 (8th Cir.1995).
This Court has long recognized that appellate review is preserved by a Rule 50(a) motion "alleg[ing] a lack of evidence" as to each of the plaintiff's claims. Cincinnati Ins. Co. v. Little, 443 So. 2d 891, 893 (Ala. 1983) ("Cincinnati, having directed its motion to each count, therefore properly preserved... alleged errors for appeal"). Thus, in Lawrence v. Lackey, 451 So. 2d 278 (Ala.1984), this Court concluded that a Rule 50(a) motion stating "[t]hat the Plaintiffs have failed to prove a prima facie case of bad faith against the Defendant," preserved for appellate review the denial of the motion as to the bad-faith claim. Id. at 278-79 (emphasis added). See also Browning v. President Riverboat Casino-Missouri, Inc., 139 F.3d 631, 636 (8th Cir. 1998) (defendant in an action alleging race discrimination preserved for appellate review its objection to the imposition of punitive damages by asserting in its JML motion that the evidence was insufficient for a finding of race discrimination).
At the close of Cellulink's evidence, BellSouth moved for a JML on the grounds that the "evidence is insufficient to support [the] plaintiffs alleged claims that the defendants, separately or severally, wrongfully interfered with any business [or contractual] relationship the plaintiff Cellulink, Inc. had with Wal-Mart." At the close of all the evidence, and after trial, BellSouth renewed its JML motion, reiterating these arguments. These arguments challenged the sufficiency of the evidence as to each element of the tortious-interference claim. Consequently, BellSouth has not waived its right to rely on the party-to-the-contract argument as a ground for reversal of the judgment on appeal.
Our review of the tortious-interference claim is guided in particular by Bama Budweiser of Montgomery, Inc. v. Anheuser-Busch, Inc., 611 So. 2d 238, 247 (Ala. 1992). That case involved a dispute between two wholesale beer distributors, Horn Beverage Company, Inc. ("Horn"), and Bama Budweiser of Montgomery, Inc. ("Bama"), over the right to sell products supplied to them by Anheuser-Busch, Inc. Prior to that dispute, there existed between the predecessors of Horn and Bama an "unwritten informal agreement," whereby Horn's predecessor occasionally sold Anheuser-Busch's products in an area that Anheuser-Busch had designated to Bama's predecessor. Id. at 242. Both Horn and Bama neededand received Anheuser-Busch's approval in order to effectuate the contracts for the purchases of the distributorships from their respective predecessors.
After Horn and Bama acquired their distributorships, Anheuser-Busch, at the instance of Horn, formally expanded the sales area it had allotted to Horn to conform to the long-standing oral agreement. Subsequently, Bama sued Anheuser-Busch, alleging that Anheuser-Busch had tortiously interfered with the contract under which Bama purchased its wholesale beer distributorship. The "trial court determined that Anheuser-Busch was a party to [that] contract," and entered a summary judgment in favor of Anheuser-Busch.
This Court affirmed that judgment. In doing so, it stated: "A party to a particular *214 contract cannot, as a matter of law, be liable for tortious interference with that contract." Id. at 247. It particularly noted that the contract under which Bama purchased its wholesale distributorship "required Anheuser-Busch's approval, without which the transfer could not be completed." Id. Moreover, it explained, "[a]bsent Anheuser-Busch's consent and affiliation, neither [Bama] nor [its predecessor] could market or sell Anheuser-Busch products."
This case is analogous to Bama Budweiser in that, absent BellSouth's "affiliation and approval," Cellulink and Wal-Mart could not have consummated the Lease Agreement. In fact, Ogletree conceded at trial that he needed BellSouth's permission to operate kiosks in Wal-Mart. Specifically, he stated:
"Q. [By counsel for Cellulink] Did that [Letter Agreement] deal with anything other than the [Inverness Wal-Mart] store and a couple others that were listed that you wanted to go into?
"A. [Ogletree] This was separate. This was specifically identifying those stores that [BellSouth] agreed to let me go into."
(Reporter's Transcript, at 947-48.) (Emphasis added.) Similarly, the Agency Agreement between Cellulink and BellSouth necessarily made BellSouth a party to every air-time subscription solicited by Cellulink at Wal-Mart. Like the beer distributorships that sold Anheuser-Busch's products, Cellulink sold BellSouth equipment and air time while in Wal-Mart only BellSouth equipment and air time.
In this connection, Cellulink was, under both the Agency Agreement and the Letter Agreement, on the premises of the Inverness Wal-Mart store only by the express permission of BellSouth. Indeed, Article X of the Agency Agreement required BellSouth's written approval for "additional or substitute sales facilities." On the basis of the Letter Agreement, BellSouth owned the kiosk erected in the store, including the furniture and fixtures valued at $9,750.00. BellSouth paid Cellulink for advertising, and paid Wal-Mart commissions in the amount of "10% of the monthly cellular telephone sales [Cellulink] activated" on the premises.
Finally, the Lease Agreement itself expressly defined certain rights and obligations of BellSouth vis-à-vis Wal-Mart. Specifically, it obligated BellSouth to pay Wal-Mart $1,000.00 per month for floor space. Although the Lease Agreement was actually executed by Ogletree, his signatory authority was derived from the Letter Agreement.
The undisputed facts thus compel the conclusion that BellSouth was anything but a stranger to the relationship between Cellulink and Wal-Mart. Consequently, it is immaterial whether, as Cellulink contends, BellSouth played a clandestine role in the negotiations between Wal-Mart and ALLTEL that eventually led to Cellulink's eviction from the Inverness Wal-Mart store. Because of its own rights and duties arising out of (1) the Agency Agreement, (2) the Letter Agreement, and (3) the Lease Agreement, BellSouth had the legal right to terminate Cellulink's relationship with Wal-Mart directly. Clearly, BellSouth could do indirectly what it had the right to do directly. We will not "superimpose on a wrongful-interference claim a requirement of good faith that would compel a party to forgo any reliance on a legal right conferred by the agreement[s] underlying the ... relationship." Patterson, 788 So.2d at 139. Where "[t]he conduct of [the defendant] that [the plaintiff] condemns is specifically allowed by the agreement[s]," the plaintiff, *215 "by characterizing that conduct as conduct taken in bad faith, cannot defeat [the defendant's] right to take that action." Id. "Improper motives cannot transform lawful actions into actionable torts." Texas Beef Cattle Co. v. Green, 921 S.W.2d 203, 211 (Tex.1996). "Whatever a man has a legal right to do, he may do with impunity, regardless of motive, and if in exercising his legal right in a legal way damage results to another, no cause of action arises against him because of a bad motive in exercising the right." Id. (internal quotations omitted).
Under these facts, Cellulink was not entitled to recover on its claim of tortious interference with a business relationship. Consequently, the trial court erred in denying BellSouth's motions for a JML. The judgment entered on the jury verdict against BellSouth is, therefore, reversed.[6] We next address the cross appeal.
II. Appeal No. 1990224
In its cross appeal, Cellulink asks this Court to (1) reinstate the original verdict, (2) reverse the judgment for BellSouth on its breach-of-contract counterclaim, (3) reverse the summary judgment in favor of BellSouth on Cellulink's fraud claims, (4) reverse the summary judgment on the breach-of-fiduciary-duty claim, and (5) reverse the summary judgment on Ogletree's individual claims. We first address the breach-of-contract claim.
A. Breach of Contract
The jury awarded BellSouth $206,909.00 on its counterclaim against Cellulink for payments allegedly due on equipment BellSouth had supplied Cellulink. Cellulink does not dispute the amount that was due, that is, it does not argue that it did not receive equipment for which it failed to pay. It argues only that its performance under the Agency Agreement has been excused or discharged by BellSouth's own conduct.
For that proposition, it relies on the provision in the Agency Agreement purporting to relieve a party from liability "for loss or damage ... if its failure to perform its obligations results from ... acts or omissions of the other party." Cellulink argues that BellSouth's actions, namely, (1) the "freezing" of Cellulink's credit and the withholding of a percentage of Cellulink's commissions and residual compensation for a time in 1995; and (2) the termination of the Agency Agreement before its expiration date for failure to meet its quota, relieved Cellulink of its responsibility to pay BellSouth for equipment it had supplied Cellulink on credit. This is so, Cellulink argues, because BellSouth's actions placed Cellulink in a financial strait.
Significantly, however, Cellulink concedes that these actions were expressly authorized by the Agency Agreement. For example, the termination of the Agency Agreement is expressly authorized by ¶¶ 9.3(A), and 22.3(A)(iv), for failure to "meet quota." It is undisputed that when BellSouth terminated the Agency Agreement more than a year after Cellulink commenced this actionCellulink was not meeting its quota.
Furthermore, the Agency Agreement provided that if Cellulink "receive[d] Equipment ... and invoices [were] not timely paid, or if [Cellulink] owe[d] [BellSouth] amounts for any other reason, ... [BellSouth had] the right to deduct such unpaid amounts from [Cellulink's] compensation." More generally, ¶ 15.1 required Cellulink to "maintain its business on a *216 sound financial basis and comply with all legal obligations to [BellSouth]."
Reduced to its essence, Cellulink's argument is that the performance by one party according to the unambiguous terms of a contract discharges the duty of the other party to perform the unambiguous, reciprocal duties. It cites no legal authority for such a proposition, and we know of none.
Indeed, the settled rules of contract construction compel a contrary conclusion. "It is well settled that where there is uncertainty and ambiguity in a contract, it is the duty of the court to construe the contract so as to express the intent of the parties." Weathers v. Weathers, 508 So. 2d 272, 274 (Ala.Civ.App.1987). If there is any ambiguity in the Agency Agreement, it regards, of course, the intent of the parties as to the effect of the phrase, "acts or omissions of the other party." However, "it is presumed that parties intend to make reasonable contracts"; therefore, "courts will give ambiguous contracts a reasonable construction." Id. (emphasis added).
In ordinary experience, contracting parties do not contemplate that the prescribed performance of one party will excuse the reciprocal performance of the other party. In fact, one party's performance generally shifts, or increases, the burden on the other party, as where the delivery of goods gives rise to a reciprocal duty to pay. Such reciprocity is, however, the essence of contracts, and of the contracting process.
We see nothing in the Agency Agreement suggesting that the parties intended the result urged by Cellulink. The "Impossibility-of-Performance" section on which Cellulink relies also includes factors, such as, acts of God, war, and illegality. These are contract provisions of the most ordinary sort. Considering this paragraph in context counsels against attaching such an extraordinary meaning to the phrase "acts or omissions of the other party" as Cellulink does. We conclude, therefore, that the trial court did not err in denying Cellulink's motion for JML, remittitur, or new trial, on BellSouth's counterclaim. We next address the summary judgment entered in favor of BellSouth on Cellulink's fraud claims.
B. Fraud
"Our standard for reviewing a summary judgment is well settled. A summary judgment is proper if there was no genuine issue of material fact and the movant was entitled to a judgment as a matter of law." Callens v. Jefferson County Nursing Home, 769 So. 2d 273, 278 (Ala.2000). "In determining whether the nonmovant has created a genuine issue of material fact, we apply the `substantial-evidence rule' evidence, to create a genuine issue of material fact, must be `substantial.'" Id. at 278-79. "[S]ubstantial evidence is evidence of such weight and quality that fairminded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assurance Co. of Florida, 547 So. 2d 870, 871 (Ala.1989). What is to be evaluated is that body of evidence that was before the trial court when it entered its summary judgment. Cowen v. M.S. Enters., Inc., 642 So. 2d 453, 454-55 (Ala.1994). In this case, therefore, our review is limited to the evidence that was in the record on November 30, 1998, when this summary judgment was granted.
Cellulink contends that BellSouth committed two species of misrepresentation, namely, (1) fraud, and (2) promissory fraud. We first address the fraud claim.
(1) Fraud
This claim is based on what Cellulink alleges is a misrepresentation that *217 BellSouth was "committed to its agents." Appellee's Reply Brief, at 55. It argues that BellSouth "lied to Ogletree when it stated that it was Cellulink's `partner' and that it was committed to the agency channel." Id. at 52. Ogletree presented an affidavit, in which he defined more precisely the character of this representation. He stated:
"From the time Cellulink became an authorized agent, BellSouth Mobility repeatedly stressed that we were `partners' and that our relationship was a `long term partnership.' Representatives of BellSouth regularly described the relationship both orally and in writing as a `financial partnership.' BellSouth invited our trust and stressed that it was totally committed to the success of Cellulink. In November 1993 I received a letter from Sarah Relfe, Director Sales for BellSouth. In the letter she reiterated statements she made to me orally including that: `BellSouth Mobility is totally committed to our strategic long term partnership.' She went on to say that BellSouth looked forward to `continuing a strong partnership far into the future.' These and similar comments were made throughout our relationship, both before and after I signed the agency agreement."
For the following reasons, such statements as these were not actionable.
A fraud action relating to events that occurred before March 14, 1997, must be based upon (1) a false representation of (2) an existing, material fact, (3) upon which the plaintiff justifiably relied (4) to his damage. Kline v. Resort Inv. Corp., 547 So. 2d 495, 497 (Ala.1989).[7] Consequently, the plaintiff must show that the defendant's statements "were representations of fact and not mere statements of opinion amounting to nothing more than sales talk or `puffery.'" Gable v. Boles, 718 So. 2d 68, 70 (Ala.Civ.App.1998) (emphasis added). "[S]tatements of opinion amounting to nothing more than `puffery' ... are not statements concerning material facts upon which individuals have a right to act and, therefore, will not support a fraud claim." Fincher v. Robinson Brothers Lincoln Mercury, Inc., 583 So. 2d 256, 259 (Ala. 1991). For example, American Pioneer Life Ins. Co. v. Sherrard, 477 So. 2d 287 (Ala.1985), involved a statement by the potential underwriter of an "idea for a combined annuity/mortgage protection policy," that the idea was the underwriter's "number one priority." This Court held that the statement was mere "puffery," and, consequently, would not support a claim of fraud by the plaintiff, who invested in the idea.
Similarly, representations that BellSouth was "committed to its agents" are puffery, and not the types of statement that will support a fraud claim. The trial judge did not err in granting BellSouth's motion for a summary judgment on this claim.
(2) Promissory Fraud
In Howard v. Wolff Broadcasting Corp., 611 So. 2d 307 (Ala.1992), cert. denied, 507 U.S. 1031, 113 S. Ct. 1849, 123 L. Ed. 2d 473 (1993), this Court stated:
"To establish a cause of action for promissory fraud, the plaintiff must prove: (1) that the defendant made a false representation of a material fact; (2) that the false representation was relied upon by the plaintiff; (3) that the plaintiff was damaged as a proximate result of the reliance; (4) that the representation *218 was made with a present intent to deceive; and (5) that when the representation was made the defendant intended not to perform in accordance with it."
Id. at 311. See also Pinyan v. Community Bank, 644 So. 2d 919, 923 (Ala.1994); Capitol Constr. Co. v. Alabama Exterior Supply, Inc., 696 So. 2d 1087, 1090 (Ala. Civ.App.1997). "The burden is on the plaintiff to prove that when the promise was made the defendant intended to deceive." Goodyear Tire & Rubber Co. v. Washington, 719 So. 2d 774, 776 (Ala.1998) (emphasis added).
In support of its promissory-fraud claim, Cellulink states: "Cellulink stated a claim for promissory fraud arising from BellSouth's misrepresentation that Cellulink would be included in a marketing program with Wal-Mart." Brief of Appellee, at 82. However, the only "representation" to which it directs usthat was timely before the trial courtwas an alleged statement by Bob Faught. Faught was BellSouth's "director of consumer sales and marketing." This statement was contained in Ogletree's affidavit, where he stated: "Mr. Faught made clear to me that if BellSouth got into Wal-Mart I would be there too." Just how Faught made the idea "clear" to Cellulink is, however, left to speculation. Its very vagueness precludes independent review of its evidentiary sufficiency. In other words, the statement does not constitute "substantial" evidence of any promise.
In short, Cellulink has directed us to no representation sufficient to support a promissory-fraud claim. Consequently, the trial court did not err in granting a summary judgment on this claim.[8]
In summary, the judgment of the trial court in appeal no. 1990082 is reversed and the cause is remanded for proceedings consistent with this opinion. The judgment in appeal no. 1990224 is affirmed.
1990082REVERSED AND REMANDED.
HOUSTON, SEE, BROWN, HARWOOD, and STUART, JJ., concur.
MOORE, C.J., and LYONS and JOHNSTONE, JJ., dissent.
1990224AFFIRMED.
HOUSTON, SEE, LYONS, BROWN, JOHNSTONE, HARWOOD, and STUART, JJ., concur.
MOORE, C.J., dissents.
LYONS, Justice (concurring in case no. 1990224 and dissenting in case no. 1990082).
In case no. 1990082, the majority reverses the judgment based on a jury verdict in favor of Cellulink and against BellSouth for tortious interference and remands. The majority concludes that Cellulink had the burden of establishing the absence of BellSouth's involvement in the business relationship as an element of its claim for tortious interference. Then the majority finds that BellSouth's preverdict motions for a judgment as a matter of law ("JML") sufficiently stated grounds to support granting those motions and reverses the trial court for failure to grant those motions.
That a party to a contract or relationship cannot be liable for tortious interference with that contract or relationship is well settled under Alabama law. In Harrell v. Reynolds Metals Co., 495 So. 2d 1381, 1387-88 (Ala.1986), this Court held:
*219 "Although the torts of interference with contractual relations (Evans v. Swaim, 245 Ala. 641, 18 So. 2d 400 (1944)), and interference with business relations (Mims v. Citizens Bank of Prattville, 372 So. 2d 311 (Ala.1979)), are recognized under Alabama law, the alleged tortfeasor, by definition, must be independent of, or a third party to, the particular relation. Restatement (Second) of Torts § 766 (1979). It is well settled that a party to the `relation' cannot be held liable for interference with that relation. George A. Davis, Inc. v. Camp Trails Co., 447 F. Supp. 1304, 1309 (E.D.Pa.1978); West v. Troelstrup, 367 So. 2d 253 (Fla.Dist.Ct.App.1979); Continental Casualty Co. v. Mirabile, 52 Md. App. 387, 449 A.2d 1176 (1982)."
The majority rejects Cellulink's argument, based upon Rule 8(c), Ala.R.Civ.P., that BellSouth waived its right to assert that it was a party to the business relationship because BellSouth failed to raise this issue as an affirmative defense and in its answer. If I were writing on a clean slate, I would first analogize the issue whether one is a party to, or a stranger to, a business relationship to the issue of privilege; I would then conclude that it is more appropriately treated as an affirmative defense. The majority cites Atlanta Market Center Management Co. v. McLane, 269 Ga. 604, 608, 503 S.E.2d 278, 282 (1998), to support its conclusion that the plaintiff has the burden to establish that the defendant is a "third party" or a "stranger" to the contract with which the defendant has allegedly interfered. In NationsBank, N.A. v. SouthTrust Bank of Georgia, N.A., 226 Ga.App. 888, 487 S.E.2d 701 (1997), the Georgia Court of Appeals dealt with the question whether a bank was a stranger to a relationship involved in an action alleging tortious interference by the bank. In concluding that a relationship existed and that that relationship established a privilege, the Georgia court stated:
"`The particular privilege applicable here is the protection of the speaker's interest under OCGA § 51-5-7(3). This privilege, while primarily applicable to claims of libel or slander, may also be asserted as a defense to a claim for tortious interference with contractual relations. See Kitchen Hardware [Ltd. v. Kuehne & Nagel, Inc., 205 Ga.App. 94, 97(3), 421 S.E.2d 550 (1992)]. "[S]tatements made with a good faith intent on the part of the speaker to protect his interest in a matter in which he is concerned are privileged. OCGA § 51-5-7(3)." Id. at 96 [421 S.E.2d at 550].'"
226 Ga.App. at 892, 487 S.E.2d at 706 (quoting Choice Hotels Int'l, Inc. v. Ocmulgee Fields, Inc., 222 Ga.App. 185, 188, 474 S.E.2d 56, 59 (1996)). The Georgia statute (OCGA § 51-5-7(3)) applicable in defamation cases and found by the Georgia Court of Appeals in Kitchen Hardware to be analogous to issues as to status as a stranger vel non in tortious-interference cases deals specifically with the privilege available for statements made in protection of the speaker's interest. A defendant in a tortious-interference action who claims that any actions taken or statements made should not be the basis for liability because of that defendant's relationship to the matter made the basis of the plaintiff's complaint essentially asserts a defense of privilege or justification.
Our defamation cases have consistently recognized that the defense of privilege is an affirmative defense. See, e.g., Ex parte Blue Cross & Blue Shield of Alabama, 773 So. 2d 475 (Ala.2000). However, as earlier noted, we are not writing on a clean slate.
"[In Georgia, i]n order to prevail on a claim alleging tortious interference with contract, a plaintiff must establish the existence of a valid contract and that the *220 defendant acted intentionally, without privilege or legal justification, to induce another not to enter into or continue a business relationship with the plaintiff, thereby causing the plaintiff financial injury."
Atlanta Market Ctr., 269 Ga. at 608, 503 S.E.2d at 282 (emphasis added). Placing the burden on the plaintiff to demonstrate the absence of privilege or legal justification justifies the conclusion of the Georgia court in Atlanta Market Center, relied upon by the majority, that the plaintiff, as an element of its case, must establish that the defendant is a "third party" or a "stranger" to the contract.
The solution to this issue of appropriate treatment of the burden of proof would be simple if our caselaw consistently adhered to the same rule. However, in Century 21 Academy Realty, Inc. v. Breland, 571 So. 2d 296 (Ala.1990), Justice Houston, writing for a unanimous Court, stated:
"We note that in the past we have listed an absence of justification for the defendant's interference as one of the elements of the plaintiffs cause of action; however, we recognize today that it is illogical to continue to list an absence of justification as one of the elements of the plaintiff's cause of action and then to place the burden on the defendant to disprove it."
571 So.2d at 298 (emphasis added). Unfortunately, subsequent cases have continued to describe the plaintiffs burden of proof in an action for tortious interference without acknowledging the modification of the rule in Century 21 Academy Realty. See, e.g., Colonial Bank v. Patterson, 788 So. 2d 134 (Ala.2000), for which I must take responsibility, and Soap Co. v. Ecolab, Inc., 646 So. 2d 1366, 1370-71 (Ala.1994), where absence of justification again appears as an element of the plaintiffs cause of action, without reference to the rule announced in Century 21 Academy Realty. While I believe that Century 21 Academy Realty states the better and more sensible rule, given the confused state of our precedent it would be unjust to penalize BellSouth for not complying with it. I therefore concur with the majority's conclusion, albeit on different grounds, that BellSouth did not, by failing to include the defense in its answer, waive the right to insist that it was not liable because it was not a stranger to the relationship.
Before BellSouth can obtain a reversal of the judgment against it and a JML in its favor, it must have complied with Rule 50, requiring preverdict and postverdict motions for a JML. King Mines Resort, Inc. v. Malachi Mining & Minerals, Inc., 518 So. 2d 714 (Ala.1987). Rule 50(a)(2) provides that "[s]uch a motion [for a JML] shall specify the judgment sought and the law and the facts on which the moving party is entitled to the judgment." The majority relies upon Cincinnati Insurance Co. v. Little, 443 So. 2d 891 (Ala.1983), where this Court found the motion for directed verdict (now JML) to be sufficient. This Court there described the motion as one that "alleged a lack of evidence." 443 So.2d at 893. The majority refers to that description as if it were all the motion stated and, based on the supposition that that was all it stated, concludes that a motion merely "alleging a lack of evidence" is sufficient. 815 So.2d at 213. However, in Cincinnati Insurance this Court was only characterizing the motion and not quoting from it verbatim when it stated that "[t]he motion alleged a lack of evidence on plaintiff's claims for breach of contract, fraud, and bad faith refusal to pay." 443 So.2d at 893. For all that appears, this statement was merely a summary of a more detailed motion. The Court's merely giving a shorthand rendition was justified based upon the following *221 statement of the applicable law in Cincinnati Insurance, where the Court also stated:
"Under Alabama law:
"`[I]f a complaint has more than one count and the defendant believes that the evidence is not sufficient to support one or more of those counts, he must challenge this by motion for directed verdict, specifying the count which is not supported by evidence and detailing with specificity the grounds upon which the particular count is not supported by the evidence. If this is not done and all counts go to the jury and a general verdict is returned, the court will presume that the verdict was returned on a valid count.' Aspinwall v. Gowens, 405 So. 2d 134, 138 (Ala.1981)."
Id. (emphasis added).
The majority also relies upon Pruitt v. Pruitt, 343 So. 2d 495 (Ala.1976), for the proposition that "`[t]echnical precision is not necessary in stating grounds for the motion so long as the trial court is aware of the movant's position.'" 343 So.2d at 500 (quoting United States v. Fenix & Scisson, Inc., 360 F.2d 260, 266 (10th Cir. 1966)). This early case dealt with the question whether an affirmative charge was sufficient, and it did not discuss the grounds-stating requirements of Rule 50(a)(1). Moreover, its holding should be confined to instances where the trial court's awareness of the movant's position cannot be fairly questioned.
In Ott v. Fox, 362 So. 2d 836 (Ala.1978), this Court held that where the defendant's motion for a directed verdict at the close of the plaintiff's case and, upon renewal at the close of all the evidence, fails to state as a ground therefor any contention having to do with absence of proof on a specific issue, the issue as to lack of such evidence is considered to have been waived. Later, in Perdue v. Gates, 403 So. 2d 165 (Ala. 1981), this Court embraced the liberal rule of federal cases as to what constitutes a motion for a directed verdict and treated a requested jury instruction to the effect that the jury must find for the defendant as the equivalent of renewal of the motion for directed verdict at the conclusion of the evidence. However, in Perdue, the defendants had previously moved unsuccessfully for summary judgments and, at the close of the plaintiff's evidence, had orally moved for a directed verdict. These repeated arguments against the sufficiency of the evidence justified accepting the request for an affirmative charge without hypothesis as being the equivalent of a renewal of the previous oral motion.
The record here reflects that BellSouth did not contend that it was a party to Cellulink's relationship with Wal-Mart, either in its answer, in its motion for summary judgment, in its requested jury instructions, in its closing arguments, or in its preverdict motion for a JML. Indeed, the record reflects that on two separate occasions BellSouth's regional vice president testified that Cellulink's relationship with various Wal-Mart stores in Alabama was entirely independent of BellSouth. BellSouth maintains that the trial court was aware of its contention when the court ruled on the motion. The argument was raised with great clarity in BellSouth's postverdict motion for JML. If that contention was made at all before the jury returned its verdict, to characterize its assertion as oblique may well be an overstatement. Consequently, Pruitt and Perdue are distinguishable.
Rather than hold that the trial court should have entered a JML in favor of BellSouth on this weak record of compliance with Rule 50(a)(1), I would apply the rule that when the verdict is insufficient to support the judgment, a new trial is appropriate, notwithstanding the failure to satisfy *222 the requirements of Rule 50. See King Mines Resort, 518 So.2d at 716. On remand, problems with this defense, which we can safely assume BellSouth will assert with precision before a verdict in any subsequent trial, may prove insurmountable. Nevertheless, that is not our concern today.
We should resolve this case in a manner consistent with the fundamental fairness that flows from requiring a preverdict movant for a JML to alert not only the trial court, but also the opposing party, of deficiencies in proof before the conclusion of all the evidence. The United States Court of Appeals for the First Circuit observed as follows in Mayo v. Schooner Capital Corp., 825 F.2d 566 (1st Cir.1987), with respect to the comparable federal rule:
"[T]he prudential rationale underlying Rule 50(b) is that both the opposing party and the court should be on notice of the movant's legal claim prior to the case going to the jury. This ensures that the opposing party will be able to cure any deficiency in his case and permits the judge to rule on the legal sufficiency of the case `without impinging on the jury's fact-finding province.'"
825 F.2d at 572 (quoting Martinez Moll v. Levitt & Sons of Puerto Rico, Inc., 583 F.2d 565, 569 (1st Cir.1978)).
I must therefore respectfully dissent in case no. 1990082. I concur in case no. 1990224.
NOTES
[1] This litigation has involved three "BellSouth" entities, namely, (1) BellSouth Mobility; (2) BellSouth Cellular Corp.; and (3) BellSouth National Marketing. The record contains no explanation of the precise manner in which these entities are related. The record does contain a stipulation that BellSouth Cellular Corp. "is a holding company, which provides, among other things, management for various BellSouth companies." (Clerk's Record, at 1611.) It also contains a stipulation that BellSouth Mobility and BellSouth National Marketing would "not assert as a defense against any of the claims made [in this action] that any alleged wrongful conduct was done by employees of BellSouth Cellular Corp. instead of employees of [BellSouth Mobility] and/or [BellSouth National Marketing]." Id. Thus, in referring to individuals affiliated with one or more of these entities, we will not attempt to assign them to a particular company. Instead, we will regard them as employees or representatives of "BellSouth." Similarly, we will disregard any distinction among the entities and refer to them collectively as "BellSouth." In this connection, all claims against BellSouth Cellular Corp. and BellSouth National Marketing have been resolved. Therefore, neither of those two entities is a party to this appeal. Moreover, BellSouth points out that appeal no. 1990224 refers to an entity that is erroneously styled as "BellSouth Cellular National Marketing."
[2] A similar provision was contained in a "General Purchase Agreement" (the "Purchase Agreement"), executed by the parties on the same day as the Agency Agreement. The Purchase Agreement provided in pertinent part:
"WHEREAS, [Cellulink] contemplates repetitive purchases of cellular terminal equipment (`Equipment') from [BellSouth] and through the Supplier(s) from which [BellSouth] purchases such Equipment....
". . . .
"If invoices are not timely paid and [BellSouth] owes [Cellulink] monies for any other reason, [BellSouth] reserves the right to deduct the past due sums owed hereunder from such monies."
[3] This case involves two individuals named Dan Smith.
[4] BellSouth has noteither in the trial court, or in this Courtchallenged the verdict in favor of Cellulink on its breach-of-contract claim against BellSouth.
[5] We do not overlook Century 21 Academy Realty, Inc. v. Breland, 571 So. 2d 296, 298 (Ala.1990), in which this Court said:
"We note that in the past we have listed an absence of justification for the defendant's interference as one of the elements of the plaintiff's cause of action; however, we recognize today that it is illogical to continue to list an absence of justification as one of the elements of the plaintiff's cause of action and then to place the burden on the defendant to disprove it."
Breland is not inconsistent with this case, because "justification" is not synonymous with the party-to-the-relationship element. On the contrary, "justification" is a much broader concept, susceptible of application in a wide variety of circumstances. See Gross v. Lowder Realty Better Homes & Gardens, 494 So. 2d 590 (Ala.1986). For that reason, it is appropriate to treat justification as an affirmative defense, separate and distinct from the party-to-the-relationship element.
[6] Because of our holding in appeal no. 1990082, we do not address the implications of the trial court's disposition of the damages award.
[7] This action was commenced before March 14, 1997, the date of the release of Foremost Insurance Co. v. Parham, 693 So. 2d 409 (Ala. 1997), which prospectively abandoned the justifiable-reliance rule.
[8] We have considered the arguments of Cellulink on all the remaining issues raised in its cross appeal and find them to be moot or without merit. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1873888/ | 586 So. 2d 893 (1991)
GREENE COUNTY BOARD OF EDUCATION
v.
Roland S. BAILEY, et al.
1901316.
Supreme Court of Alabama.
August 23, 1991.
*894 Carlos A. Williams of Chestnut, Sanders, Sanders, Turner, Williams & Pettaway, Selma, for appellant.
Ray Ward and Thomas W. Powe, Jr. of Ray, Oliver & Ward, Tuscaloosa, for appellees.
HOUSTON, Justice.
The plaintiff, Greene County Board of Education, appeals from the dismissal of its complaint alleging conversion on the part of the defendants, Roland S. Bailey; Sarah N. Bailey; Pelham E. Brittain; Alabama Institutional Foods, Inc.; Joseph L. Wilson; Shelia G. Holland; and First National Bank of Tuskaloosa d/b/a AmSouth Bank of Tuscaloosa. We reverse and remand.
The plaintiff's complaint reads, in pertinent part, as follows:
"The Greene County Board of Education is an entity of the State of Alabama charged with the general administration and supervision of schools in Greene County.
"Upon information and belief, Roland S. Bailey is a resident of Tuscaloosa County, Alabama. From 1970 to 1984 defendant Roland S. Bailey was an employee of defendant Alabama Institutional Foods, Inc (AIF).
"Upon information and belief, Sarah N. Bailey is a resident of Tuscaloosa County, Alabama. From 1970 through 1984 defendant Sarah Bailey was an employee of the First National Bank of Tuskaloosa.
"Defendant Pelham E. Brittain was at all relevant times president of Alabama Institutional Foods.
"Defendant First National Bank of Tuskaloosa, now known as AmSouth Bank, and defendant Merchants & Farmers Bank of Greene County[1] wrongfully cashed checks for defendant Bailey and thereby aided Bailey in his fraudulent and wrongful scheme to deprive Greene County of its funds and resources.
"Defendant ... AIF is an Alabama corporation doing business with Paramount High School in Greene County, Alabama. Prior to its incorporation in the early 1970s, AIF constituted the institutional foods sales division of Peco Foods, Inc.
"Defendant Joseph L. Wilson was the principal of Paramount High School at all relevant periods pertinent to this complaint and was charged with the responsibility of managing and monitoring Paramount *895 High School's Nutrition Program, including the lunchroom purchases and payments of food items.
"Defendant Shelia G. Holland was secretary to the principal of Paramount High School during the relevant period. Her primary duties included the maintenance of vendor bills for lunchroom purchases, and arranging payments of said purchases.
". . . .
"The Greene County Board of Education school system consists of three elementary schools, two high schools, and one vocational school, to-wit: Birdine Elementary, Carver Elementary, Eatman Elementary, Paramount High School, Eutaw High School, and Peter Kirksey Vocational School.
"During the year 1972-1984 inclusive, Paramount High School participated in both the National School Lunch Program (NSLP) and the National School Breakfast Program (NSBP). Each of these programs was funded by the United States Department of Agriculture (USDA) through the Food and Nutrition Service (FNS).
"At the state level, each of the food programs previously mentioned was administered by the State Department of Education.
"Each participating school was responsible for providing both the facilities and trained personnel to serve the meals.
"At all relevant times the local school principal and his staff were responsible for all transactions involved in the purchase, payment, inventory, and accountability for food purchases made.
"All meals served were required to meet minimum federal requirements and each school was required to maintain complete and accurate records of meals served for eligible children attending participating schools.
"Participating schools were required to submit a monthly claim for reimbursement to the State Department of Education in order to receive payment [for] meals served to eligible students.
"In order to receive reimbursement from the USDA for meals served under the programs, the sponsor must maintain sufficient records to substantiate allowable costs claimed.
"Paramount High School kept various records and continuing inventory of foods in the lunchroom; a record of specific ingredients used in the preparation of breakfasts and lunches; the cost of preparing each meal; the number of meals served free, at reduced charge, or at the full price.
"During the relevant period, 1972-1984, Roland S. Bailey was employed by defendant [AIF] as sales manager and was directly involved with the sale of food products to Paramount High School.
"During the period of October 12, 1972, through March of 1980, defendant Bailey purchased eighty-four (84) money orders and cashier's checks from the Merchants & Farmers Bank of Eutaw, utilizing forty-four (44) checks drawn on the Paramount lunchroom account.
"Of these 84 money orders, 42 were negotiated through the defendant AIF company's account at the First National Bank of Tuskaloosa (FNB), now doing business as AmSouth Bank in Tuscaloosa.
"The remaining 42 money orders bore the endorsement of either Peco Foods, Inc. by P.E. Brittain or Ala. Institutional Foods, Inc., by P.E. Brittain. None of the proceeds from these items were reflected in ... AIF records as being received by the company.
"Each of the latter 42 money orders was wrongfully cashed at the FNB, Tuscaloosa, by defendant Sarah Bailey.
"The eighty-four (84) money orders purchased by defendant Bailey had a total value of four hundred seven thousand eight hundred eighty three and 50/100 [dollars] ($407,883.50). Of that figure, only two hundred sixty three thousand four hundred twenty five ... and 65/100 [dollars] ($263,425.65) was received by defendant AIF for payment of food products sold to Paramount. The remaining one hundred forty four thousand four hundred fifty seven ... and 85/100 [dollars] *896 ($144,457.85) was not credited to Paramount's account and not utilized in the feeding programs.
"... [D]efendant Bailey submitted false invoices to Paramount in order to receive the funds used to purchase the forty two (42) checks cashed at the FNB (now AmSouth Bank), Tuscaloosa, by defendant Sarah Bailey during the period 1972-1980.
"Defendant AIF invoice registers revealed numerous invoices purporting [to evidence] sales to the Paramount lunchroom. Likewise, `credit memos' of total equal monetary value were prepared effectively canceling the original transaction from AIF records. "A comparison of AIF data with Paramount records revealed that customer copies of the canceled invoices were furnished to Paramount; however, the canceled invoices were not included on AIF billing statements to Paramount. Their equivalent value was included along with payment for actual purchases and lunchroom checks issued to AIF.
"Defendants Bailey and his co-conspirators' scheme to defraud [was] designed to hide said wrongful conduct, and designed to mislead and lull plaintiff from discovery of said wrongdoing.
"The person directly charged with the day-to-day issuance of payments of Paramount High School was defendant Shelia G. Holland.
"Paramount lunchroom's perpetual inventory and production records revealed that the products sold, as represented by the above-described invoices, were neither received nor utilized by the Paramount lunchroom.
"Paramount lunchroom checks drawn at a school account at Merchants & Farmers Bank, payable to defendant ... AIF, for the period of March 1982 through April of 1983 revealed two distinctly different endorsements. The majority of the checks bore the endorsement `For Deposit Only Alabama Institutional Foods, Inc.' The checks bearing this endorsement were negotiated and applied to the Paramount account at AIF.
"A second style of endorsement on Paramount checks paid to AIF bore the endorsement `Alabama Institutional Foods R.S. Bailey' or `Alabama Institutional Foods Swanson Bailey.' The Paramount checks bearing this endorsement were not credited or applied to Paramount's account at AIF.
"There were five checks bearing this second endorsement totaling sixty eight thousand six hundred forty two ... and 81/100 [dollars] ($68,642.81). Each of these checks [was] wrongfully negotiated at the Merchants & Farmers Bank in Eutaw.
"In addition to the foregoing, defendant Bailey used Paramount's checks payable to AIF to purchase money orders payable to AIF. Ten of the money orders thus purchased bore two distinctly different endorsements.
"Five of the money orders bore the stamped endorsement `For Deposit Only, Alabama Institutional Foods, Inc.' These money orders were negotiated and applied to Paramount's account at AIF.
"The remaining five money orders bore the endorsement: `Alabama Institutional Foods by P.E. Brittain.' The money orders bearing the latter endorsement were not credited to or applied against the Paramount account at AIF.
"These latter money orders amounted to a total of sixteen thousand two hundred sixty eight ... and 73/100 [dollars] ($16,268.73). Each of these money orders [was] cashed by Sarah Bailey while she worked as head teller of the Skyland branch of the Tuscaloosa FNB (now Am-South Bank).
"From December of 1980 through May 1983, AIF by defendant Swanson Bailey submitted ten invoices that purported [to evidence] sales to the Paramount lunchroom. Each of the invoices appeared on AIF's billing statement to Paramount and was paid for by Paramount; however, no record of the purported products' receipt or utilization by the lunchroom could be identified.
"Payment of the latter invoices for which no products were received amounted *897 to a total of nine thousand three hundred sixty five ... and 98/100 [dollars] ($9,365.98).
"From 1972-1980 and 1982-1983, the Merchants & Farmers Bank of Eutaw wrongfully negotiated checks made payable to Defendant [AIF] without inquiring whether Bailey was authorized to cash the checks. The plaintiff avers that either the bank and/or the agent cashing the checks was part of the scheme to defraud plaintiff. Negotiation of the checks to persons other than the identified payee was contrary to bank policy and aided defendant in his scheme to defraud plaintiff and conceal said embezzlement from plantiff.
"... [D]efendant Bailey's scheme to defraud plaintiff could not be effected without the knowledge and active participation of defendant Shelia Holland and defendant Wilson. Defendants Wilson and Holland actively participated with Bailey to keep the scheme hidden from plaintiff in order to avail themselves of the embezzled funds.
"... [D]efendants Roland S. Bailey, Sarah Bailey, Joseph Wilson, ... Shelia G. Holland, Pelham E. Brittain, [AIF], Merchants & Farmers Bank of Eutaw, and First National Bank of Tuskaloosa, now known as AmSouth Bank, acted in concert to effect the above-stated acts, which resulted in the fraudulent, wrongful, or illegal taking and interference of funds ... of the Greene County Board of Education.
". . . .
"The above-cited acts of defendant Roland S. Bailey constitute a wrongful taking, detention, and interference of the funds or resources of the Greene County Board of Education.
"The above-cited acts of defendant Roland S. Bailey constitute an illegal assumption of ownership or illegal use or misuse of the funds and resources of the Greene County Board of Education.
"... [T]he remaining defendants ... acted in concert with defendant Roland S. Bailey in effecting the aforementioned acts and/or wrongfully assisted Roland S. Bailey in the act of conversion."
The defendants moved to dismiss the complaint under Rule 12(b)(6), Ala.R.Civ.P., on the ground that it failed to state a claim upon which relief could be granted. Specifically, the defendants argued that the plaintiff had failed to allege that specific money capable of identification had been converted. The trial court granted the defendants' motion, stating, in pertinent part, as follows:
"The plaintiff contends that the defendants converted money; however, the money was not any specific money and [the complaint states] a general claim for relief. The plaintiff's theory is that the defendants wrongfully obtained money from the account of the plaintiff through a scheme of false invoices. No particular identifiable earmarked money is alleged to have been taken. Under these circumstances, this Court is of the opinion that a count for conversion is not appropriate."
We disagree.
The standard by which the plaintiff's complaint in this case must be reviewed is well established:
"It is a well-established principle of law in this state that a complaint, like all other pleadings, should be liberally construed, Rule 8(f), Ala.R.Civ.P., and that a dismissal for failure to state a claim is properly granted only when it appears beyond a doubt that the plaintiff can prove no set of facts entitling him to relief. Winn-Dixie of Montgomery, Inc. v. Henderson, 371 So. 2d 899 (Ala. 1979). Stated another way, if under a provable set of facts, upon any cognizable theory of law, a complaint states a claim upon which relief could be granted, the complaint should not be dismissed. Childs v. Mississippi Valley Title Insurance Co., 359 So. 2d 1146 (Ala.1978).
"Where a [Rule] 12(b)(6) motion has been granted and this Court is called upon to review the dismissal of the complaint, we must examine the allegations contained therein and construe them so as to resolve all doubts concerning the sufficiency of the complaint in favor of *898 the plaintiff. First National Bank v. Gilbert Imported Hardwoods, Inc., 398 So. 2d 258 (Ala.1981). In so doing, this Court does not consider whether the plaintiff will ultimately prevail, only whether he has stated a claim under which he may possibly prevail. Karagan v. City of Mobile, 420 So. 2d 57 (Ala. 1982)."
Fontenot v. Bramlett, 470 So. 2d 669, 671 (Ala.1985). (Emphasis in original.)
To constitute conversion, there must be a wrongful taking or wrongful detention or interference, or an illegal assumption of ownership, or an illegal use or misuse of another's property. The gist of the action is the wrongful exercise of dominion over property to the exclusion or in defiance of a plaintiff's rights, where the plaintiff has a general or special title to the property or the immediate right to possession. Ex parte SouthTrust Bank of Alabama, N.A., 523 So. 2d 407 (Ala.1988).
Generally, an action will not lie for the conversion of money. However, if the money at issue is capable of identification, then a claim of conversion may be appropriate. In Lewis v. Fowler, 479 So. 2d 725, 726 (Ala.1985), this Court discussed at length the circumstances under which an action for conversion will lie to recover a sum of money:
"`"[T]rover lies for the conversion of `earmarked' money or specific money capable of identification, e.g., money in a bag or coins or notes which have been entrusted to defendants' care."` Hunnicutt v. Higginbotham, 138 Ala. 472, at 475, 35 So. 469, at 470 (1903) (quoting from 21 Enc.Pl. & Prac., 1020, 1021). See also Moody v. Keener, 7 Port. 218 (Ala. 1838), and Humana of Alabama, Inc. v. Rice, 380 So. 2d 862 (Ala.Civ.App. 1979), cert. denied, 380 So. 2d 864 (Ala. 1980).
"Money in any form is generally regarded and treated as property, and it is well settled that an action will lie for the conversion thereof, where there is an obligation to keep intact and deliver the specific money in question, and where such money can be identified. Moody v. Keener, supra (money sealed up in a particular letter); Hunnicutt v. Higginbotham, supra ($180 in $20 gold pieces and $102 in paper money which was `wrapped up to itself' and placed in a safe). In England, it was first held that money could not be converted so as to support an action in trover unless it was in a `bag or chest.' Holliday v. Hicks, 78 Eng.Rep. 878, 900 (1599).
"The requirement that there be `earmarked money or specific money capable of identification' before there can be a conversion has been complicated as a result of the evolution of our economic system.
"Now, in conversion cases, the courts are not confronted so much with a particular piece of money, i.e., a coin or a bill, but with identified or segregated sources from which money has come or types of accounts into which money has been deposited.
"Money paid by an insurance company to a hospital which had been assigned to the hospital by the plaintiff has been determined as a matter of law not to be specific property which would support an action of conversion. Humana of Alabama, Inc. v. Rice, supra. Shares in a `Ready Assets Trust Account' which must be redeemed for cash and on which checks can be written have been held to be sufficiently identifiable to support an action in conversion. Limbaugh v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 732 F.2d 859 (11th Cir.1984) (citing Alabama law).
"Section 7 of the Annotation, `Nature of property or rights other than tangible chattels which may be subject of conversion,' 44 A.L.R. 2d 927 (1926), lists numerous cases in which attempts have been made to recover for the conversion of money.
"In this case, the Court is being asked to determine whether money which was withheld from wages of an employee by an employer in response to a garnishment filed against the employer by a creditor of the employee is specific property which will support an action in conversion. *899 Clearly, there is no identifiable coin or bill, and nothing that has been sealed up in a particular letter, `wrapped up to itself,' or placed in a bag or chest. There is no evidence that this money was placed in a special account. It is merely money which was not paid to an employee or to the creditor of an employee, but was withheld from an employee's wages in response to a garnishment."
(Emphasis added.)
As this Court recognized in Lewis, the evolution of our economic system has resulted in courts' today being asked more often than not to determine whether money traceable to identified or segregated sources or accounts can be the subject of a conversion action. Although Lewis did not involve money that was traceable to a special account,[2] this Court, citing Limbaugh v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 732 F.2d 859 (11th Cir.1984), recognized that money directly traceable to a special account is sufficiently identifiable to support an action for conversion. More recently, in Covington v. Exxon Co., U.S.A., 551 So. 2d 935 (Ala.1989), this Court, discussing Lewis, again recognized that money traceable to a special account is sufficiently identifiable to support an action for conversion. In addition, this Court in Covington cited with approval Estate of Jackson v. Phillips Petroleum Co., 676 F. Supp. 1142 (S.D.Ala.1987):
"In Estate of Jackson v. Phillips Petroleum Co., 676 F. Supp. 1142 (S.D.Ala. 1987), the court held that funds held by a buyer of hydrocarbons in an escrow account upon the instructions of the unit operator, Phillips Petroleum, were `specific money capable of identification' and could be subject to conversion under Alabama law. In Jackson, supra, a dispute arose over the expenses charged the working interest owners in the production of hydrocarbons. The plaintiffs, working interest owners, contended that the expenses were not unit expenses. Defendant, Phillips Petroleum, sought to recoup these expenses and invoked a lien against the proceeds of plaintiffs' sale of hydrocarbons to a third party. Phillips Petroleum instructed the third party to withhold payments to plaintiffs. Plaintiffs sought damages on several theories, including conversion of their diverted funds.
"The court concluded that the funds were sufficiently identified under Alabama law to be converted. The evidence revealed that the third party escrowed the funds upon receiving the defendant's instructions to withhold them. Therefore, the funds were `segregated from all other funds in the universe and constituted specific money capable of identification.' Id. at 1147."
551 So.2d at 938-39. This Court went on to hold in Covington, as it had in Lewis, that, under the particular facts of that case, the money at issue was not sufficiently identifiable to support a conversion action:
"In the present case, the Covingtons argue that because each interest owner had its own account number, this sufficiently constituted `specific money capable of identification.' During the time the royalty funds were held in suspense, the monies attributable to Exxon's royalty owner accounts were located in numerous banks nationwide. The funds in these accounts are commingled. The Covingtons' royalty funds were never segregated into a separate account.
"For the foregoing reasons, we conclude that the royalty funds were not sufficiently identified to be converted."
551 So.2d at 939.
Applying the applicable standard of review to the present case, we are not persuaded that the plaintiff has failed to state a claim for conversion. The allegations of the complaint suggest that the plaintiff may be able to prove that the defendants, through an intricate scheme involving bogus invoices and checks and money orders, converted to their own use funds that had been specifically deposited in the "[Paramount *900 High School] lunchroom account" to pay for the high school's breakfast and lunch programs. Although the defendants cite us to a number of cases in which this Court held that conversion would not lie to recover certain funds, those cases are distinguishable in that they did not involve funds that were directly traceable to a special account.
Based on the foregoing, we hold that the plaintiff has stated a claim for conversion and, therefore, that the trial court's order dismissing the plaintiff's complaint is due to be reversed and the case remanded for further proceedings.
REVERSED AND REMANDED.
HORNSBY, C.J., and MADDOX, SHORES and KENNEDY, JJ., concur.
NOTES
[1] The Merchants and Farmers Bank of Greene County was dismissed by a stipulation of the parties and is not a party to this appeal.
[2] Lewis involved a debtor-creditor relationship between the plaintiff and the defendant. That relationship formed the alternative basis for this Court's holding that the plaintiff's conversion action would not lie. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1880720/ | 910 So. 2d 96 (2005)
Jo Ellen HENSLEY and Gold Rush Enterprises, Inc.
v.
Don A. POOLE.
Don A. Poole
v.
Jo Ellen Hensley and Gold Rush Enterprises, Inc.
1031504 and 1031538.
Supreme Court of Alabama.
April 8, 2005.
*98 Cheryl Baswell-Guthrie of Baswell-Guthrie, P.C., Huntsville, for appellants/cross-appellees Jo Ellen Hensley and Gold Rush Enterprises, Inc.
Jerry Knight, Decatur, for appellee/cross-appellant Don A. Poole.
HARWOOD, Justice.
Jo Ellen Hensley ("Jo Ellen") and Gold Rush Enterprises, Inc. ("GRE"), appeal from a judgment of the Morgan Circuit Court finding them liable to Don A. Poole on his claim alleging breach of fiduciary duty and denying their counterclaim alleging similar tortious conduct. Poole cross-appeals from the court's denial of his request for the imposition of a constructive trust.
Facts and Procedural History
Dale Hensley ("Dale") incorporated Gold Rush Tax Services, Inc. ("Gold Rush"), a tax-return preparation business, in 1991.
*99 He authorized the issuance of 5,000 shares of stock, and issued all of those shares to himself. In that same year, he hired Jo Ellen,[1] whom he had met when he was operating a similar business from an office located on property owned by Jo Ellen's father, Don A. Poole. In 1992, Dale transferred to Jo Ellen 10 percent of his stock in Gold Rush. Later Dale transferred to Jo Ellen an additional 35 percent of all issued stock in Gold Rush, giving her a total of 45% of all shares and keeping for himself the remaining 55%.
In late 1993, Dale sought to sell his 55% interest in Gold Rush. He suggested to Jo Ellen that she purchase his interest, but she lacked the money to do so. Poole, however, offered to pay Dale $20,000 for his 55% interest, and Dale accepted the offer. Poole suggested to Jo Ellen that she retain 70% of all issued stock and that he would have 30% of the stock. The agreement evidencing the sale of Dale's stock in Gold Rush, however, recites a transfer of Dale's entire remaining interest, 2,750 shares, to Jo Ellen; Poole is mentioned nowhere in the sales agreement.
After Dale transferred the 2,750 shares to Jo Ellen, in or around October 1993, she became not only the sole stockholder but also the president, treasurer, and secretary of Gold Rush. Through procedures not entirely clear from the record, Jo Ellen wound up with 70% of Gold Rush's stock, and Poole with 30%.
Once Jo Ellen became president and the sole director of Gold Rush, she and Poole jointly ran the business and sought to generate new customers. Jo Ellen owned the building in Decatur from which Gold Rush operated. Gold Rush later expanded to a second office in Athens, the operation of which was primarily entrusted to Poole. Each year, Gold Rush paid rent to Jo Ellen for the Decatur office.
Beginning in early 1994, Jo Ellen occasionally wrote checks on Gold Rush's account to Poole, sometimes specifying on the "For" line that the payments were for "loan repayment," other times stating that the checks constituted a disbursement to Poole of 30% of Gold Rush's profits, and other times not specifying a reason.
As the business grew, Jo Ellen hired several employees to work during the tax-preparation season. At one point she hired her husband, Wade Hensley,[2] as an employee. Wade performed functions similar to those of other employees and was compensated for his work.
In 1997, Poole visited the Decatur office while Jo Ellen was away. While he was there, he noticed bank statements indicating that Jo Ellen was receiving payroll checks from Gold Rush. Apparently, Jo Ellen had authorized a $45,000 salary for herself, as well as bonuses for two employees in the Decatur office. After Poole became aware that Jo Ellen was receiving a salary, Poole's attorney wrote a letter to Jo Ellen informing her that, under Poole's interpretation of their oral agreement, she was not to receive a salary in addition to her share of the profits. The relationship between Jo Ellen and Poole then chilled significantly. At the end of 1997, Jo Ellen demanded that Poole relinquish his 30% interest in Gold Rush. He refused.
In 1998, Poole and Dale entered into a joint venture, which they named "Tax Smart," performing substantially the same business as that performed by Gold Rush. *100 Poole openly solicited existing Gold Rush customers, although there is no indication in the record that he actually secured any of these customers.
From 1998 to 2000, Jo Ellen and Poole had virtually no contact. Jo Ellen continued to send Poole annually K-1 partnership schedules reflecting his 30% passive income allocations. On the other hand, she declared no dividends for those three years; thus, neither she nor Poole received any dividends. On May 8, 2001, Jo Ellen incorporated GRE. On May 22, 2001, she conducted a dissolution auction at Gold Rush's premises. Poole, having received a hand-delivered notice of this auction, attended. During the auction, Jo Ellen offered Poole all of the tangible assets of Gold Rush for the sum of $1.00. He declined. On December 18, 2001, Jo Ellen filed articles of dissolution to dissolve Gold Rush.
On February 11, 2002, Poole sued Jo Ellen and GRE, alleging three counts of breach of fiduciary duty: usurpation of corporate business opportunities, waste and misappropriation of corporate assets, and misappropriation of trade name. He later amended his complaint to seek the imposition of a constructive trust. Jo Ellen and GRE filed a counterclaim against Poole, alleging breach of contract, unjust enrichment, breach of good faith and fair dealing, tortious interference with a business relationship, various forms of fraud, and the tort of outrage, and requesting restitution, a constructive trust, and an equitable lien.
The trial court conducted a three-day bench trial, beginning on August 18, 2003, at which ore tenus evidence was presented. Seven months later, on March 29, 2004, the trial court entered an order concluding that Jo Ellen, both individually and on behalf of Gold Rush, had breached her fiduciary duty by misappropriating business opportunities and corporate assets. The court denied relief as to Poole's allegation that Jo Ellen and GRE misappropriated Gold Rush's trade name and denied Poole's request that the court impose upon GRE a constructive trust. In this latter denial of relief, the trial court specifically stated that "by virtue of his creation and operation of Tax Smart" Poole did not have "clean hands." The trial court also concluded that Jo Ellen and GRE failed to show that Poole had in any way injured Gold Rush, GRE, or Jo Ellen by his actions, consequently denying their counterclaim. Jo Ellen and GRE then timely filed a "motion to alter or amend said judgment," or, in the alternative, for a new trial, which motion the trial court denied on June 10, 2004. Jo Ellen and GRE appeal (case no. 1031504), and Poole cross-appeals (case no. 1031538).
Standard of Review
In reviewing a trial court's findings of fact based on ore tenus evidence, this Court presumes those findings to be correct. Robbins v. Sanders, 890 So. 2d 998, 1008-09 (Ala.2004). However, the "`ore tenus rule does not extend to cloak a trial judge's conclusions of law ... with a presumption of correctness.'" Ex parte Baron Servs., 874 So. 2d 545, 549 (Ala.2003)(quoting Eubanks v. Hale, 752 So. 2d 1113, 1144-45 (Ala.1999)). Furthermore, "[t]he application of the clean hands doctrine is a matter within the sound discretion of the trial court." J & M Bail Bonding Co. v. Hayes, 748 So. 2d 198, 199 (Ala.1999).
Case No. 1031504The Appeal
Jo Ellen and GRE appeal two aspects of the trial court's judgment. First, they appeal its judgment insofar as it finds them liable for breach of fiduciary duty. Second, they appeal its judgment insofar as it denies their counterclaim.
*101 A. Statute of Limitations
Jo Ellen and GRE argue that the trial court erred in finding Jo Ellen liable for breach of fiduciary duty, because, they argue, Poole is barred by the two-year statutory limitations period from pursuing any of his breach-of-fiduciary-duty claims. Poole argues that the statute of limitations for such claims is six years.
Ala.Code 1975, § 6-2-38(l), provides:
"All actions for any injury to the person or rights of another not arising from contract and not specifically enumerated in this section must be brought within two years."
In Norman v. Occupational Safety Association of Alabama Workmen's Compensation Fund, 811 So. 2d 492, 497 (Ala.2001), and System Dynamics International, Inc. v. Boykin, 683 So. 2d 419, 419 (Ala.1996), this Court noted that a cause of action for breach of fiduciary duty sounds in tort and, for purposes of the statute of limitations, is governed by § 6-2-38(l). Because a two-year statute of limitations applies, argue Jo Ellen and GRE, the statutory limitations period on any viable cause of action Poole had expired well before he filed this action. Poole, however, argues that his breach-of-fiduciary-duty claim alleges conversion and that it is thus governed by the six-year statute of limitations found in Ala.Code 1975, § 6-2-34(3).
Even assuming, without deciding, that a six-year statute of limitations applies to actions for breach of fiduciary duty based upon conversion, we find that the trial court's judgment is nevertheless partially erroneous. Any allegation of conversion, to the extent one exists, concerns the conversion of money. This Court has held repeatedly that "`[g]enerally, an action will not lie for the conversion of money'" unless "`the money at issue is capable of identification.'" Campbell v. Naman's Catering, Inc., 842 So. 2d 654, 659 (Ala.2002)(quoting Greene County Bd. of Educ. v. Bailey, 586 So. 2d 893, 898 (Ala.1991)). Only when money is "earmarked" or otherwise identifiable, such as enclosed in a container like a bag or chest, does an action lie for conversion of money. Bailey, 586 So.2d at 898 (citing, e.g., Holliday v. Hicks, 78 Eng. Rep. 878, 900 (Q.B.1599)). In Lewis v. Fowler, 479 So. 2d 725, 726 (Ala.1985), this Court recognized, by reference to Limbaugh v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 732 F.2d 859 (11th Cir.1984), that "money directly traceable to a special account"in the Limbaugh case a "Ready Assets Trust Account"is sufficiently identifiable to support an action for conversion. See also Bailey, 586 So.2d at 899. So long as accounts at financial institutions are "sufficiently segregated and identifiable," this Court will generally allow a conversion claim to proceed. Waddell & Reed, Inc. v. United Investors Life Ins. Co., 875 So. 2d 1143, 1164 (Ala.2003).
In the instant action, as Jo Ellen and GRE point out, Poole has not argued, nor has he provided any evidence indicating, that the money at issue was in any way segregated or identifiable. Rather, he claimed that he was simply due a 30% share and that Jo Ellen was limited to 70% of whatever profits Gold Rush distributed. Thus, we hold that the trial court erred to the extent that it found Jo Ellen liable for any conduct occurring more than two years before Poole filed his action.
The trial court, in its March 29 order, concluded that Jo Ellen breached her fiduciary duty to Poole in six different ways. Two of those were one-time events occurring within two years of Poole's filing his action. Specifically, on April 5, 2001, Jo Ellen allegedly used Gold Rush funds to pay for improvements or repairs to the *102 building in which the Decatur office was located (as to which she held title), and on December 18, 2001, she dissolved Gold Rush, thereby appropriating Poole's business opportunity. Both acts clearly occurred within the two years preceding the filing of Poole's action on February 11, 2002. Hence, we hold that, as to those two acts, the trial court did not err in holding that the claims predicated on those acts were not barred by the applicable statute of limitations. We therefore affirm the trial court's judgment as to those two breaches.
The remaining four ways in which Jo Ellen breached her duty to Poole involved multiple acts beginning more than two years before Poole filed his action and occurring intermittently throughout several years, the latter of the acts occurring within the two-year statutory limitations period. In other words, although some of the wrongful conduct alleged in this case occurred more than two years before Poole filed this action, other instances of that conduct occurred within the two-year time frame.
"Where multiple acts are involved, subsequent damages have been recognized as flowing from subsequent acts, and the fact that a limitations period may have expired as to an earlier act does not bar an action for the subsequent injury." Spain v. Brown & Williamson Tobacco Corp., 872 So. 2d 101, 114 (Ala.2003). As to Jo Ellen's conduct, on her own or through Gold Rush, occurring outside the two-year statute of limitations governing this case, the trial court erred in finding her liable for such conduct. As to her conduct occurring within the statutory period of limitations, however, the trial court did not err in finding her liable.
The trial court first concluded that from 1997 until Gold Rush's December 18, 2001, dissolution Jo Ellen had breached her fiduciary duty by using Gold Rush funds to pay herself rent that was excessive and unreasonable. From 1997 to 2001, Jo Ellen received $132,000 from Gold Rush for rent of a building she owned that housed the Decatur office. One of Poole's experts calculated that the annual market rent for this building was $15,626, making the total overpayment of rent $53,870. Another of Poole's experts suggested that the rent overpayment during this time frame was $85,855. Jo Ellen and GRE's expert agreed that rent had been overpaid, concluding that Jo Ellen had been paid $67,185 in excess of the rent demanded by the market. The trial court, however, concluded that Jo Ellen had received excessive rent in the amount of $64,087. We cannot determine how the court arrived at this figure. It is not the number advocated by either party, not the average of the two numbers posited by Poole's experts, and not an average of all numbers posited.
The court next found that Jo Ellen breached her fiduciary duty by using Gold Rush funds to pay Wade excessive and unreasonable compensation from 1999 to 2001. For those years, Wade was paid a total of $174,154. We can find no evidence in the record indicating that any of Poole's experts specifically testified as to whether Wade's pay was excessive. At least, so far as those experts' calculations are presented, there is no specific line item revealing a computation indicating whether Wade's compensation was excessive.[3] One of Jo *103 Ellen and GRE's experts, however, did compute the amount he believed Wade had been overpaid, concluding that Wade had received $70,982 in excessive compensation. The court concluded that Wade's compensation for those three years had been excessive in the amount of $71,185. Again, we cannot determine the origin of this number.
The trial court's third conclusion was that Jo Ellen had breached her fiduciary duty in using Gold Rush funds to pay herself excessive and unreasonable salaries and dividends from 1996 to December 18, 2001. On this matter, Poole, on the one hand, and Jo Ellen and GRE, on the other, each introduced evidence from one expert concerning the degree to which Jo Ellen had been overpaid.[4] Patsy Bramlett, a vocational rehabilitation counselor testifying on behalf of Poole, stated that the average annual salary for a person in Jo Ellen's position was $23,525. From 1996 through 2001, Jo Ellen received a total of $572,252 in salary. According to Bramlett's calculations, the salary to which Jo Ellen was entitled for that same period was $141,150, thus yielding an overpayment of $431,102. The trial court concluded that Jo Ellen had overpaid herself by $168,129. Jo Ellen states in her brief to this Court that this figure was reached by adding together 30% of $431,102, that is, $129,330.60, and the "dividends" Jo Ellen failed to declare for 1998, 1999, and 2000. Yet we can find no evidence in the record as to the amount of dividends that should have been declared for those years; consequently, we are unaware how the trial court arrived at this figure.
Finally, the trial court concluded that Jo Ellen had breached her fiduciary duty by using Gold Rush funds to pay her personal credit-card charges from 1998 to 2001. The only evidence contained in the record concerning these credit-card expenses is a list, proffered by Poole, of some 16 purchases totaling $3,525.54, and another list, proffered by Jo Ellen and GRE, of some 94 purchases totaling $82,501.72, which they maintain are proper business expenses. The trial court concluded that Jo Ellen used Gold Rush funds to pay $4,201.70 during this period. Again, we cannot determine how the trial court arrived at this figure.
The basic problem presented by our inability to determine how the trial court arrived at the figures recited in its order is that we cannot determine with precision the exact evidence upon which that court relied in entering a judgment in Poole's favor. Without knowing what evidence the trial court was relying upon, we cannot determine with precision which specific acts the trial court judged to be wrongful. In turn, without knowing which acts were judged to be wrongful, we cannot determine which acts were committed within, and which acts were outside, the two-year statutory limitations period. Consequently, as to the statute-of-limitations defense, we affirm the trial court's conclusion that Jo Ellen was liable, but we remand this cause to the trial court for a determination of exactly which acts it judged to be wrongful. For every wrongful act that occurred before February 11, 2000 (two years before Poole filed his action), *104 we reverse the judgment of the trial court and instruct it to find in Jo Ellen and GRE's favor. For every act judged wrongful that occurred between February 11, 2000, and December 18, 2001, we affirm the judgment of the trial court as to the statute-of-limitations issue.
B. Salary and Rent Paid to Jo Ellen
Jo Ellen and GRE's second argument on appeal is that the decision to pay Jo Ellen the salaries and rents she received was justified by the business-judgment rule. In keeping with our holding in Section A., supra, our analysis is confined to the salaries and rents paid to Jo Ellen from February 11, 2000, to December 18, 2001, i.e., within the two-year statute of limitations.
Jo Ellen and GRE argue that the decisions to use Gold Rush funds to pay Jo Ellen's compensation and rent were made in conducting Gold Rush's internal business affairs and are therefore protected by the business-judgment rule. Poole contests Jo Ellen and GRE's invocation of the business-judgment rule, arguing that Jo Ellen's compensation was excessive and unreasonable.
Alabama's business-judgment rule is stated best in Michaud v. Morris, 603 So. 2d 886 (Ala.1992):
"`If in the course of management, directors arrive at a decision, within the corporation's powers ..., for which there is a reasonable basis, and they act in good faith, as the result of their independent discretion and judgment, and uninfluenced by any consideration other than what they honestly believe to be the best interest of the corporation, a court will not interfere with internal management and substitute its judgment for that of the directors to enjoin or set aside the transaction or to surcharge the directors for any resulting loss.'"
603 So.2d at 888 (quoting Roberts v. Alabama Power Co., 404 So. 2d 629, 631 (Ala.1981), quoting in turn H. Henn, Law of Corporations § 242 (2d ed. 1970)).
Unless a court finds the existence of either bad faith or the absence of a "reasonable basis," a court is "loath to interfere" in the decisions of a business. Smith v. Dunlap, 269 Ala. 97, 102, 111 So. 2d 1, 4 (1959). However, a court need only conclude that one of those two conditions exists for it to disallow the defense and to assess the conduct of the business.
In its order, the trial court concluded that Jo Ellen, as director of Gold Rush, paid herself "excessive and unreasonable" rents and salaries. The court did not speak to whether Jo Ellen acted in good faith. Unless we conclude that the trial court erred in its finding that the salaries and rents paid to Jo Ellen were "excessive and unreasonable," we need not reach the issue of Jo Ellen's good faith or lack thereof.
In evaluating compensation under the business-judgment rule, our inquiry is "whether the compensation is so excessive that it bears no reasonable relation to the value of services rendered." Dunlap, 269 Ala. at 101, 111 So.2d at 4.
"`To come within the rule of reason the compensation must be in proportion to the executive's ability, services and time devoted to the company, difficulties involved, responsibilities assumed, success achieved, amounts under jurisdiction, corporate earnings, profits and prosperity, increase in volume or quality of business or both and all other relevant facts and circumstances.'"
Dunlap, 269 Ala. at 101, 111 So.2d at 4 (quoting Gallin v. National City Bank of *105 N.Y., 152 Misc. 679, 273 N.Y.S. 87, 114 (N.Y.Sup.Ct.1934)).
Jo Ellen and GRE argue that the trial court erred in concluding that Jo Ellen used Gold Rush funds to pay herself excessive and unreasonable salaries. The evidence presented to the trial court by both sides was weighty and well documented by experts. Jo Ellen and GRE's experts argued that although Jo Ellen may have been paid more than she was worth in the latter years of Gold Rush's operation, this was to make up for earlier years in which she was underpaid. They also argued that although Jo Ellen received from Gold Rush rent in excess of the market rate for the building she owned, the cost per square foot was less than that charged by an independent third party with whom Jo Ellen and GRE had formerly dealt.
Poole's experts testified that the rent Jo Ellen charged Gold Rush was far in excess of the fair-market value. Concerning Jo Ellen's salary, they conceded that their analyses did not account for the fact that Jo Ellen was the office manager, an officer of the company, the controlling shareholder, and the sole director. They argued, however, that she was overpaid throughout her tenure as president of Gold Rush.
Although this Court might conclude otherwise were it reviewing this evidence for the first time, it is our practice to defer to the trial court's findings of fact where that court has conducted a hearing at which ore terius evidence was presented. Thus, we are obliged to affirm the judgment of the trial court insofar as that judgment was based on its finding that the rents and salaries Jo Ellen paid herself were excessive. Therefore, we find the assertion of the defense of the business-judgment rule not well taken.
C. Statute of Frauds
Jo Ellen and GRE next argue that the trial court erred in finding that Poole owned 30% of the stock of Gold Rush. Based upon this finding, the trial court ordered that Poole be awarded an amount equal to 30% of the total profits of Gold Rush, based on the amount of the salaries, dividends, and distributions Jo Ellen had received, which the trial court found to be 70%. Jo Ellen and GRE argue that Poole "loaned" Jo Ellen $20,000 to enable her to purchase Dale's interest in Gold Rush and that she subsequently repaid Poole. Even if the $20,000 was not a loan, however, they argue that because there was no written agreement between Poole and Jo Ellen to act as partners the Statute of Frauds would prevent the conclusion that they were partners.
Jo Ellen and GRE are correct that the Statute of Frauds renders void certain agreements not reduced to writing, and that one such agreement governed by the Statute of Frauds is one that, "by its terms, is not to be performed within one year from the making thereof." Ala.Code 1975, § 8-9-2(1). The problem with Jo Ellen and GRE's argument is that an oral agreement allocating a proportionate share of profits to each party carries within itself no guarantee that the venture they undertake shall endure for any length of time. That is, such an agreement could exist for one month before a fledgling partnership collapses, or it could last beyond a long lifetime. What is important to note is that "by its terms," an agreement to split money does not require performance beyond the one-year mark. Abbott v. Hurst, 643 So. 2d 589, 592 (Ala.1994). Consequently, we find no merit in this argument, and we conclude that the trial court did not err in finding that Poole was a 30% shareholder in Gold Rush.
*106 D. Jo Ellen & GRE's Counterclaim
The trial court wholly denied Jo Ellen and GRE's counterclaim. On appeal, Jo Ellen and GRE argue that the court erred in doing so. They first argue that the relationship between Poole and Jo Ellen was a confidential and special relationship and that his formation of Tax Smart while contemporaneously owning shares of Gold Rush constituted a breach of his fiduciary duty as a shareholder of Gold Rush. They next argue that Poole tortiously interfered with Gold Rush's contracts and its business. Finally, they argue that Poole fraudulently concealed from Jo Ellen the existence of Tax Smart.
A claim alleging breach of fiduciary duty sounds in tort, Brooks v. Hill, 717 So. 2d 759, 764 (Ala.1998), and "[a] necessary element to be proven in an action alleging breach of duty is damages." Williams v. Citizens Nat'l Bank of Shawmut, 570 So. 2d 635, 638 (Ala.1990). Also, an essential element of a claim of tortious interference is damages. Parsons v. Aaron, 849 So. 2d 932, 946 (Ala.2002). Finally, damages is a prerequisite element to finding a defendant liable for fraudulent concealment. Ex parte Liberty Nat'l Life Ins. Co., 797 So. 2d 457, 465 (Ala.2001). As Poole notes, Jo Ellen and GRE have failed to demonstrate any injury that is attributable to the creation and/or operation of Tax Smart. Jo Ellen and GRE argue that Poole caused business to be diverted from Gold Rush to Tax Smart, yet their citation to several pages in the record fails to substantiate this or to show any other circumstances occasioning damages. Rather, the citations indicate the following: that Poole "solicited existing [Gold Rush] clients for Tax Smart"; that Tax Smart competed for business with Gold Rush; that Wade had negotiated a contract between Gold Rush and Redstone Federal Credit Union, and at some point after this contract was negotiated, he left Gold Rush; that Jo Ellen trusted her father in 1993 and 1994; that Redstone Federal Credit Union declined to renew its contract with Gold Rush in July 2003 because of Poole's lawsuit; and that some 35% of Gold Rush's business is received from credit unions. This evidence does not establish that Poole, through Tax Smart, did any more than attempt to entice customers away from Gold Rush. In short, Jo Ellen and GRE point to no evidence indicating that Poole in any way succeeded in securing Gold Rush clients or that Redstone Federal Credit Union chose not to renew its contract with Gold Rush because it desired to have Tax Smart provide its services. Finally, Jo Ellen and GRE assert that Tax Smart "made profits of over $45,000." The materials in the record evidencing Tax Smart's profits indicate, however, that for tax years 1998 to 2002, the total profits hardly surpassed $4,500. Moreover, those materials in no way indicate that any business was diverted from Gold Rush to Tax Smart.
Assuming, for the sake of argument, that Poole owed a fiduciary duty, a duty not to interfere, and/or a duty to disclose a material fact to Jo Ellen and GRE, their counterclaim alleging breach of those duties must fail for want of proof of damages. We therefore affirm the judgment of the trial court as to Jo Ellen and GRE's counterclaim.
In conclusion, in case no. 1031504, we affirm the judgment of the trial court in the following respects: Jo Ellen and GRE are liable for the excessive rents and salaries paid by Gold Rush to Jo Ellen between February 11, 2000, and December 18, 2001, the date of the dissolution of Gold Rush. They are liable for dividends (if any) that should have been declared and paid to Poole between February 11, 2000, and December 18, 2001. They are liable for excess *107 compensation paid to Wade between February 11, 2000, and December 18, 2001. They are liable for funds used to pay Jo Ellen's personal credit-card bills between February 11, 2000, and December 18, 2001. They are liable for Gold Rush's payment to Jo Ellen for capital improvements made to the building on April 5, 2001. They are liable for dissolving Gold Rush and appropriating the business opportunities to GRE. Finally, we affirm the judgment of the trial court in all material respects in its denial of Jo Ellen and GRE's counterclaim.
We reverse the judgment of the trial court to the extent it entered judgment for Poole as to any conduct occurring before February 11, 2000, because as to any conduct occurring before that date his action is barred by the two-year statute of limitations. In order for the trial court to determine the proper amounts of damages to be awarded Poole, we remand the case.
Case No. 1031538The Cross-Appeal
The trial court determined that Poole's conduct in forming Tax Smart while remaining a shareholder in Gold Rush resulted in his having "unclean hands," and it refused to impose a constructive trust upon the profits of GRE. Poole cross-appeals from this determination. Jo Ellen and GRE argue that the trial court was correct in determining that Poole's conduct evidenced unclean hands.
The trial court, in its order, stated:
"[A]s to [Poole's] demand for the imposition of a constructive trust over the stock, assets and income of GRE, the Court is reasonably satisfied that [Poole] does not have `clean hands' by virtue of his creation and operation of Tax Smart, a competing business, and is not entitled, therefore, to such equitable relief."
Poole first argues that the trial court erred in awarding damages rather than imposing a constructive trust, contending that imposing a constructive trust would be a more equitable, not to mention more straightforward, remedy. Although we agree with Poole that the imposition of a constructive trust would not have presented to this Court the previously noted difficulties of reviewing the trial court's damages calculations, we disagree as to the equity of such a remedy.
As we have explained, "a constructive trust may not be imposed unless relief at law would be inadequate." Interstate Truck Leasing, Inc. v. Bender, 608 So. 2d 716, 720 (Ala.1992) (citing American Family Care, Inc. v. Irwin, 571 So. 2d 1053, 1061 (Ala.1990)). Although Poole contends that the imposition of a constructive trust would be "more effective in providing a just result" and would have "rendered unnecessary any conjecture as to how to evaluate [his] loss of equity interest in the defunct corporation," Poole never argues or explains to this Court how the remedy actually afforded him by the trial court was inadequate. Because he fails to make such an argument, we conclude that the trial court did not err in denying Poole's request for the imposition of a constructive trust.
Further, in cases such as this, we have held that the imposition of a constructive trust is a remedy that is to be imposed in favor of the corporation. Morad v. Coupounas, 361 So. 2d 6, 10 (Ala.1978); McKinstry v. Thomas, 258 Ala. 690, 698, 64 So. 2d 808, 813 (1953); see Ala.Code 1975, § 10-2B-14.05. Thus, for Poole to take advantage of such a remedy, his action should have been derivative in form. Because it was not, Poole has failed to demonstrate that he is entitled to the remedy.
Conclusion
In case no. 1031504, the judgment of the trial court is affirmed in part, reversed in *108 part, and the cause is remanded to the trial court for proceedings consistent with this opinion. In case no. 1031538, the judgment of the trial court is affirmed.
1031504AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.
1031538AFFIRMED.
NABERS, C.J., and SEE, STUART, and BOLIN, JJ., concur.
NOTES
[1] She was known at the time as Jo Ellen White. She became Jo Ellen Hensley when she married Wade Hensley, as hereinafter noted.
[2] Wade is Dale's first cousin.
[3] Dr. Gene Bryson, an expert witness testifying on behalf of Poole, was asked to place a value on Gold Rush as a business. In so doing, he generated a spreadsheet that accounted for certain variables. One of these variables was "above-market salaries." Neither the spreadsheet nor Dr. Bryson's testimony definitively indicates whether the spreadsheet accounted for all "above-market salaries" or only those of a particular individual, such as Jo Ellen or Wade.
[4] As noted in footnote 3, supra, Dr. Bryson prepared a spreadsheet reflecting "above-market salaries." Because we have no indication whether this line item concerns only Jo Ellen or all above-market salaries paid by Gold Rush, and because neither party suggests the weight to be accorded to this evidence, we do not consider this evidence in evaluating whether Jo Ellen's compensation was excessive. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1399473/ | 536 F.3d 819 (2008)
UNITED STATES of America, Plaintiff-Appellee,
v.
Steve L. WRIGHT, Jr., Defendant-Appellant.
No. 07-1439.
United States Court of Appeals, Eighth Circuit.
Submitted: January 15, 2008.
Filed: August 4, 2008.
*821 Dennis J.C. Owens, Kansas City, MO, argued (William E. Shull, Liberty, MO, on the brief), for appellant.
Steve L. Wright, Jr., White Deer, PA, pro se.
Charles E. Ambrose, Jr., Asst. U.S. Atty., Kansas City, MO, argued (John F. Wood, U.S. Atty., on the brief), for appellee.
Before LOKEN, Chief Judge, MURPHY, Circuit Judge, and JARVEY,[*] District Judge.
LOKEN, Chief Judge.
After an eleven-day trial, a federal jury convicted Steve L. Wright of fourteen counts of conspiracy to distribute cocaine base, ecstacy, marijuana, PCP, and Diazepam; possession, attempted possession, and aiding and abetting the possession with intent to distribute cocaine base, cocaine, ecstasy, marijuana, PCP, and methamphetamine; use of a firearm in relation to drug trafficking crimes resulting in two deaths; aiding and abetting the possession of firearms in furtherance of drug trafficking crimes; and aiding and abetting the killing of a potential witness in violation of 18 U.S.C. § 1512(a)(1)(C). The district court[1] sentenced Wright to life in prison plus 110 years. On appeal, Wright's attorney argues that the district court committed a jury voir dire error related to Wright's membership in the "51st Street Crips" Kansas City street gang. In a pro se supplemental brief, Wright argues that his Confrontation Clause rights were violated by the admission of hearsay statements of a deceased victim, Michael Birks, and that the government failed to prove that he aided and abetted the killing of Birks with the intent to prevent Birks from communicating with law enforcement about possible federal offenses, an element of the § 1512(a)(1)(C) offense. We affirm.
I. The Jury Voir Dire Issue
Prior to voir dire, the district court mailed prospective jurors 113 questions prepared by counsel. One question, proposed by Wright, asked:
If an individual has been identified as a member of any group that might be called a "street gang", do you believe that this person is more likely to be prone to violence or to crime than an individual who is not a member of a "street gang"?
Of the 134 prospective jurors who responded, 106 answered yes to this question. Wright moved to strike all 106 for cause, arguing that the affirmative answer "clearly indicates a presumption of bias and prejudice against the Defendant who will be identified as a member of a street gang." The magistrate judge[2] recommended *822 that the 106 not be struck because their answers did not establish inability to render a fair and just verdict, and recommended that the district court at voir dire inquire whether each of the 106 would be able to follow the law as instructed and render a verdict based on the law and the facts as found. Wright objected, arguing that all 106 should be struck for cause. The district court overruled this objection, advised that the court would conduct voir dire limited to follow-up questions based on the jurors' prior responses, and invited counsel to submit proposed follow-up voir dire questions.
In response, Wright requested that the court ask 43 supplemental voir dire questions, 25 of which related to street gangs, and conduct "individual and separate" voir dire of each prospective juror. Before the start of voir dire, the district court advised that follow-up questions would be limited to those recommended by the magistrate judge and invited counsel to request more or otherwise make a record after this questioning. At the start of each day of the two-day voir dire, the court asked the entire panel whether any member's judgment would be affected by the race of the defendant; none responded. The court then separated the panel into groups of six or seven and asked each potential juror who answered the street gang question affirmatively whether he or she could keep an open mind and wait until all the evidence was presented before deciding whether the government met its burden of proof. The court refused defense counsel's requests that particular panel members be asked additional questions concerning gang membership. All jurors whose answers evidenced even the slightest possible anti-gang bias were stricken for cause.
On appeal, Wright argues that the court deprived him of the right to obtain a fair and impartial jury when it refused to ask prospective jurors who answered the gang question affirmatively extensive follow-up questions regarding possible gang-related bias. Wright does not challenge the fairness of any person selected as a juror. He does not argue that any specific prospective juror was not asked particular questions. And he does not argue that he lacked information needed in exercising his peremptory challenges as to specific jurors. Compare United States v. Blom, 242 F.3d 799, 804-06 (8th Cir.), cert. denied, 534 U.S. 880, 122 S.Ct. 184, 151 L.Ed.2d 128 (2001).
Absent "substantial indications of the likelihood of racial or ethnic prejudice affecting the jurors in a particular case.... the Constitution leaves it to the trial court, and the judicial system within which that court operates, to determine the need for" voir dire questions probing possible juror bias or prejudice. Rosales-Lopez v. United States, 451 U.S. 182, 190, 101 S.Ct. 1629, 68 L.Ed.2d 22 (1981) (plurality opinion); see Mu'Min v. Virginia, 500 U.S. 415, 422-27, 111 S.Ct. 1899, 114 L.Ed.2d 493 (1991). In general, a district court should, if requested, ask voir dire questions designed to detect a prejudice that may be relevant to the impending trial, but the extent and nature of that inquiry is left to the court's discretion. See, e.g., United States v. Spaar, 748 F.2d 1249, 1252-54 (8th Cir.1984). Here, the district court adopted procedures for the lengthy jury selection process that we approved in a recent capital case from this District, United States v. Ortiz, 315 F.3d 873, 888-89 (8th Cir.2002), cert. denied, 538 U.S. 1042, 123 S.Ct. 2095, 155 L.Ed.2d 1078 (2003). By including a gang-related question in the initial questionnaire, the court honored Wright's request to inquire into that possible prejudice. No such inquiry was made in People v. Jimenez, 284 Ill. *823 App.3d 908, 220 Ill.Dec. 97, 672 N.E.2d 914, 916-17 (1996), the case on which Wright primarily relies. Moreover, at voir dire, the district court was careful to ask the kind of follow-up question that the dissenters concluded should have been asked in Gardner v. Barnett, 199 F.3d 915, 924 (7th Cir.1999) (en banc) (Cudahy, J., dissenting), cert. denied, 529 U.S. 1079, 120 S.Ct. 1699, 146 L.Ed.2d 504 (2000). There was no abuse of discretion.
II. The Confrontation Clause Issue
Count Six charged Wright with aiding and abetting William Williams and Rashawn Long in shooting and wounding Anthony Conaway and Justin Hill during an attempted PCP robbery on February 1, 2001. Before Conaway testified, Wright objected that testimony relating what Michael Birks said to Conaway that evening would violate Wright's Sixth Amendment Confrontation Clause rights because Birks was murdered later that night and therefore was unavailable and had not been subject to cross examination. The district court overruled the objection, and Conaway testified that Birks told him who had participated in the shooting.
On appeal, Wright argues that this testimony violated his Confrontation Clause rights as construed in Crawford v. Washington, 541 U.S. 36, 124 S.Ct. 1354, 158 L.Ed.2d 177 (2004). Crawford recognized a common law "forfeiture by wrongdoing" exception to the right of confrontation, id. at 62, 124 S.Ct. 1354, but the exception does not apply, Wright contends, because the government failed to prove that Birks was murdered for the purpose of preventing him from testifying.[3] However, the Confrontation Clause only bars "admission of testimonial statements of a witness who did not appear at trial unless he was unavailable to testify, and the defendant had had a prior opportunity for cross-examination." Davis v. Washington, 547 U.S. 813, 821, 126 S.Ct. 2266, 165 L.Ed.2d 224 (2006) (emphasis added), quoting Crawford, 541 U.S. at 53-54, 124 S.Ct. 1354. Thus, the threshold Confrontation Clause issue is whether Birks's statement to Conaway was "testimonial."
The Supreme Court has not comprehensively defined "testimonial" statements. In Davis, it held that statements made in a 911 call "to describe current circumstances requiring police assistance" are not testimonial. 547 U.S. at 827, 126 S.Ct. 2266. Applying Davis, we held in United States v. Johnson, 495 F.3d 951, 976 (8th Cir. 2007), that remarks about murders made by one inmate to another "fall safely outside the scope of testimonial hearsay." And in Giles, the Court recently observed in dicta that "[s]tatements to friends and neighbors about abuse and intimidation, and statements to physicians in the course of receiving treatment," are not testimonial. 128 S.Ct. at 2692-93. Reviewing the statements made by Birks to Conaway in the context of these decisions, we agree with the government that the statements were not testimonial. Therefore, Wright's Confrontation Clause rights were not violated.
III. Sufficiency of the Evidence on Count Seven
Count Seven charged Wright with aiding and abetting Williams and Long in *824 murdering Michael Birks to prevent him from communicating with law enforcement officials regarding possible federal offenses in violation of 18 U.S.C. § 1512(a)(1)(C). Wright argues that we must vacate his conviction and life sentence on Count Seven because the government failed to prove that the murder of Birks was committed with the requisite intent. In resolving this issue, we review the evidence in the light most favorable to the jury's verdict, giving the government the benefit of all reasonable inferences. "We must uphold the conviction unless no reasonable jury could find [Wright] guilty." United States v. Marquez, 462 F.3d 826, 828 (8th Cir.2006) (quotation omitted).
To prove a violation of § 1512(a)(1)(C), the government need not prove that the defendant knew a federal investigation was underway, or even contemplated, or that defendant intended to prevent the victim from communicating with federal officials. See § 1512(e)-(g); United States v. Harris, 498 F.3d 278, 284-86 (4th Cir.2007), cert. denied, ___ U.S. ___, 128 S.Ct. 1703, 170 L.Ed.2d 515 (2008). But there must be proof "that at least some part of a defendant's motive in killing that victim" was to prevent communication with law enforcement officials in the investigation of a possible federal crime. Emery, 186 F.3d at 925. The district court instructed, without objection, that the government must prove either Wright, "or others whom he was then aiding and abetting," murdered Birks with this intent.
Government witness Marlin Brown testified that he met with Wright, Williams, Long, and Birks on the evening of January 31, 2001. Birks urged the group to rob and kill competing drug dealer Conaway, who Birks believed was carrying $10,000 and nine ounces of PCP. Birks arranged a drug buy with Conaway, and the five drove to the meeting place. After waiting twenty minutes, Wright and Long left in a separate vehicle. When Conaway arrived in a car driven by Hill, Birks walked to the vehicle and handed Conaway money for vials of PCP. Williams pulled his car alongside Conaway's and began firing, seriously wounding Conaway and Hill before driving away with Brown. Birks ran from Conaway's vehicle to avoid gunfire from Conaway but told Williams and Brown to leave him at the scene.
After riding with Williams to a friend's house, Brown called Birks on his cell phone. Birks said he had driven Conaway to the hospital and was waiting for Wright and Long to pick him up. Some time later, Wright, Long, and Birks arrived. Birks went upstairs to change his clothes, which were covered with Conaway's blood. Long told Williams to kill Birks because he told Conaway that Williams was the shooter. Birks came downstairs and suggested they attempt to recover Conaway's money and PCP. When that effort failed, the five drove Birks to where he had hidden money and marijuana a few hours earlier. When Birks left to retrieve the items, Long told Williams to shoot Birks. Birks returned, and Williams opened fire. Wounded, Birks begged for his life. Long executed Birks at close range with a handgun Wright gave him earlier in the evening. Long robbed Birks's body, and the four left.
Brown testified that Long told Williams to kill Birks because Birks had told Conaway that Williams shot him. Therefore, Wright argues, the evidence only established that Birks was killed because Williams feared retaliation by Conaway, a rival gang member and drug dealer, not to prevent communication with law enforcement officials. But the evidence viewed in the light most favorable to the jury's verdict points in another direction. Williams, *825 at Long's urging, initially shot Birks, but it was Long who executed the wounded Birks as he pleaded for his life. Conaway testified that Birks identified the four assailants Wright, Long, Williams, and Brown but never said who did the shooting. Long and Wright then drove Birks to where Brown and Williams were waiting. The jury could have inferred that, during this drive, Birks told Wright and Long what he had disclosed to Conaway. Killing Birks would not protect the group from revenge by Conaway, but it would eliminate Birks, a now-proven "snitch," who was eyewitness to the drug theft and shooting of Conaway, crimes that were later charged as Counts Five and Six of this federal indictment. The statute does not require proof that a federal investigation was underway at the time of the killing, only that Long and/or Wright believed that Birks was a potential witness against them. See United States v. Davis, 357 F.3d 726, 728 (8th Cir.2004), vacated on other grounds, 543 U.S. 1099, 125 S.Ct. 1049, 160 L.Ed.2d 993 (2005).
There was additional circumstantial evidence that Wright and his associates killed Birks to prevent communication with law enforcement officials concerning federal offenses. After the killing, Marlin Brown sensed danger, ran from the others, and hid until daylight. Five days later, he told the police about the killing. One month after that, Brown saw Long for the first time since the killing at a nightclub. When Brown and his friends got in their car to leave, Long approached and began shooting with an assault rifle. Hit three times, Brown is now paralyzed from the waist down. In addition, Wright was arrested numerous times for gun, drug, and driving offenses in the thirteen months prior to the shooting of Birks. John Roberts, also a member of the 51st Street Crips, testified that in March 2000 he saw Wright fire into a parked vehicle from the passenger side of the car in which Wright was riding. Wright later told Roberts that he shot at the driver of the other vehicle, a drug dealer named Gerald, because he was a "snitch." Gerald Johnson later testified that he had been cooperating with the police at the time of the shooting, and "[p]eople in the streets knew."
Viewing this evidence in its entirety, it was reasonable for the jury to find that Wright and/or Long and Williams murdered Birks to prevent his communication with law enforcement officials about the shooting of Conaway and Hill, or about the gang members' other on-going federal drug and firearm offenses. See United States v. Rose, 362 F.3d 1059, 1067-68 (8th Cir.2004).
The judgment of the district court is affirmed.
NOTES
[*] The HONORABLE JOHN A. JARVEY, United States District Judge for the Southern District of Iowa, sitting by designation.
[1] The HONORABLE FERNANDO J. GAITAN, JR., Chief Judge of the United States District Court for the Western District of Missouri.
[2] The HONORABLE ROBERT E. LARSEN, United States Magistrate Judge for the Western District of Missouri.
[3] This argument was strengthened by the Supreme Court's recent decision in Giles v. California, ___ U.S. ___, 128 S.Ct. 2678, 2688-93, ___ L.Ed.2d ___ (2008). We note that the common law exception at issue in Giles is not necessarily co-extensive with the forfeiture-by-wrongdoing hearsay exception codified in Rule 804(b)(6) of the Federal Rule of Evidence. Wright did not raise Rule 804(b)(6) in the district court, and therefore we do not consider it. See generally United States v. Emery, 186 F.3d 921, 926-27 (8th Cir.1999), cert. denied, 528 U.S. 1130, 120 S.Ct. 968, 145 L.Ed.2d 839 (2000). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1425127/ | 722 A.2d 143 (1998)
COMMONWEALTH of Pennsylvania, Appellee,
v.
Joseph KINDLER, Appellant.
Supreme Court of Pennsylvania.
Submitted February 27, 1998.
Decided December 11, 1998.
Reargument Denied March 15, 1999.
A. Charles Peruto for J. Kindler.
Catherine Marshall, Philadelphia, Robert A. Graci, Harrisburg, for Com.
Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO, NEWMAN and SAYLOR, JJ.
OPINION
NEWMAN, Justice.
Presently before this Court is the appeal of Joseph Kindler (Appellant) from the Order of the Court of Common Pleas of Philadelphia County, which, on August 9, 1996, denied his petition under the Post Conviction Relief Act, 42 Pa.C.S. §§ 9541-9546 (1988) (PCRA). For the reasons that follow, we affirm the Order of that court.
On November 15, 1983, Appellant was convicted by a jury of murder in the first degree,[1] kidnapping,[2] and conspiracy[3] in the killing of twenty-two-year-old David Bernstein. The evidence submitted at trial, as summarized by this Court in Commonwealth v. Kindler, 536 Pa. 228, 639 A.2d 1, 5-6 (1994), disclosed that:
On April 2, 1982, the Sound Odyssey store in Lower Moreland Township, Bucks County, was burglarized. A Lower Moreland Township patrol officer noticed a vehicle with its lights out pulling out of the cul-de-sac behind the Sound Odyssey at a high rate of speed and further noticed three persons inside the vehicle. Police were able to stop this vehicle, but the driver fled and was not apprehended. The two remaining passengers of this vehicle, Scott Shaw (Shaw), a sixteen-year old juvenile and the victim, David Bernstein (Bernstein) were detained and arrested. While in police custody, Bernstein identified Appellant as the driver of the vehicle and furthermore told the police that the burglary *144 was Appellant's idea and that he would be willing to testify against Appellant and Shaw. This information was then conveyed to the Philadelphia Police, since Appellant lived in Philadelphia, and the police secured a warrant for Appellant's arrest.
The police executed the warrant by going to Appellant's home and, after a struggle, handed Appellant a copy of the warrant which clearly named Bernstein as the informant. Appellant was arrested and charged with the burglary of Sound Odyssey, along with other theft-related offenses at other locations in three counties. Following a preliminary hearing, Appellant was held for court in Montgomery County for the Sound Odyssey theft and Appellant filed a motion to quash the charges against him, claiming that the evidence presented at the preliminary hearing was insufficient. A hearing was scheduled on this motion for July 23, 1982, and the Montgomery County District Attorney's Office obtained an order granting Bernstein immunity so that he could testify at this hearing. Bernstein's attorney informed Appellant's attorney that his client had been immunized for the July 23, 1982, hearing and that, if called to the stand, he would testify.
At the July 23, 1982, hearing Bernstein appeared pursuant to the immunity order but Appellant did not appear, nor did his counsel and the motion to quash was dismissed with prejudice. Trial was set for August 17, 1982, and Bernstein, fearing that Appellant might try to prevent him from testifying, planned to move back home with his parents on July 25, 1983, (sic) according to testimony provided by the victim's mother.
Appellant complained to Shaw and Shaw's girlfriend, Michelle Raifer (Raifer), that he had to get rid of Bernstein because he would testify against him and discussed several plans with them for eliminating Bernstein, including drowning him in the Delaware River. On July 24, 1982, Appellant met with Raifer, who arranged to get her mother's car and to meet Appellant and Shaw. That evening the three met and drove the car to within a block of Bernstein's apartment. Raifer called Bernstein and established that he was home and Appellant instructed Raifer to leave and return to the apartment later in the evening with the car. At this time, Appellant placed an inner tube and flippers into the trunk of the automobile.
Appellant and Shaw then hid in a field near Bernstein's apartment to watch the door. Raifer returned between 2:30 and 2:45 a.m. on July 25, 1982, and Appellant, holding a black baseball bat, met her outside the apartment. Appellant told Raifer to ring the doorbell and to get Bernstein to come outside while Appellant, armed with his baseball bat, hid in the alleyway right next to the door to the apartment building.
Raifer did as she was instructed. Bernstein opened the door and had a conversation with Raifer and after some time Appellant pulled the door fully open, dragging out Bernstein and began beating him over the head with the baseball bat approximately 20 times. Shaw also appeared on the scene and Appellant instructed him to hit Bernstein with an electric prod, which he did five times in the ribs. At this point Bernstein was rendered immobile and Appellant and Shaw dragged their victim to Raifer's waiting automobile, leaving a thirty-foot long trail of blood stains, and threw him into the trunk. Appellant, Raifer and Shaw got into the car and drove with Bernstein still moaning in the trunk, for seven miles to a point on the River Road on the Delaware River. Appellant and Shaw then took Bernstein out of the trunk and as they began to throw Bernstein's body into the river, Appellant told Raifer to drive back to the main road and wait for them. Raifer drove off, but returned soon to find Appellant and Shaw emerging from the river. All three reentered the automobile and Appellant explained that Bernstein's body wouldn't sink so they had to fill his lungs with water and tie a cinder block around his neck to weigh the body down.
On the way back to Philadelphia, Raifer was instructed to stop the car so that Appellant could throw away the baseball bat, clothes and shoes he and Shaw had used during the murder. These items *145 were tossed into various sewer inlets along Grant Street. The police later recovered the blood-stained baseball bat, shirt, pants and shoes that Appellant wore, and Shaw's t-shirt and shoes.
When the three returned to Appellant's home, they tried to wash the blood stains out of the trunk, using a Styrofoam ice chest to carry out the water. They then broke up the ice chest and threw it and the trunk mat of Raifer's automobile into another sewer inlet. The pieces of broken ice chest and the trunk mat, the swimming suits that Appellant and Shaw were wearing, the inner tube, electric prod and a camouflage shirt that Appellant had worn were all later recovered from this sewer inlet by the police.
There was also testimony provided by one of Bernstein's neighbors (Craig Satinsky) that he heard Bernstein being beaten and a car driving away and that when he came outside to investigate he saw Bernstein's apartment door open with Bernstein's girlfriend sitting there. By this time the girl was hysterical and corroborated Satinsky's suspicion that it was Bernstein that he heard being beaten and dragged off in an automobile. They both went out to the street and saw the trail of blood and Bernstein's girlfriend, Lisa Rothbarth, called the police giving them information which led them to look for Raifer's car. Within a few hours, the police intercepted Raifer at her home and seized the blood-soaked car. Raifer eventually confessed, identified Shaw and Appellant as Bernstein's murderers, and led the police to the various sewer inlets, where as already indicated, they retrieved the various items used in connection with the murder.
On July 26, 1982, at around 7:30 p.m., Bernstein's body surfaced in the Delaware River near River Road. The body had a cinder block tied to its neck. Multiple blows to the head were observed which were later shown by a medical examination to be consistent with blows from a bat and bruises were seen to the chest consistent with being made by the electric prod. The forensic medical examination also revealed that, prior to expiring, Bernstein ingested water and silt. The cause of death was identified as drowning and massive head injuries.
After Appellant's penalty hearing, the jury found two aggravating circumstances; that the victim was a prosecution witness to a felony committed by the Appellant and that the victim was killed for the purpose of preventing his testimony against Appellant in a criminal proceeding (42 Pa.C.S. § 9711(d)(5)), and that the killing was perpetrated in the commission of a felony (kidnapping) (42 Pa.C.S. § 9711(d)(6)). The jury found no mitigating circumstances.
Appellant filed Post-Verdict Motions that were pending when he escaped from the maximum-security block of the Philadelphia Detention Center on September 19, 1984.[4] Because of Appellant's fugitive status, the Commonwealth filed a Motion to Dismiss his Post-Verdict Motions. The trial court held a hearing on this motion, after which it determined that, because Appellant had voluntarily removed himself from the jurisdiction of the court, he had waived his right to have his Post-Verdict Motions considered and, accordingly, granted the Motion to Dismiss. Sentencing was deferred until Appellant was apprehended.
Appellant remained at large until his arrest in Quebec, Canada, on April 26, 1985. He was held in Canadian custody (while he challenged extradition) until October 23, 1986, when he escaped from a Montreal prison by breaking through a skylight and lowering himself thirteen stories to the ground on a rope of bedsheets. A fellow inmate, who was escaping with Appellant, fell from the rope to his death. Subsequently, the television program "America's Most Wanted" aired a story on Appellant, and in September 1988, he was spotted and arrested in New Brunswick, Canada.
Appellant was finally returned to Pennsylvania, and on October 2, 1991, sentenced to death for the murder of David Bernstein. A direct appeal to this Court followed.
*146 On February 9, 1994, this Court affirmed the judgment of sentence.[5] In the Opinion Announcing the Judgment of the Court, Justice Papadakos, writing for a plurality of the Court, determined that the trial court's action in dismissing Appellant's Post-Verdict Motions in response to his escape from custody and flight was not error.[6] Accordingly, we found that the appeal came to us with no allegations of error preserved. However, we did undertake a review of (1) whether sufficient evidence was presented at trial to support Appellant's conviction of murder in the first degree;[7] (2) whether the sentence of death was the product of passion, prejudice or any other arbitrary factor; (3) whether the evidence supported the finding of at least one specified aggravating circumstance; and, (4) whether the sentence was excessive or disproportionate to the penalty imposed in similar cases, considering both the circumstances of the crime and the character and record of the defendant.[8] After our review of the record we sustained Appellant's conviction of murder in the first degree and affirmed the sentence of death. There were no dissents. The United States Supreme Court denied Appellant's Writ of Certiorari on October 11, 1994.
On January 11, 1996, Appellant filed a PCRA Petition. In it he raised allegations of ineffective assistance of trial and successor counsel, and submitted that as a matter of "fundamental fairness" he should have those claims, as well as claims previously raised in his direct appeal, heard and considered on their merits by the courts of this Commonwealth. The Court of Common Pleas of Philadelphia County (PCRA court) dismissed the Petition without a hearing on April 15, 1996. In its opinion, the PCRA court stated that, since this Court had already decided that Appellant's decision to become a fugitive resulted in the waiver of all issues, he was not entitled to PCRA relief. The PCRA court also noted that Appellant's post-conviction actions manifested his complete contempt for the legal process and also a "conscious intent" not to avail himself of whatever legal review he was entitled to in Pennsylvania. After being denied relief in the lower court, Appellant again decided to invoke Pennsylvania legal process and appealed to this Court.[9]
In this Court, Appellant claims that the dismissal of his PCRA Petition was an abuse of discretion because there was no present connection between his 1984-1991 fugitive status and the PCRA court's ability to review the merits of his claims in his 1996 collateral attack. Distilled to its essence, Appellant has presented a simple issue, that the court below erred in dismissing his PCRA Petition. However, for the reasons explained below, Appellant was ineligible for PCRA relief.
To be eligible for PCRA relief a petitioner must establish that his conviction or sentence resulted from one or more of the enumerated errors or defects listed in 42 Pa.C.S. § 9543(a)(2)[10]and that the issues *147 that he raises have not been previously litigated. Commonwealth v. Crawley, 541 Pa. 408, 413, 663 A.2d 676, 678 (1995) (emphasis added). An issue has been previously litigated if the highest appellate court in which the petitioner could have had review has ruled on the merits of the issue. Id., 663 A.2d at 678, 42 Pa.C.S. §9544(a)(2). In the instant matter, Appellant's claim was previously litigated in his 1994 appeal to this Court when Appellant challenged the trial court's dismissal of his Post-Verdict Motions and argued that it was an abuse of discretion not to allow him to have his post-trial motions considered once he was recaptured. After our review of Appellant's arguments we found them baseless, and determined that the appeal had come to us "without any allegations of error (direct or collateral) preserved."[11]Kindler, 536 Pa. at 234, 639 A.2d at 3.
This Court's decision in Appellant's direct appeal rested on a firm foundation based, in part, on Commonwealth v. Passaro, 504 Pa. 611, 476 A.2d 346 (1984). In Passaro, this Court decided that a defendant, whose direct appeal was quashed because of his escape from custody during the pendency of that appeal, was not entitled to have his appeal reinstated following his recapture. In so doing we reiterated that, "a defendant who deliberately chooses to bypass the orderly procedures afforded one convicted of a crime for challenging his conviction is bound by the consequences of his decision." Id. at 613, 476 A.2d at 347 (emphasis added). We also emphasized that a defendant's escape operated as a rejection of the legitimate means afforded him for challenging his conviction, and we found no reason that a fugitive's "apprehension, which he in no way intentionally assisted, should entitled him to rights already forfeited." Id. at 615, 476 A.2d at 349 (emphasis added).
We also reviewed cases from the United States Supreme Court in making our decision in Appellant's direct appeal, including Molinaro v. New Jersey, 396 U.S. 365, 90 S.Ct. 498, 24 L.Ed.2d 586 (1970).[12] In Molinaro, the Appellant appealed his state conviction to the Supreme Court, and then became a fugitive while the appeal was pending. The Court dismissed the appeal, stating that the Appellant's flight "disentitled" him from calling upon the resources of the Court for the determination of his claims. Id. at 366, 90 S.Ct. 498.
We noted that, although Molinaro was not binding upon us, we did find its logic persuasive and that it aided us in our conclusion that our own courts, when faced with a fugitive defendant, have the right to dismiss pending post-verdict motions. Accordingly, *148 we found that the dismissal of Appellant's post-verdict motions was proper and that the appeal came to us, as previously stated, with no allegations of error (direct or collateral) preserved.
To grant Appellant the relief he requests in his PCRA, an evidentiary hearing on claims already forfeited by his flight from captivity, would render meaningless all previous rulings of the trial court and of this Court. Appellant has presented us with no reason to disregard all prior decisions validly and legitimately entered and we will not do so. What we stated in 1994 still holds true:
[I]t would be anomalous to permit Appellant to prevail on this claim and then to subject the trial court to a remand order requiring it to rule on the merits of these same [issues] which were raised, or which could have been raised, at an earlier time and which could have been addressed had Appellant demonstrated some respect for the trial court and legal process.
Kindler at 228, 639 A.2d at 4. Accordingly, we find that the PCRA court did not err in dismissing Appellant's Petition for Relief.[13]
Justice ZAPPALA concurs in the result.
Justice NIGRO concurs in the result.
NOTES
[1] 18 Pa.C.S. § 2502(a).
[2] 18 Pa.C.S. § 2901.
[3] 18 Pa.C.S. § 903.
[4] Appellant apparently made his escape, along with another inmate, through the window of a third inmate's cell where a steel bar had been sawed through and the glass broken.
[5] Commonwealth v. Kindler, 536 Pa. 228, 639 A.2d 1 (1994).
[6] Justice Cappy filed a concurring opinion stating that he would hold that, "the post-verdict motions of an ex-fugitive may be reinstated in the court's discretion if, after being returned to custody, the fugitive can show a compelling reason for having his post-verdict motions heard." He did find, however, that under the facts of Appellant's case, the trial court possessed full authority to dismiss his post-verdict motions.
Justice Flaherty (now Chief Justice Flaherty) joined Justice Cappy's concurring opinion and filed his own concurring opinion stating that he would go somewhat further and "require that a compelling reason of the most extraordinary nature be present before the post-verdict motions of an ex-fugitive may be reinstated" (which reasons were not present in Appellant's case).
[7] The duty to review the sufficiency of the evidence in death penalty cases is self-mandated and stems from Commonwealth v. Zettlemoyer, 500 Pa. 16, 454 A.2d 937 (1982), cert. denied 461 U.S. 970, 103 S.Ct. 2444, 77 L.Ed.2d 1327 (1983).
[8] This review is mandated by the Sentencing Code, 42 Pa.C.S. § 9711(h).
[9] 42 Pa.C.S. § 9546(d), in effect at the time Appellant filed his PCRA Petition, provided that a final order disposing of an Appellant's post-conviction petition in a death penalty case was directly appealable to this Court.
[10] 42 Pa.C.S. § 9543(a)(2), in effect at the time Appellant filed his PCRA Petition, provided:
That the conviction or sentence resulted from one of the following:
(i) A violation of the Constitution of Pennsylvania or laws of this Commonwealth or the Constitution of the United States which, in the circumstances of the particular case, so undermined the truth-determining process that no reliable adjudication of guilt or innocence could have taken place.
(ii) Ineffective assistance of counsel which, in the circumstances of the particular case, so undermined the truth-determining process that no reliable determination of guilt or innocence could have taken place.
(iii) A plea of guilty unlawfully induced where the circumstances make it likely that the inducement caused an individual to plead guilty.
(iv) The improper obstruction by Commonwealth officials of the petitioner's right of appeal where a meritorious appealable issue existed and was properly preserved in the trial court.
(v) A violation of the provisions of the Constitution, law or treaties of the United States which would require the granting of Federal habeas corpus relief to a State prisoner.
(vi) The unavailability at the time of trial of exculpatory evidence that has subsequently become available and that would have affected the outcome of the trial if it had been introduced.
(vii) The imposition of a sentence greater than the lawful maximum.
(viii) A proceeding in a tribunal without jurisdiction.
[11] It is important to note that all six Justices participating in the decision of Appellant's case agreed that Appellant's judgment of sentence should be affirmed. Although Justice Cappy and Justice Flaherty (now Chief Justice Flaherty) wrote separately to suggest that a returned fugitive's post-verdict motions should be reinstated under certain circumstances, both agreed that no such circumstances were present in Appellant's case and that the trial court correctly dismissed Appellant's post-verdict motions.
[12] We also cited to Ortega-Rodriguez v. United States, 507 U.S. 234, 113 S.Ct. 1199, 122 L.Ed.2d 581 (1993), for the proposition that where there is a connection between a defendant's fugitive status and the appellate process, the sanction of dismissal of the appeal was a reasonable response. The Court in Ortega-Rodriguez did, however, remand the matter for a determination of whether a defendant's flight and recapture occurring before his appeal had sufficient connection to his appeal to justify its dismissal.
[13] Appellant also argues that, because this is a capital case, he should be given the benefit of the "relaxed waiver" rule under Commonwealth v. Zettlemoyer, 500 Pa. 16, 454 A.2d 937 (1982), cert. denied, 461 U.S. 970, 103 S.Ct. 2444, 77 L.Ed.2d 1327 (1983). This doctrine permits the review of claims in capital cases even if there has been a procedural default in the history of the case. What Appellant misapprehends however, is that it was not a procedural default that precluded review of his claims, but rather his own act of becoming a fugitive that resulted in the forfeiture of the right to review of those claims. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1462778/ | 517 F.3d 1137 (2008)
SYBERSOUND RECORDS, INC., Plaintiff-Appellant,
v.
UAV CORPORATION, doing business as Karaoke Bay doing business as Sterling Entertainment; Madacy Entertainment LP, doing business as Karaoke Party; Audio Stream, Inc., doing business as Keynote Karaoke; Top Tunes, Inc.; Singing Machine Company, Inc.; BCI Eclipse Company, LLC; Amos Alter; David Alter; Edward Goetz; Dennis Norden; Frank Robertson; Douglas Vogt; Richard Vogt, Defendants-Appellees.
No. 06-55221.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted October 18, 2007.
Filed February 27, 2008.
*1138 *1139 *1140 Peter L. Haviland and Julian Brew, Kaye Scholer LLP, Los Angeles, CA, for the plaintiff-appellant.
Paul N. Sorrell and Henry L. Self, III, Lavely & Singer Professional Corporation, Los Angeles, CA; Daniel A. Johnson, Sullivan Johnson LLP, Los Angeles, CA; Robert A. Aronson, Beverly Hills, CA, for the defendants-appellees.
Before: DIARMUID F. O'SCANNLAIN and MILAN D. SMITH, JR., Circuit Judges, and MICHAEL W. MOSMAN,[*] District Judge.
MILAN D. SMITH, JR., Circuit Judge:
Sybersound Records (Sybersound), a karaoke record producer, appeals the district court's judgment dismissing the first amended complaint (FAC) it filed against its competitors (collectively, Corporation Defendants), and their officers and employees (collectively, Individual Defendants). We affirm the judgment of the district court.
*1141 In this appeal, we determine whether a party lacking standing to bring a copyright infringement suit under the Copyright Act, but who complains of competitive injury stemming from acts of alleged infringement, may bring a Lanham Act claim, Racketeer Influenced and Corrupt Organizations Act (RICO) claim, or related state law unfair competition claims, whose successful prosecution would require the litigation of the underlying infringement claim. We hold that it cannot.
We also consider whether the transfer of an interest in a divisible copyright interest from a copyright co-owner to Sybersound, unaccompanied by a like transfer from the other copyright co-owners, can be an assignment or exclusive license that gives the transferee a co-ownership interest in the copyright. We hold that it cannot.
I. Factual Background
A. Copyright Compliance Statements
Sybersound and the Corporation Defendants are competitors that produce and sell karaoke records. They primarily sell to a group of distributors and retailers that resell these records to the public. This purchasing group (collectively, Customers) includes Anderson Merchandising, Handleman Entertainment Resources, Alliance Entertainment Corporation, Wal*Mart, KMart, Best Buy, Toys "R" Us, and Fry's Electronics.
According to Sybersound, to reproduce and distribute karaoke records, karaoke record producers must obtain karaoke synchronization licenses from each copyright holder with an interest in each song included on the record. The Customers require that the karaoke records they buy be 100% licensed. To comply with the Customers' policies, sellers of karaoke records must obtain copyright licenses from and pay fees and full royalties to each of the copyright owners. Some Customers have instituted measures to ensure compliance with their licensing requirements. For example, in 2003, Handleman required its vendors to sign an indemnification agreement in which each vendor "represents that it has all the appropriate and necessary licenses in order for Handleman to sell Vendor's merchandise to Handleman's customers." The following year, Handleman began requiring that each karaoke vendor annually provide a written certification that it has acquired karaoke licenses from each copyright holder and that "each such license is current, valid and paid in full to the date of the opinion letter." Similarly, Anderson requires its vendors to provide written documentation that its karaoke recordings are fully licensed and that vendors are accurately reporting sales and accounting for royalties.
Sybersound alleges that the Corporation Defendants misrepresent to the Customers that their karaoke records are 100% licensed and that all applicable royalties have been paid. Specifically, Sybersound alleges that its competitors claim to have all necessary licenses when they hold only compulsory licenses, licenses from less than 100% of the copyright holders, or no licenses at all. It further alleges that the Individual Defendants have, on various occasions, admitted that they intentionally failed to acquire the appropriate licenses for their karaoke recordings.
Sybersound also alleges that Madacy and Singing Machine use misleading labeling on their karaoke records which state, for example, that all songs are "used with permission" or that "The Singing Machine, The Leader in Home Karaoke, strictly adheres to all applicable music copyright and licensing laws."
Finally, Sybersound alleges that UAV and Madacy's licensing agent sent a letter to the Customers and publishers falsely claiming that Sybersound did not have karaoke-use *1142 licenses for many songs included in its recordings.
B. Sybersound's Copyright Infringement Claim
Sybersound also claims that UAV, Madacy, Audio Stream, Top Tunes, and BCI are infringing Sybersound's copyrights in several songs by producing karaoke records of these songs without obtaining a license from Sybersound or its copyright assignor, TVT Music Publishing (TVT). Sybersound claims to have acquired an ownership interest in these songs by entering into a written agreement with TVT, an original co-claimant[1] to the copyright of these songs. This written agreement allegedly made Sybersound an "exclusive assignee and licensee of TVT's copyrighted interests for purposes of karaoke use, and also the exclusive assignee of the right to sue to enforce the assigned copyright interest." According to Sybersound, the copyright holders of these songs had an understanding that each could license only his or her respective shares and that a duly authorized karaoke recording would require a written license from each.
II. Procedural Background
Sybersound, along with six music publishing companies, filed a complaint against the Corporation Defendants, alleging copyright infringement, violation of the Lanham Act, intentional interference with prospective economic relations, unfair competition under California Business and Professions Code § 17200 et seq., common law unfair competition, unfair trade practices under California Business and Professions Code § 17000 et seq., and seeking rescission and an accounting. The district court severed the music publishing plaintiffs from the suit and dismissed the claims for rescission of licenses and an accounting without prejudice. The Corporation Defendants then filed motions to dismiss for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). The district court granted these motions, dismissing the remaining claims with leave to amend.
Sybersound then filed a FAC that included most of the alleged causes of action pled in the original complaint, but also added claims against the Individual Defendants for violations of RICO, 18 U.S.C. § 1962(a), (c). The Corporation Defendants and the Individual Defendants (collectively, Defendants) filed motions to dismiss the FAC for failure to state a claim. The district court granted these motions, dismissing all claims with prejudice, and entered final judgment for the Defendants.[2] Sybersound timely appealed.
III. Standard of Review and Jurisdiction
Dismissals for failure to state a claim are reviewed de novo. Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir.2005). Generally, the review is limited to the consideration of the complaint, and all allegations of material fact are construed in the light most favorable to the nonmoving party. Id. Dismissal is appropriate only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim entitling plaintiff to relief." Id. (citations omitted). "This court can affirm the district court's dismissal on any ground supported by the record, even if the district *1143 court did not rely on the ground." Id. at 950 (citations omitted).
We have jurisdiction under 28 U.S.C. § 1291.
IV. Discussion
A. Lanham Act Claim
The Lanham Act § 43(a)(1) states in pertinent part:
Any person who, on or in connection with any goods or services, . . . uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which
(A) is likely to cause confusion, or to cause mistake, or to deceive . . . as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities,
shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
Lanham Act § 43(a)(1), 15 U.S.C. § 1125(a)(1).
The Lanham Act was intended to protect against the "deceptive and misleading use of marks" and to "protect persons engaged in . . . [interstate] commerce against unfair competition." 15 U.S.C. § 1127; Dastar v. Twentieth Century Fox Film Corp., 539 U.S. 23, 28, 123 S.Ct. 2041, 156 L.Ed.2d 18 (2003). Section 43(a), 15 U.S.C. § 1125(a), "is one of the few provisions[of the Act] that goes beyond trademark protection" and addresses unfair competition. Dastar, 539 U.S. at 29, 123 S.Ct. 2041. This provision, however, "does not have boundless application as a remedy for unfair trade practices" and is not a "federal `codification' of the overall law of `unfair competition' . . . but can apply only to certain unfair trade practices prohibited by its text." Id. (citations omitted).
Sybersound contends that the Corporation Defendants engaged in unfair competition by violating copyright laws, thereby paying less in royalties and licensing fees to produce their products than Sybersound did to produce its own, and by misrepresenting their compliance with the Customers' licensing policies, which permitted them to sell pirated records at prices that undercut Sybersound's own prices. Furthermore, representatives of UAV and Madacy purportedly sent letters or made statements to the Customers accusing Sybersound of also failing to obtain the requisite licenses for its re-recordings. Sybersound contends these are misrepresentations under § 43(a)(1)(B) of the Lanham Act because they are made in commercial advertising or promotion to the Customers and the misrepresentations are about the "nature, characteristics, [and] qualities" of the karaoke records.
Sybersound claims that it is contesting only the Corporation Defendants' misrepresentations in response to the Customers' policies. According to Sybersound's own description of copyright law in the context of karaoke synchronization licenses, however, the Customers' policies parallel the licensing agreements that exist in the recording industry and are a mechanism for the Customers to ensure that the products they sell comply with copyright law. The nature of the alleged misrepresentation exposes a tension between the Lanham Act's goal of preventing unfair competition and the Copyright Act's goal of providing a statutory scheme granting rights only to copyright owners.
Copyright is wholly a "creature of statute, and the only rights that exist under *1144 copyright law are those granted by statute." Silvers v. Sony Pictures Entm't, 402 F.3d 881, 883-84 (9th Cir.2005) (en banc). Under copyright law, only copyright owners and exclusive licensees of copyright may enforce a copyright or a license. See 17 U.S.C. § 501(b) (conferring standing only to the "legal or beneficial owner of an exclusive right" who "is entitled . . . to institute an action for any infringement . . . while he or she is the owner of it"); Silvers, 402 F.3d at 885. Therefore, third party strangers and nonexclusive licensees cannot bring suit to enforce a copyright, even if an infringer is operating without a license to the detriment of a nonexclusive licensee who has paid full value for his license. See 3-10 Melville B. Nimmer & David Nimmer, Nimmer on Copyright, § 10.02[B][1] (2007).
The reasoning behind the Supreme Court's decision in Dastar, 539 U.S. 23, 123 S.Ct. 2041, 156 L.Ed.2d 18, is instructive in resolving the issue before this court because it addressed the tension between the Lanham Act and the Copyright Act. Id. at 33-35, 123 S.Ct. 2041.
In Dastar, a film company copied a television series that had passed into the public domain, and marketed it as its own. Id. at 27-28, 123 S.Ct. 2041. Production companies that owned the exclusive television rights from the original book on which the series was based brought a Lanham Act suit, claiming that the lack of attribution to the original series misrepresented the "origin" of the series. Id. The Court held that "origin of goods" in the Lanham Act § 43(a)(1)(A) did not refer to the author of any idea, concept, or communication embodied in a good, but to the producer of the tangible good itself. Id. at 37, 123 S.Ct. 2041. Otherwise, the Lanham Act would provide authors of creative works with perpetual protection that they did not have under the Copyright Act. Id.
In dicta, the Court further noted that if the film company had misrepresented, in advertising or promotion, that the contents of the video were significantly different from the series that it copied, it would have a Lanham Act claim for misrepresenting the "nature, characteristics [or] qualities" of its goods. Id. at 38, 123 S.Ct. 2041.
Sybersound argues that the licensing status of each work is part of the nature, characteristics, or qualities of the karaoke products. Following the reasoning in Dastar, however, to avoid overlap between the Lanham and Copyright Acts, the nature, characteristics, and qualities of karaoke recordings under the Lanham Act are more properly construed to mean characteristics of the good itself, such as the original song and artist of the karaoke recording, and the quality of its audio and visual effects. Construing the Lanham Act to cover misrepresentations about copyright licensing status as Sybersound urges would allow competitors engaged in the distribution of copyrightable materials to litigate the underlying copyright infringement when they have no standing to do so because they are nonexclusive licensees or third party strangers under copyright law, and we decline to do so.
Accordingly, we affirm the district court's dismissal of Sybersound's Lanham Act claims.
B. Copyright Infringement
Sybersound's second cause of action alleges that UAV, Madacy, Audio Stream, Top Tunes, and BCI infringed Sybersound's copyrights in nine songs. Sybersound asserts standing to sue as a co-owner in the copyrights for those songs.
Sybersound bases its copyright infringement claim on the following reasoning: TVT is an original co-claimant or joint copyright holder (co-owner) in nine songs. *1145 Such co-owners are like tenants in common, each owning a share of the undivided whole. H.R.Rep. No. 94-1476, at 121 (1976), as reprinted in 1976 U.S.C.C.A.N. 5659, 5736 ("Under the bill, as under present law, coowners of a copyright would be treated generally as tenants in common, with each co-owner having an independent right to use or license the use of a work, subject to a duty of accounting to the other co-owners for any profits."). Sybersound contends that it stepped into TVT's shoes and became a co-owner in the karaoke-use interest of the copyright when it became the "exclusive assignee and licensee of TVT Music Publishing's copyrighted interests for purposes of karaoke use, and also exclusive assignee of the right to sue to enforce the assigned copyright interests, for both present and past infringements in karaoke exploitation" pursuant to an assignment agreement with TVT. Citing 17 U.S.C. § 201(d)(1), Sybersound asserts standing to sue, as a co-owner, for copyright infringement against the Corporation Defendants that use any of the nine referenced copyrighted songs for karaoke purposes without having obtained a license from Sybersound or TVT. See 17 U.S.C. § 501(b); Davis v. Blige, 505 F.3d 90, 99 (2d Cir.2007) (co-owners may bring suit for copyright infringement without joining other co-owners).
Sybersound's analysis is flawed because, as a co-owner of the copyright, TVT could not grant an exclusive right in the karaoke-use interest of the nine referenced copyrights.
Prior to the current 1976 Copyright Act, under the 1909 Copyright Act and the doctrine of indivisibility, a copyright owner could not assign less than "`the totality of rights commanded by copyright.'" Gardner v. Nike, Inc., 279 F.3d 774, 778 (9th Cir.2002) (quoting 3-10 Nimmer, supra, § 10.01[A] (2001)) (a copyright owner possessed a bundle of rights that could not be assigned in parts). "Anything less than an assignment was considered to be a license," and only the copyright owner or assignee had standing to bring an infringement action. Id.
The 1976 Copyright Act largely eliminated the doctrine of indivisibility and codified the divisibility of the bundle of rights that constitutes a copyright.[3] 17 U.S.C. § 201(d)(2); Silvers, 402 F.3d at 886. However, 17 U.S.C. § 201(d), entitled "Transfer of Ownership," codified this divisibility as follows:
(1) The ownership of a copyright may be transferred in whole or in part by any means of conveyance or by operation of law, and may be bequeathed by will or pass as personal property by the applicable laws of intestate succession.
*1146 (2) Any of the exclusive rights comprised in a copyright, including any subdivision of any of the rights specified by section 106, may be transferred as provided by clause (1) and owned separately. The owner of any particular exclusive right is entitled, to the extent of that right, to all of the protection and remedies accorded to the copyright owner by this title.
17 U.S.C. § 201(d) (emphasis added). Next, 17 U.S.C. § 101 defines "transfer of copyright ownership" as "an assignment, mortgage, exclusive license, or any other conveyance, alienation, or hypothecation of a copyright or any of the exclusive rights comprised in a copyright . . . but not including a non exclusive license." 17 U.S.C. § 101 (emphasis added). "In other words, exclusive rights may be chopped up and owned separately, and each separate owner of a subdivided exclusive right may sue to enforce that owned portion of an exclusive right, no matter how small." Silvers, 402 F.3d at 887 (emphasis added).
If TVT were the sole copyright owner of the nine referenced songs and had transferred an exclusive karaoke-use interest to Sybersound (assuming such a divisible interest exists), Sybersound would have had standing as the exclusive licensee to sue the Corporation Defendants for infringement. However, even if a karaoke-use is a properly divisible interest in a copyright, TVT is not the exclusive owner of the karaoke-use interest in the copyright. In its Request for Judicial Notice filed concurrently with its motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), Madacy attached copies of copyright registration records from the United States Copyright Office showing that EMI Music Publishing, Ltd., Beyonce Publishing, Scott Storch Music, Careers-BMG Music Publishing, Inc., Xtina Music, Logrhythm Music, and others, are all co-owners of the copyrights in one or more of the nine assigned songs. Thus, unless all the other co-owners of the copyright joined in granting an exclusive right to Sybersound, TVT, acting solely as a co-owner of the copyright, could grant only a nonexclusive license to Sybersound because TVT may not limit the other co-owners' independent rights to exploit the copyright. See Oddo v. Ries, 743 F.2d 630, 633 (9th Cir. 1984). Sybersound does not allege that it has received the consent of the other co-owners to become the exclusive licensee for the karaoke-use interest.
Sybersound assumes that because its assignment agreement with TVT says that TVT is transferring all its karaoke-use interests in the copyrights to Sybersound, and says that Sybersound became exclusive assignee of TVT's copyrighted interest in karaoke use and of TVT's right to sue, Sybersound became a co-owner upon execution of the agreement. Sybersound is mistaken. Although the 1976 Copyright Act permits exclusive rights to be chopped up and owned separately, to be effective, the assignment or other type of alienation permitted by 17 U.S.C. §§ 101 and 201(d)(2) must be exclusive. Since TVT's assignment was admittedly non-exclusive, TVT succeeded only in transferring what it could under 17 U.S.C. § 201(d), a non-exclusive license, which gives Sybersound no standing to sue for copyright infringement. See 3-10 Nimmer, supra, § 10.02[B][1] (2007).
We hold that because Sybersound is neither an exclusive licensee nor a co-owner in the nine copyrights, it lacks standing to bring the copyright infringement claims alleged in the FAC, and, thus, its copyright infringement claims fail.
C. RICO Claims
1) Statutory Standing
RICO provides a private right of action for "[a]ny person injured in his business or property" by a RICO violation. 18 U.S.C. *1147 § 1964(c). Sybersound seeks relief pursuant to RICO statutes, 18 U.S.C. § 1962(a) and (c). 18 U.S.C. § 1962(a) prohibits a person who receives income derived from a pattern of racketeering activity from using or investing such income in an enterprise engaged in interstate commerce.[4] 18 U.S.C. § 1962(c) prohibits a person employed by or associated with any enterprise engaged in interstate commerce to conduct or participate in the conduct of the enterprise through a pattern of racketeering activity.[5]
Sybersound alleges that some of the individual executives of the Corporation Defendants engaged in racketeering in violation of § 1962(c) by engaging in the predicate acts of criminal copyright infringement, mail fraud, and wire fraud. Specifically, it alleges that the Individual Defendants engaged in copyright infringement by copying and distributing karaoke records for which they lacked licenses and did not pay royalties, and further engaged in mail and wire fraud by representing to the Customers via mail or fax that they comply with the Customers' policies.[6] Sybersound also seeks recovery under § 1962(a), alleging that the Corporation Defendants invested the proceeds from these predicate acts to unfairly reduce prices to undercut their competitors. Sybersound contends that it has met the standing requirements under 18 U.S.C. § 1962(a) and (c) because it is a competitor that has been directly injured by the resulting undercutting of its prices.
In Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 267-68, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992), the Supreme Court held that Congress intended the statute conferring a private right of action under RICO, 18 U.S.C. § 1964(c), to include a proximate causation requirement because the relevant language in the RICO statute mirrored that of the civil-action portions of the federal antitrust laws. Holmes, 503 U.S. at 267-68, 112 S.Ct. 1311. It reasoned that at the time RICO was enacted, courts had interpreted the anti-trust provision to include a proximate causation requirement. Id. Because Congress is presumed to know how the federal courts interpret its statutes, the Supreme Court concluded that Congress intended that the courts read a similar proximate causation requirement into RICO. Id.
Following the Supreme Court's analysis in Holmes, this court formulated three non-exhaustive factors to determine whether the RICO proximate causation requirement has been met:
*1148 (1) whether there are more direct victims of the alleged wrongful conduct who can be counted on to vindicate the law as private attorneys general; (2) whether it will be difficult to ascertain the amount of the plaintiff's damages attributable to defendant's wrongful conduct; and (3) whether the courts will have to adopt complicated rules apportioning damages to obviate the risk of multiple recoveries.
Mendoza v. Zirkle Fruit Co., 301 F.3d 1163, 1168-69 (9th Cir.2002) (quotations and citation omitted). The district court dismissed Sybersound's RICO claim, reasoning that it had failed to overcome this proximate causation hurdle.
Sybersound argues that as a competitor injured by unlawful predicate acts, it is the quintessential RICO plaintiff that has suffered a direct injury. Furthermore, Sybersound claims that because of the small number of Customers involved, damages would not be difficult to ascertain because it can establish when it lost a contract to a competitor charging lower prices. It also claims that its injuries are separate and distinct from the injuries to the copyright holders, eliminating the risk of multiple recoveries.
The Supreme Court recently clarified the proximate causation requirement for a suit brought under § 1962(c), thereby foreclosing Sybersound's argument. Anza v. Ideal Steel Supply Corp., 547 U.S. 451, 126 S.Ct. 1991, 164 L.Ed.2d 720 (2006).
In Anza, National Steel Supply (National) failed to charge New York sales tax to its cash-paying customers and submitted fraudulent tax returns, which allegedly allowed it to undercut Ideal Steel Supply Corporation's (Ideal) prices. Id. at 1994-95. Ideal brought suit under RICO, 18 U.S.C. § 1962(a) and (c). Id. at 1995. The district court granted National's Rule 12(b)(6) motion to dismiss for failure to state a claim. Id. at 1995. The Second Circuit vacated the district court's judgment, holding that the plaintiff has standing "even where the scheme depended on fraudulent communications directed to and relied on by a third party rather than the plaintiff." Id. The Supreme Court reversed, holding that the attenuated harm suffered by Ideal did not meet the directness requirement laid out in Holmes as to the § 1962(c) claim. Id. at 1996.
In reaching its conclusion, the Supreme Court considered the principles underlying the directness requirement. Id. at 1997-98. First, "[o]ne motivating principle is the difficulty that can arise when a court attempts to ascertain the damages caused by some remote action." Id. at 1997. The Supreme Court noted that defrauding the tax authority did not require National to lower prices, since lower prices may have resulted from, for example, a decision that "additional sales would justify a smaller profit margin." Id. Moreover, "Ideal's lost sales could have resulted from factors other than petitioner's alleged acts of fraud. Businesses lose and gain customers for many reasons. . . ." Id.
Similarly in this case, the court would have to engage in a speculative and complicated analysis to determine what percentage of Sybersound's decreased sales, if any, were attributable to the Corporation Defendants' decision to lower their prices or a Customer's preference for a competitor's products over Sybersound's, instead of to acts of copyright infringement or mail and wire fraud. See id. This case would require an even more speculative analysis than Anza because Sybersound has more than one principal competitor.
As noted by the Supreme Court,
[t]he element of proximate causation recognized in Holmes is meant to prevent these types of intricate, uncertain inquiries from overrunning RICO litigation. It has particular resonance when *1149 applied to claims brought by economic competitors, which, if left unchecked, could blur the line between RICO and the antitrust laws.
Id. at 1998. "When a court evaluates a RICO claim for proximate causation, the central question it must ask is whether the alleged violation led directly to plaintiff's injuries." Id.
Second, "[t]he requirement of direct causal connection is especially warranted where the immediate victims of an alleged RICO violation can be expected to vindicate the laws by pursuing their own claims." Id. at 1998. The Supreme Court noted that the direct victim, the state tax authority, could be expected to pursue National for its tax violations. Id. Here, as well, the more direct victims of the Corporation Defendants' alleged infringement actions, the copyright holders, can be expected to pursue their own claims. In fact, prior to the severing of their claims, six music publishers pursued their copyright infringement claims as part of this very action.
The third factor discussed in Holmes was the risk of multiple recoveries. Holmes, 503 U.S. at 269, 112 S.Ct. 1311. Anza makes clear, however, this is not a necessary condition for concluding that proximate cause is lacking. See Anza, 126 S.Ct. at 1997-98 (acknowledging that there was no appreciable risk of duplicative recoveries).
Following Anza, we hold that Sybersound cannot overcome the proximate causation hurdle to assert a RICO violation under § 1962(c).
2) Investment Injury
Sybersound has not alleged an investment injury separate and distinct from the injury flowing from the predicate act, as required for a RICO claim brought under § 1962(a).
In Nugget Hydroelectric, L.P. v. Pacific Gas and Electric Co., 981 F.2d 429, 437 (9th Cir.1992), we held that a "plaintiff seeking civil damages for a violation of section 1962(a) must allege facts tending to show that he or she was injured by the use or investment of racketeering income." In this case, Sybersound must allege that the investment of racketeering income was the proximate cause of its injury. Reinvestment of proceeds from alleged racketeering activity back into the enterprise to continue its racketeering activity is insufficient to show proximate causation. See Wagh v. Metris Direct, Inc., 363 F.3d 821, 829 (9th Cir.2003), overruled on other grounds, Odom v. Microsoft Corp., 486 F.3d 541, 551 (9th Cir.2007) (en banc); Westways World Travel v. AMR Corp., 182 F.Supp.2d 952, 960-61 (C.D.Cal.2001) (explaining that when racketeering is committed on behalf of a corporation, almost every racketeering act committed by a corporation would also result in a § 1962(a) violation because corporations generally reinvest their profits, eviscerating the distinction between § 1962(c) and (a)).
Sybersound argues that it meets § 1962(a)'s investment injury requirement because it is the direct victim of the use of proceeds generated by the predicate acts. Its competitors used the proceeds from their copyright infringements and mail fraud to undercut Sybersound's prices. Sybersound, however, has not alleged any injury separate and distinct from the injuries incurred from the predicate act itself.
Here, Sybersound's injury stems from the alleged copyright infringement. The purported infringement by the Corporation Defendants, not the income from the sale of pirated records, allegedly allowed the Corporation Defendants to undercut Sybersound's prices. Sybersound's reliance on Simon v. Value Behavioral Health, 208 F.3d 1073, 1083 (9th Cir.2000), *1150 overruled on other grounds, Odom, 486 F.3d at 551, is unavailing. In that case, Value Behavioral Health fraudulently denied health benefit claims to patients and reinvested that income to build a group of preferred medical providers who undertook to eliminate outside providers. Id. The court, in dicta, noted that the victims of the investment were competitors who were driven out of business by the preferred providers. Id. There, the competitors in Simon would not have been injured by the predicate act of the fraudulent denial of health care benefits, but would have been directly injured by the reinvestment of the proceeds resulting from such denial. In contrast, Sybersound's competitive injury stems from the alleged copyright infringement for which it does not have statutory standing to bring a RICO claim.
Accordingly, we hold that the district court properly dismissed Sybersound's § 1962(a) and (c) RICO claims.
D. State Law Claims
1) Preemption
Finally, Sybersound seeks relief under a variety of California state laws. The district court dismissed all state law claims, finding that they are preempted by the Copyright Act. It reasoned that the underlying basis of each of Sybersound's state law claims is that because the Corporation Defendants failed to obtain complete licenses for the songs they sell, they caused harm to Sybersound. It therefore concluded that the state law claims are "merely copyright claims dressed up to look like state law claims" and that the claims were not distinguishable from copyright infringement claims.
The Copyright Act explicitly preempts state laws that regulate in the area of copyright, stating that "all legal or equitable rights that are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 . . . are governed exclusively by this title." 17 U.S.C. § 301(a). Copyright law does not preempt state laws with respect to "activities violating legal or equitable rights that are not equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106." Id. § 301(b)(3). Traditionally, two conditions must be satisfied for a law to be preempted under the federal Copyright Act. Downing v. Abercrombie & Fitch, 265 F.3d 994, 1003 (9th Cir.2001). "First, the content of the protected right must fall within the subject matter of copyright as described in 17 U.S.C. §§ 102 and 103. Second, the right asserted under state law must be equivalent to the exclusive rights contained in section 106 of the Copyright Act." Id.
In this case, the plaintiff lacks standing to bring a claim of copyright infringement under the federal copyright law. The cases cited by Sybersound to avoid preemption are inapplicable because they all involve plaintiffs who would have had standing under the federal copyright act, or who pursued non-infringement claims. E.g., Firoozye v. Earthlink Network, 153 F.Supp.2d 1115 (N.D.Cal.2001) (plaintiff asserted own copyright claim); Rubin v. Brooks/Cole Pub. Co., 836 F.Supp. 909 (D.Mass.1993) (same); PMC, Inc. v. Saban Entm't, Inc., 45 Cal.App.4th 579, 52 Cal. Rptr.2d 877, 885 n. 8 (1996) (gravaman of complaint was that defendant prevented plaintiff from finalizing a licensing deal), overruled on other grounds, Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 131 Cal.Rptr.2d 29, 63 P.3d 937, 954 n. 11 (2003).
The exclusive rights of copyright owners granted by Congress under § 106 of the Copyright Act may only be enforced by an owner or exclusive licensee of the right; allowing the litigation of these state claims would defeat Congress's intent to have federal law occupy the entire field of copyright *1151 law. See 17 U.S.C. § 501(b); Perfect 10, Inc. v. Cybernet Ventures, Inc., 167 F.Supp.2d 1114, 1125 (C.D.Cal.2001). If we were to permit Sybersound's claims based on incidences of copyright infringement to proceed, Sybersound would be litigating a third party copyright infringement claim under the guise of state law; to prevail on either the infringement claim or the claim based on misrepresentations of whether infringement occurred, Sybersound would have to prove that copyright infringement occurred. Accordingly, the state law claims that necessarily depend on such a showing were properly dismissed.
We now turn to the remaining state law claims.
2) Intentional Interference with Prospective Economic Relations
Sybersound alleges that the Corporation Defendants intended to disrupt, and have disrupted, its business relationships with its Customers by engaging in the wrongful acts of misrepresenting to the Customers that the Corporation Defendants are paying all royalties required under their licensing contracts, and that Sybersound does not have valid licenses for its songs.
In California, the elements of the tort of intentional interference with prospective economic advantage are:
(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional [wrongful] acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.
Korea Supply Co., 131 Cal.Rptr.2d 29, 63 P.3d at 950.
As noted, to the extent an alleged wrongful act by the Corporation Defendants is based on copyright infringement, it is preempted.
Furthermore, Sybersound has failed to plead facts either showing or allowing the inference of actual disruption to its relationship with the Customers. See Silicon Knights, Inc. v. Crystal Dynamics, Inc., 983 F.Supp. 1303, 1313 (N.D.Cal.1997) (finding the pleadings insufficient where the complaint alleged only that the misrepresentations induced distributors not to deal with plaintiffs without providing facts alleging an actual disruption to negotiations or potential contracts). In its complaint, Sybersound merely states in a conclusory manner that it "has been harmed because its ongoing business and economic relationships with Customers have been disrupted." Sybersound does not allege, for example, that it lost a contract nor that a negotiation with a Customer failed.
Accordingly, Sybersound's cause of action for tortious interference with prospective economic relations was properly dismissed.
3) Unfair Competition Law (UCL), California Business and Professions Code § 17200 et seq.
California's statutory unfair competition laws broadly prohibit unlawful, unfair, and fraudulent business acts. Korea Supply Co., 131 Cal.Rptr.2d 29, 63 P.3d at 943. Unlawful acts are "anything that can properly be called a business practice and that at the same time is forbidden by law . . . be it civil, criminal, federal, state, or municipal, statutory, regulatory, or court-made," where court-made law is, "for example a violation of a prior court order." Nat'l Rural Telecomm. Coop. v. DIRECTV, Inc., 319 F.Supp.2d 1059, 1074 & n. 22 (C.D.Cal.2003) (quoting Smith v. State Farm Mut. Auto. Ins. Co., *1152 93 Cal.App.4th 700, 113 Cal.Rptr.2d 399, 414 (2001); Saunders v. Superior Court, 27 Cal.App.4th 832, 33 Cal.Rptr.2d 438, 441 (1994)) (internal quotations omitted). Unfair acts among competitors means "conduct that threatens an incipient violation of an antitrust law, or violates the spirit or policy of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition." Cel-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 83 Cal.Rptr.2d 548, 973 P.2d 527, 544 (1999). Finally, fraudulent acts are ones where members of the public are likely to be deceived. Nat'l Rural Telecomm. Co-op., 319 F.Supp.2d at 1077-78.
In its FAC, Sybersound asserts that the "foregoing acts constitute unlawful, unfair and fraudulent business acts or practices within the meaning of Section 17200" and that it has "suffered injury in fact and has lost money as a direct result of the Defendants' violations of Section 17200." Even assuming that this constitutes a sufficiently detailed pleading, Sybersound has failed to state a claim.
To the extent the improper business act complained of is based on copyright infringement, the claim was properly dismissed because it is preempted. What remains are claims based on the Corporation Defendants' alleged misrepresentations to the Customers that they are complying with policies requiring payment of royalties, misrepresentations to copyright holders that they are obtaining proper licenses from other co-owners and paying all royalties, and misrepresentations to the Customers that Sybersound is infringing copyrights.
We first address the claims based on contracts and misrepresentations to which Sybersound was not a party, namely the misrepresentations to the Customers and copyright holders about payment of royalties and licenses, which sound in contract law. Under the sweeping standing provisions of California's UCL, "[s]ection 17200 does not require that a plaintiff prove that he or she was directly injured by the unfair practice or that the predicate law provides for a private right of action."[7]Gregory v. Albertson's Inc., 104 Cal.App.4th 845, 128 Cal.Rptr.2d 389, 392 (2002). "[A] breach of contract may form the predicate for a section 17200 claim, provided it also constitutes conduct that is unlawful, or unfair, or fraudulent." Nat'l Rural Telecomm. Co-op., 319 F.Supp.2d at 1074 (internal quotation and citation omitted). Sybersound, however, has not pled that the breaches of contract are independently unlawful, unfair, or fraudulent, merely that the Corporation Defendants do not pay royalties or acquire licenses from other co-owners, in breach of their contracts with licensors and the Customers.
Furthermore, allowing Sybersound to bring suit to essentially vindicate the rights of the copyright holders and the Customers would pose significant problems in administering the equitable remedy provided under the UCL. In its FAC, Sybersound requests "a preliminary and permanent injunction barring the Defendants from engaging in additional acts of unfair competition and for such restitution as permitted by law." It further states that "forcing Defendants to fully license their products will result in the enforcement of an important right affecting the *1153 public interest." Because the unfair competition claim is based upon the misrepresentations that occurred in separate business relationships among karaoke records producers, licensors, and the Customers, the court would be placed in the awkward situation of enforcing private contracts among sophisticated parties who are not all parties to this lawsuit. See Gregory, 128 Cal.Rptr.2d at 396 (dismissing a UCL claim and noting that the specific remedy sought under the UCL would "cause the court to assume the roles of real estate broker or property manager . . . [and] require the court to make competitive business judgments." (internal quotation omitted)).
In this case, forcing "Defendants to fully license their products" and enforcing sales and royalties contracts through this litigation may "leave victims worse off than they would be if they filed individual actions against [defendants]." Rosenbluth Int'l, Inc. v. Superior Court, 101 Cal. App.4th 1073, 124 Cal.Rptr.2d 844, 847 (2002) (dismissing a UCL claim that was based on a contract where the public in general was not harmed by the defendant's unlawful practices, but where the victims of the unlawful actions were sophisticated corporations that negotiated their individual contracts with defendants). Courts are institutionally ill-suited to enforce and superintend private contracts among business entities where the concerned entities themselves are not parties to the suit.
Sybersound's allegations that UAV and Madacy falsely told the Customers that Sybersound's karaoke recordings infringed on copyrights also fail to state a claim. Since Sybersound cannot state a claim under the Lanham Act or the Copyright Act and has not pled any other unlawful acts under which this claim would fall, it cannot meet the unlawful conduct prong of the UCL. Moreover, Sybersound has also not pled an act that would be an incipient violation of antitrust law, as required under Cel-Tech for claims against competitors. Finally, Sybersound has not pled that these misrepresentations are likely to deceive members of the general public.
Accordingly, we conclude that the UCL claim was also properly dismissed by the district court.
4) California Common Law Unfair Competition
"The common law tort of unfair competition is generally thought to be synonymous with the act of `passing off' one's goods as those of another." Bank of the W. v. Superior Court, 2 Cal.4th 1254, 10 Cal.Rptr.2d 538, 833 P.2d 545, 551 (1992) (explaining that the tort provided "an equitable remedy against the wrongful exploitation of trade names and common law trademarks that were not otherwise entitled to legal protection" and that the expansion of unfair competition law is primarily based in statutes). Sybersound has not alleged that the Corporation Defendants have passed off their goods as those of another nor that they exploit trade names or trademarks and, thus, has not stated a common law unfair competition claim.
5) Unfair Trade Practices, California Business and Professions Code § 17000 et seq.
Under California Business and Professions Code § 17043, "[i]t is unlawful for any person engaged in business within this State to sell any article or product at less than the cost thereof to such vendor, or to give away any article or product, for the purpose of injuring competitors or destroying competition." Cal. Bus. & Prof. Code § 17043 (emphasis added).
The California Supreme Court has held that to violate this act, a generalized understanding *1154 or intent that particular conduct will injure competition is insufficient to state a claim; instead, the violator must act with the specific purpose of injuring its competition. Cel-Tech Commc'ns, 83 Cal. Rptr.2d 548, 973 P.2d at 536 ("Section 17043 uses the word `purpose,' not `intent,' not `knowledge.' We therefore conclude that to violate section 17043, a company must act with the purpose, i.e., the desire, of injuring competitors or destroying competition.").
Sybersound has not met this requirement. It alleges that the Defendants engaged in their behavior "knowing that their below-cost sales would undercut the prices of their competitors . . . and specifically intended to injure competitors . . . and to destroy competition." As noted, the intent to injure competitors is insufficient; Sybersound must allege that the Corporation Defendants' purpose was to injure Sybersound. Because it has not done so, this claim also fails.
V. Conclusion
For the foregoing reasons, the judgment of the district court is AFFIRMED.
NOTES
[*] The Honorable Michael W. Mosman, United States District Judge for the District of Oregon, sitting by designation.
[1] A copyright claimant is either the "author of the work," or the "person or organization that has obtained ownership of all rights under the copyright initially belonging to the author." 37 C.F.R. § 202.3(a)(3).
[2] Defendants Madacy, Amos Alter, and David Alter filed a motion to stay or dismiss the FAC based on international comity and forum non conveniens arguments. The district court denied this motion as moot.
[3] A copyright consists of a bundle of six statutorily created rights, currently codified at 17 U.S.C. § 106. The statute confers upon the owner of the copyright the exclusive right to do and authorize the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
Id.
[4] Section 1962(a) states:
It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of a unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce.
[5] Section 1962(c) states:
It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt.
[6] Sybersound also alleged in the FAC that the letters sent by individuals at UAV and Madacy to Customers that falsely stated that Sybersound's karaoke records lacked the requisite licenses were acts of mail and wire fraud. Sybersound, however, failed to raise this argument in its brief, and we decline to reach the merits of this claim. Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir.1999).
[7] Recently, Proposition 64 restricted UCL's standing requirement somewhat by requiring a private action be brought by "any person who has suffered injury in fact and has lost money or property as a result of such unfair competition." Cal. Bus. & Prof.Code § 17204. Sybersound has alleged loss of money as a result of the Corporation Defendants' wrongfully acquired competitive advantage. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1912339/ | 816 So.2d 1039 (2001)
Ex parte UNION CAMP CORPORATION.
(Re Joel Cobb v. Union Camp Corporation).
1992122.
Supreme Court of Alabama.
June 1, 2001.
Rehearing Denied September 7, 2001.
*1040 Peter S. Fruin and Robert E. Poundstone IV of Maynard, Cooper & Gale, P.C., Montgomery; and Lee E. Bains, Jr., and Stephen C. Jackson of Maynard, Cooper & Gale, P.C., Birmingham, for petitioner.
J. Hunter Phillips, William S. Hereford, and Clark A. Cooper of Burr & Forman, L.L.P., Birmingham; and P. Richard Hartley of Hartley & Hickman, Greenville, for respondent.
BROWN, Justice.
We granted certiorari review to determine whether the Court of Civil Appeals correctly reversed a summary judgment entered in favor of Union Camp Corporation ("Union Camp") on a claim alleging respondeat-superior liability. Because we find that the trial court properly entered the summary judgment, we reverse and remand.
Facts and Procedural History
Before April 1993, Rocky Creek Logging Company ("Rocky Creek"), a wholly owned subsidiary of Union Camp, was responsible for harvesting 240,000 acres of timber owned by Union Camp in Butler County. Once the timber was harvested, Rocky Creek was responsible for transporting it to the Union Camp mills. In October 1992, Union Camp ceased the operation of Rocky Creek and offered its assets for sale. Lanier Edwards ("Edwards"), the president of Evergreen Forest Products, Inc. ("Evergreen"), negotiated with Union Camp, and Evergreen eventually purchased Rocky Creek's assets on April 2, 1993.
The purchase was documented in three agreements. Under a "Purchase and Sale Agreement," Evergreen agreed to purchase Rocky Creek's assets and equipment. A "Memorandum of Agreement" set forth Union Camp's agreement to provide Evergreen with a minimum 60,000 tons of "fee wood"[1] to harvest for one calendar year. Under a "Wood Supplier and Transportation Agreement," Evergreen agreed to sell 60,000 tons of "market wood"[2] and to transport 400,000 tons of wood chips and 60,000 tons of other wood products to various locations designated by Union Camp. Each agreement identified Evergreen as an independent contractor.
Anticipating the purchase of Rocky Creek's assets, Edwards met with Joel Cobb ("Cobb"), an independent professional logger, in 1993; the purpose of the meeting was to inquire about the possibility of Cobb's forming a logging crew to harvest timber for Evergreen. Cobb alleges that he and Edwards entered into an oral agreement, pursuant to which, Cobb says, Edwards guaranteed him the right to harvest a minimum of 30,000 tons of fee wood and an equal amount of quality market wood each year for a minimum of four *1041 years. Cobb testified that he told Edwards that the agreement would have to be for a minimum of four years to allow him to finance and to pay for the equipment necessary to meet the harvesting contract. In addition to the alleged oral agreement between Cobb and Edwards, Cobb entered into several written contracts with Evergreen in 1993 and 1994, all of which were for a term of one year; all of which allowed Evergreen to terminate Cobb's services by giving 20 days' written notice; and all of which identified Cobb as an independent contractor.
Cobb began harvesting Union Camp fee wood for Evergreen in May 1993. Union Camp representatives were often on the property from which the wood was being harvested. Union Camp provided Evergreen with specifications and instructions on how the timber was to be cut, how the land was to be left, what tract of land was to be cut, what type of timber was to be cut, when it was too wet to cut timber, how the wood was to be cleaned, and how the wood should be loaded onto the logging trucks. Union Camp also monitored matters such as the height of the stumps remaining after the timber was cut, stream crossings, and where permanent roads, if such roads were necessary, should be built.
Cobb continued harvesting Union Camp fee wood until February 1995, when Paul Schrantz, a Union Camp representative, instructed Tommy Mosley, a forester and procurement officer for Evergreen, not to allow Cobb to harvest fee wood on Union Camp property any longer. Although Cobb alleges that Union Camp wanted Evergreen to replace him with a logger who had formerly worked for Rocky Creek, Union Camp alleges that Cobb's work was unsatisfactory. Evergreen terminated Cobb's services.
On December 19, 1996, following his termination, Cobb sued Evergreen, its corporate officers, and Union Camp. Cobb alleged that Evergreen and its officers were liable for breach of contract, fraudulent inducement, fraudulent suppression, and promissory fraud. Against Union Camp, Cobb alleged tortious interference with a business relationship and civil conspiracy. On October 17, 1997, Cobb amended his complaint to add a respondeat-superior claim against Union Camp; he alleged that Evergreen and its officers were agents of Union Camp and, therefore, that Union Camp was also liable to him on the claims he had asserted against those other parties.
On November 20, 1997, all the defendants moved for a summary judgment. On November 26, 1997, Cobb again amended his complaint to include a claim alleging conversion as to Evergreen. The trial court heard oral arguments on the summary-judgment motions on May 7, 1998. One month after the hearing, on June 12, 1998, Cobb moved, pursuant to Rule 15(a), Ala.R.Civ.P., for leave to again amend his complaint to allege additional claims of breach of contract and fraud against Evergreen and to allege a claim of fraudulent suppression against Union Camp. The trial court never ruled on this motion. On February 9, 1999, the trial court entered a summary judgment for Union Camp; it denied the summary-judgment motions of Evergreen and its officers. The trial court certified the summary judgment for Union Camp as final, pursuant to Rule 54(b), Ala.R.Civ.P.
Cobb appealed to this Court, which transferred the case to the Court of Civil Appeals, pursuant to § 12-2-7(6), Ala. Code 1975. The Court of Civil Appeals reversed the trial court's summary judgment in favor of Union Camp on Cobb's claims alleging respondeat-superior liability. The Court of Civil Appeals affirmed the summary judgment as to Cobb's claims *1042 of tortious interference with a business relationship, fraudulent suppression, and civil conspiracy. See Cobb v. Union Camp Corp., 786 So.2d 501 (Ala.Civ.App.2000). Both Cobb and Union Camp filed applications for rehearing and motions to supplement the statement of facts in the Court of Civil Appeals' opinion, pursuant to Rule 39(k),[3] Ala.R.App.P. On July 28, 2000, the Court of Civil Appeals overruled the applications for rehearing and denied both Rule 39(k) motions. Union Camp petitioned this Court for certiorari review, and we granted its petition.
Analysis
This is an appeal from the trial court's entry of a summary judgment; thus, our review is de novo. EBSCO Indus., Inc. v. Royal Ins. Co. of America, 775 So.2d 128 (Ala.2000). "When reviewing a ruling on a motion for a summary judgment, this Court uses the same standard of review the trial court used `in determining whether the evidence before the court made out a genuine issue of material fact.' Bussey v. John Deere Co., 531 So.2d 860, 862 (Ala.1988)." Jefferson County Comm'n v. ECO Pres. Servs., L.L.C., 788 So.2d 121, 126 (Ala.2000). Once the movant makes a prima facie showing that no genuine issue of material fact exists and that the movant is entitled to a judgment as a matter of law, the burden shifts to the nonmovant to present substantial evidence creating a genuine issue of material fact. Bass v. SouthTrust Bank of Baldwin County, 538 So.2d 794, 797-98 (Ala.1989). "[S]ubstantial evidence is evidence of such weight and quality that fair-minded persons in the exercise of impartial judgment can reasonably infer the existence of the fact sought to be proved." West v. Founders Life Assur. Co. of Florida, 547 So.2d 870, 871 (Ala.1989). In reviewing a ruling on a motion for summary judgment, we view the evidence "in the light most favorable to the nonmovant and entertain[ ] such reasonable inferences as the jury would have been free to draw." ECO Pres. Servs., L.L.C., 788 So.2d at 127.
Union Camp argues that the summary judgment in its favor as to Cobb's claims based on respondeat-superior liability was proper because, it says, Cobb failed to present sufficient evidence to create a genuine issue of material fact on the question whether Union Camp had reserved a right to control the manner in which Cobb performed his work.
The test used in determining whether a defendant may be held liable under respondeat superior is "whether the alleged employer has reserved the right of control over the means by which the work is done; the test is not the actual exercise of such control." Lankford v. Gulf Lumber Co., 597 So.2d 1340, 1343 (Ala.1992). Thus, to be held liable under respondeat superior, Union Camp must have reserved the right to direct not only what work was to be done, but also how that work was to be done. See Lankford, 597 So.2d at 1343. "`Control is not established if the asserted [employer] retains the right to supervise the asserted [employee] merely to determine if the [employee] performs in conformity with the contract.'" Williams v. Tennessee River Pulp & Paper Co., 442 So.2d 20, 21 (Ala.1983) (quoting Bloedel Timberlands Dev., Inc. v. Timber Indus., Inc., 28 Wash.App. 669, 674, 626 P.2d 30, 33 (1981)).
Both Lankford and Williams involved the alleged respondeat-superior liability of timber companies whose relationship with *1043 and activities in regard to timber harvesters were similar to those of Union Camp to Evergreen and Cobb. In Lankford, International Paper Company ("IPCo") owned land on which Gulf Lumber Company ("Gulf') had contracted for the right to cut and remove certain timber. Gulf contracted with Stimpson Forestry Products, Inc. ("Stimpson"), to cut the timber. Stimpson, in turn, subcontracted the logging work to Oscar Rivers and Rivers Tree Service, a professional logging company. When one of Rivers's employees was involved in an automobile accident that resulted in the death of Lankford's husband, Lankford filed a wrongful-death action, alleging that Stimpson, Gulf, and IPCo were liable under the doctrine of respondeat superior for her husband's death. Evidence was presented indicating that IPCo sent foresters to the area being cut to inspect and to ensure that the timber was cut in compliance with the timbercutting agreement between IPCo and Gulf. Among other things, IPCo foresters would determine whether the stumps left after the cutting were the correct height, whether trash had been removed, whether the loggers were cutting the trees that had been designated for cutting, whether the roads or any structures the loggers had damaged had been repaired, and whether the roads, property lines, streams, and drainage ditches were clear of logs, timber, limbs, and debris. If an IPCo forester found a problem, he would contact Gulf or Stimpson and Gulf or Stimpson in turn would inform Rivers of the problem. Lankford, 597 So.2d at 1343. This Court held that the trial court's summary judgment in IPCo's favor as to Lankford's claim alleging respondeat-superior liability was proper because Lankford had failed to present substantial evidence that IPCo had reserved any right of control over the manner in which Rivers's work was done. The Court stated:
"The right to control the means by which the work of a purported independent contractor is done was not established by showing that IPCo retained the right to supervise or inspect the job site to make sure that Gulf and Rivers were performing in conformity with the contract.... IPCo did not tell Rivers how to cut the trees, how to load his truck or how to haul the wood. IPCo also did not supply Rivers with any trucks, equipment, or fuel to use in the removal of the timber. IPCo did not have any say as to how much wood Rivers cut, how many days a week he worked, or how many hours he worked each day.
"Although IPCo had a wood supply agreement with Stimpson and Rivers did deliver pulpwood to IPCo, IPCo did not issue any checks to Rivers. Rivers's delivery of pulpwood to IPCo does not indicate that IPCo retained any right of control over the manner in which Rivers completed his work."
Lankford, 597 So.2d at 1343-44. Thus, the Court held that the summary judgment was proper as to IPCo, because the evidence showed that Rivers was an independent contractor.
Likewise, in Williams, we held that summary judgment was proper against the plaintiff on a claim alleging respondeat-superior liability, where the only evidence presented was that the defendant, the owner of property from which timber was harvested, performed inspections to make sure that the right trees were harvested and supervised compliance with the contract specifications. We held that this evidence was insufficient to support an inference that the property owner controlled the manner in which the logging company performed its work. Williams, 442 So.2d at 21-22.
*1044 In reversing the summary judgment for Union Camp as to the claim alleging respondeat-superior liability, the Court of Civil Appeals apparently relied on the language in Lankford that Lankford had not established IPCo's respondeat-superior liability because "IPCo did not tell Rivers how to cut the trees, how to load his truck, or how to haul the wood." Lankford, 597 So.2d at 1343. The Court of Civil Appeals stated: "The evidence does, in fact, indicate that Union Camp retained the right to supervise and inspect the logging operation to ensure compliance with the specifications," and that "when the evidence is taken as a whole and viewed in a light most favorable to Cobb, ... one could infer that Union Camp had reserved a right of control over the manner in which Evergreen and Cobb performed their work." Cobb v. Union Camp, 786 So.2d at 506. The "evidence" to which the Court of Civil Appeals refers includes Cobb's ninepage affidavit submitted in response to Union Camp's motion for a summary judgment, in which Cobb averred that Union Camp representatives provided him with specifications on how to cut the wood, the size of the wood to cut, how the wood was to be cleaned, and how the wood was to be loaded on the logging trucks. Union Camp moved to strike this portion of Cobb's affidavit, arguing that it was "conclusory and plainly [contradicted] Cobb's own deposition testimony."[4]
However, in his special writing concurring in part and dissenting in part, Judge Thompson noted that "[t]he only facts Cobb alleges to demonstrate that Union Camp had reserved a right of control over Evergreen and Cobb was that Mosley [an Evergreen forester and procurement officer] had instructed him not to `cut in wet weather and do other actions inconsistent with usual logging operations' and that once Mosley had directed his crew to work on Sunday." Cobb v. Union Camp, 786 So.2d at 508 (Thompson, J., concurring in part and dissenting in part). Relying on our decisions in Lankford and Williams, Judge Thompson concluded that Cobb's "vague and conclusory statements" were insufficient to defeat a properly supported motion for summary judgment. We agree.
As was the case in Lankford, supra, Union Camp sent foresters to inspect the harvesting and to make sure that the timber was cut in compliance with Union Camp's contract with Evergreen. The Union Camp foresters would check stump height and "wood utilization"; they would make sure that the trees were properly cut and that the loggers were cutting in designated areas; and they would ensure that the loggers were following guidelines regarding the construction and use of roads on the property. Finally, when the Union Camp foresters discovered a problem with Cobb's work, they notified Evergreen, which in turn spoke with Cobb. It is undisputed that "Union Camp did not compensate Cobb, did not supervise his hours, and did not involve itself in Cobb's hiring and firing of his crew members." Cobb v. Union Camp, 786 So.2d at 508 (Thompson, J., concurring in part and dissenting in part). Additionally, there is no evidence indicating that Union Camp retained the right to control or to restrain, in any way, the business relationship between Evergreen and Cobb. Therefore, we agree with Judge Thompson that "Cobb failed to present sufficient evidence to create a genuine issue of material fact on the question whether Union Camp had reserved a right of control over the manner in which he and Evergreen performed their work." Cobb v. Union Camp, 786 So.2d at 509.
*1045 Because the facts of this case are indistinguishable from those presented in Lankford, supra, we conclude that the Court of Civil Appeals erred in reversing the summary judgment entered in favor of Union Camp as to its respondeat-superior liability. Therefore, we reverse the judgment of the Court of Civil Appeals insofar as it related to Cobb's claims seeking to hold Union Camp liable under the doctrine of respondeat superior and we remand this cause to that court with instructions that it affirm the summary judgment entered in favor of Union Camp.
REVERSED AND REMANDED.
MOORE, C.J., and SEE, LYONS, HARWOOD, and STUART, JJ., concur.
JOHNSTONE, J., concurs specially.
WOODALL, J., concurs in the result.
JOHNSTONE, Justice (concurring specially).
I concur. I write specially to address Cobb's claims against Union Camp on the theory of respondeat superior. Cobb claims that Union Camp, as the principal, is liable for the torts of Evergreen as the agent. The torts are frauds that Cobb alleges Evergreen committed against him. Specifically, Cobb claims that Evergreen misrepresented to him that it would employ him for at least four years, that it would provide him at least 30,000 tons of Union Camp "fee wood" and an equal amount of high quality "outside wood" annually, and that it would not allow Union Camp to interfere with Evergreen's employment of Cobb. Union Camp could be vicariously liable for these alleged frauds by Evergreen only if Union Camp either controlled Evergreen in its contractual negotiations with Cobb or if Union Camp reserved the right to control these contractual negotiations, for such control or reserved right of control is an essential element of any agency relationship, with Union Camp as the principal and Evergreen as the agent, for the contractual negotiations between Evergreen and Cobb.
The record does not contain substantial evidence that Union Camp controlled Evergreen in its contractual negotiations with Cobb or that Union reserved the right to exercise such control. While the record does contain substantial evidence that Union Camp controlled Evergreen in the way Evergreen cut, cleaned, and loaded trees and left the land, this control would support an agency relationship only for the function of cutting, cleaning, and loading trees and leaving the land. The previous contractual negotiations between Evergreen and Cobb were outside the line and scope of any agency status in Evergreen for cutting, cleaning, and loading trees and restoring the land.
Had Evergreen negligently broken Cobb's foot by backing a log truck over it in the course of cutting, cleaning, or loading some trees, the agency supported by the record before us would, in turn, support vicarious liability in Union Camp as the principal of Evergreen. The record before us, however, does not support vicarious liability in Union Camp for the torts of Evergreen in negotiating its contract with Cobb.
NOTES
[1] "Fee wood" is timber owned by Union Camp.
[2] "Market wood" is timber from properties not owned by Union Camp.
[3] Rule 39, Ala.R.App.P., was amended effective May 19, 2000, as to death-penalty cases and August 1, 2000, as to all other cases. The provisions relating to statements of facts are now found at Rule 39(d)(5).
[4] The trial court summarily denied this motion, as well as other pending motions, after it granted Union Camp's motion for a summary judgment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1947137/ | 499 Pa. 398 (1982)
453 A.2d 931
COMMONWEALTH of Pennsylvania
v.
William David BACHERT, Appellant.
COMMONWEALTH of Pennsylvania, Appellant,
v.
William David BACHERT.
Supreme Court of Pennsylvania.
Submitted October 21, 1982.
Decided December 17, 1982.
Filed December 17, 1982.
*399 *400 *401 *402 Ronald J. Wydo, Bernard J. Kotulak, II, Wilkes-Barre, for William Bachert.
Chester B. Muroski, Dist. Atty., Joseph P. Giovannini, Jr., Luzerne Co., Asst. Dist. Atty., for Commonwealth.
Before O'BRIEN, C.J., and ROBERTS, LARSEN, FLAHERTY, McDERMOTT and HUTCHINSON, JJ.
OPINION OF THE COURT
FLAHERTY, Justice.
On June 2, 1977, William David Bachert was convicted by a jury of murder of the first degree, robbery, kidnapping, theft, and conspiracy to commit murder, kidnapping, robbery and theft. On appeal to the Superior Court,[1] Special Transfer Docket, the judgment of sentence of murder of the first degree was vacated and the case was remanded for a new trial at which the degree of guilt was not to rise higher than murder of the second degree. All other judgments of sentence were affirmed. Pro se allegations of ineffective assistance of trial counsel, who represented defendant on appeal, were remanded to the trial court with directions to appoint counsel to pursue defendant's pro se allegations. From this order, both the defendant and the Commonwealth filed petitions for allowance of appeal, both of which were granted.
The Commonwealth challenges the Superior Court's determination that there was insufficient evidence to support a conviction of murder of the first degree, specifically with regard to the element of "intent to kill."
It is well established that the test of sufficiency of the evidence is whether, viewing the evidence in the light most favorable to the Commonwealth as verdict winner, and drawing all proper inferences favorable to the Commonwealth, the trier of fact could reasonably have determined all elements of the crime to have been established beyond a *403 reasonable doubt. Commonwealth v. Coccioletti, 493 Pa. 103, 425 A.2d 387 (1981). The evidence, viewed in this manner, establishes the following.
The defendant and his cohort, Charles Webber (herein Webber), spent much of February 1, 1977 drinking beer and whiskey in Pottsville, Schuylkill County, eventually driving off in Webber's van, traveling north on Route 61 to Interstate Route 81. The van either broke down or was parked on the right hand side of Route 61. Shortly after 6:30 P.M., a passing motorist saw the van and two men, one of whom she identified as Webber, who was hitchhiking at that time. The van was again observed in the early morning hours of February 2 in the same location by a state trooper who confirmed that it was registered in Webber's name.
At approximately 6:45 P.M. on February 1, the victim, Thomas Welsh, left his home in Port Carbon to drive north to Shenandoah to officiate a volleyball game. He drove his 1973 Chevrolet Impala, equipped with a citizen's band radio, in the direction of Route 61, which is the principal route from Port Carbon to Shenandoah. The victim, who normally would have reached the volleyball game at about 7:00 P.M. or 7:15 P.M., never arrived.
The victim passed the defendant and Webber on Route 61 on his way to Shenandoah and offered them a ride. Webber, armed with a 9 mm. Luger semi-automatic pistol, and defendant forced him to drive onto Interstate 81 North, proceeding forty and one-half miles to the exit for the Cross Valley Expressway connecting Interstate 81 with the City of Nanticoke, Luzerne County.
At approximately 8:00 P.M., the victim was observed by passing motorists on the Cross Valley Expressway near the entrance to Interstate 81 clenching his chest, staggering, and falling to one knee. Also at 8:00 P.M., a young couple were driving on the Cross Valley Expressway and were approaching the entrance to Interstate 81 when they spotted an "obstacle" in the road. The car straddled the obstacle which lodged beneath the car between the left and right tires. They drove the car to the side of the road, dragging *404 the obstacle beneath the car. Discovering that the obstacle was the victim, they jacked the car to relieve any pressure, called for an ambulance, and waited for help.
The victim was still alive and was heard to moan and complain of the cold but ultimately lost consciousness and was pronounced dead at 8:55 P.M. at the local hospital. He had three gunshot wounds, one of the chest, one of the right arm, and one of the left buttock.
The Coroner testified that the victim died of shock due to loss of blood, resulting from the gunshot wound of the chest, and that there were no crushing injuries to the body which would have occurred had the victim been run over by the automobile. There were lacerations and abrasions to the face, chest, arms, and legs, which, absent the gunshot wounds, would not have proved fatal. That the victim's wounds were inflicted by Webber's gun, found in his possession when arrested later that night, was established by a ballistics expert's testimony.
Webber and the defendant spent the late evening of February 1 drinking in a bar in Nanticoke, where they became acquainted with four other men. At about 1:30 A.M. on February 2, defendant, Webber, and the four men left the bar and drove the victim's car and a van to the coal strippings outside Nanticoke where they drank beer and smoked marijuana in the van. While there, Webber attempted to sell the victim's car. No one present being capable of paying even the nominal sum Webber sought, Webber was asked why he would sell it for so little. In response, Webber and defendant admitted that the car was stolen and that they had shot a man. At trial, three of the four other men testified that defendant repeatedly said "We shot a guy." Following the admission as to the shooting, and apparently sensing disbelief from the group, Webber pulled the handgun from his belt, displayed it and removed the clip which still contained two live cartridges. He ejected a third cartridge from the chamber, and counted these three remaining cartridges, implicitly noting the absence of three already-fired cartridges. When one of the four, Cyron, *405 asked to handle the gun, Webber was reluctant but was persuaded by another who stated "Go ahead and let him see it because he was in prison for firearms already." Thereafter, Webber again attempted to sell the car, and, there being no offers received, asserted that he would just "blow it up" as it was of no use to him. After careening through the banks of the stripping area and leaving the car stranded, Webber returned to the van, sold the car's citizen band radio to one of the four, and the group planned means of aiding Webber and the defendant in stealing another car. They left the area, eventually heading toward Wilkes Barre.
The defendant, Webber, and one of the four, Wilushewski, were dropped off. Eventually, these three attracted police attention and were arrested in Wilkes Barre and taken to police headquarters, the defendant and Wilushewski riding in a police van, Webber in a police cruiser. During the ride to headquarters, the defendant was quoted as saying: "I hope you know we are both in trouble now, so if you want to, stick up for yourself, or if you want to, help us out because we stole a car tonight and we shot a guy, we wasted a guy." The defendant then explained that he and Webber were hitchhiking when they were picked up by the victim, and that they compelled him to drive north on Interstate 81, ordered him to take an exit, told him to get out of the car, and that Webber shot him. Defendant then asked Wilushewski to aid him in fabricating an alibi that he was with the defendant in the bar in Nanticoke all afternoon and evening. Wilushewski refused and relayed this entire conversation to the police when he was removed from the police van.
The Commonwealth argues, first, that the Superior Court erred in declaring the evidence to be insufficient to establish guilt of murder of the first degree, and second, that the Superior Court erred in remanding for a new trial when the proper remedy was merely instatement, as a matter of law, of a conviction of murder of the second degree where the evidence amply established felony murder. Due to our resolution of the issue regarding sufficiency of the evidence, *406 and reversal of the order of the Superior Court, we need not address the Commonwealth's second argument.
Whether the defendant's repeated admissions that "We shot a guy" sufficiently constitute proof of a specific intent to kill, harbored by the defendant at the time of the shooting, is the issue to be resolved. To determine the kind of homicide of which the accomplice is guilty, it is necessary to look to his state of mind; the requisite mental state must be proved beyond a reasonable doubt to be one which the accomplice harbored and cannot depend upon proof of intent to kill only in the principal. LaFave and Scott, Criminal Law, 1972. "[A] person is not guilty of an offense unless he acted intentionally, knowingly, recklessly or negligently, as the law may require, with respect to each material element of the offense." 18 Pa.C.S.A. § 302(a). The trier of fact found that the defendant had the requisite mental state to convict of murder of the first degree and other charges. Such resolution of factual issues is solely within the province of the jury and an appellate court will not disturb the jury's findings when there is support in the record for the verdict. Commonwealth v. Mumma, 489 Pa. 547, 414 A.2d 1026 (1980).
The existence of a shared criminal intent between the principal and his accomplice may be inferred from the circumstances or acts of the slayer and accomplice committed shortly after the slaying. In Commonwealth v. Waters, 491 Pa. 85, 418 A.2d 312 (1980), we held that existence of a common design between felons to commit the underlying felony of felony murder may be established by an inference arising from the circumstances or acts committed shortly after the slaying. In Commonwealth v. Craig, 471 Pa. 310, 370 A.2d 317 (1977) and Commonwealth v. Ilgenfritz, 466 Pa. 345, 353 A.2d 387 (1976) it was held that specific intent to kill may be found from a defendant's words or conduct or from attendant circumstances together with all reasonable inferences therefrom.
*407 Proof of mental state is quite often difficult, and the evidence here, relevant to whether defendant bore the intent requisite to murder of the first degree, is circumstantial. In the context of the events and conversation in the van, defendant's repeated boasting statements that "We shot a guy," constitute an admission of complicity in that act; one who revolted from the act would not attempt to vaunt oneself in the eyes of peers by admissions of complicity. Furthermore, defendant's admissions in the police van to Wilushewski again ratify defendant's earlier participation in the murder. Specifically, he said to Wilushewski, "I hope you know we are both in trouble now, so if you want to, stick up for yourself, or if you want to, help us out because we stole a car tonight and we shot a guy, we wasted a guy." (Emphasis added.) At this point, aware of the imminence of interrogation, a time at which we might expect that an accomplice would begin to reassess earlier events, view them in a different light, and assert a lack of complicity, the defendant still admitted that he participated in and shared responsibility for the murder. These admissions of participation, declarations against penal interest, permit an inference, by the jury, of the existence of the requisite intent to kill.
Accordingly, the absence of direct evidence as to what occurred in the victim's car prior to and at the time the victim was forced out and shot, does not preclude a finding by the jury of culpability in the defendant, as inferred from his acts and words subsequent to the murder. Culpability as an accomplice is established by proof that the defendant, with the intent to promote or facilitate the commission of the offense, did aid or attempt to aid in the commission of the offense. 18 Pa.C.S.A. 306(c). Presented with defendant's admissions that "We stole a car" and "We shot a guy," admissions of participation, it was reasonable for the jury to infer that defendant's participation was, at a minimum, with the intent of facilitating the commission of the murder. Thus, that part of the order of the Superior Court vacating the judgement of sentence as to murder of the first degree, *408 and remanding for a new trial, is reversed, and the judgement of sentence of the trial court is reinstated.
Turning to the issues raised in defendant's appeal, we address first the argument that the trial court's refusal to grant appellant's motion for a change of venue due to pre-trial publicity was error, and constituted a denial of due process. Prior to defendant's trial, his cohort Webber was tried independently. Webber's trial, and Webber's eventual entry of a plea of guilty to murder of the second degree, as well as the earlier progress of investigation of the crime, were covered by the various news media.
In Murphy v. Florida, 421 U.S. 794, 95 S.Ct. 2031, 44 L.Ed.2d 589 (1975), the United States Supreme Court clarified the approach to reviewing a claimed denial of due process in the selection of a jury due to prejudicial pre-trial publicity. Because of apparent confusion in the federal courts regarding the import of the holding of Marshall v. United States, 360 U.S. 310, 79 S.Ct. 1171, 3 L.Ed.2d 1250 (1959) the United States Supreme Court emphasized that the Constitution requires that the conviction be set aside only where there is a showing of "actual prejudice" in the jury panel and that the holding in Marshall v. United States, Id., that persons who have learned from news sources of a defendant's prior criminal record are presumed to be prejudiced, was an exercise of the Court's "`supervisory power to formulate and apply proper standards for enforcement of the criminal law in the federal courts,' and not as a matter of constitutional compulsion." Murphy v. Florida, supra, 421 U.S. at 797, 95 S.Ct. 2031 at 2034, 44 L.Ed.2d at 593 quoting Marshall v. United States, supra, 360 U.S. at 313, 79 S.Ct. 1171 at 1173, 3 L.Ed.2d at 1252.
Further emphasized in Murphy v. Florida, supra, was that the basis for the order of a new trial in Irvin v. Dowd, 366 U.S. 717, 81 S.Ct. 1639, 6 L.Ed.2d 751 (1961), was that
[E]ight of the 12 jurors had formed an opinion that the defendant was guilty before the trial began; some went "so far as to say that it would take evidence to overcome their belief" in his guilt. . . . In these circumstances, the *409 Court readily found actual prejudice against the petitioner to a degree that rendered a fair trial impossible.
Murphy v. Florida, supra, 421 U.S. at 798, 95 S.Ct. 2031 at 2034, 44 L.Ed.2d at 594 (emphasis supplied) (citation omitted).
Correspondingly, the law of this Commonwealth places the burden of proof, as to showing prejudice, upon the challenger to venue. As we stated in Commonwealth v. Casper, "[O]ne who claims that he has been denied a fair trial because of prejudicial pre-trial publicity must show actual prejudice in the empaneling of the jury," Id., 481 Pa. 143, 150, 392 A.2d 287, 291 (1978), citing Murphy v. Florida, supra and "[i]n reviewing the trial court's decision, the only legitimate inquiry is whether any juror formed a fixed opinion of [the defendant's] guilt or innocence as a result of the pre-trial publicity." Commonwealth v. Casper, supra, 481 Pa. at 150, 392 A.2d at 291, quoting Commonwealth v. Kichline, 468 Pa. 265, 274, 361 A.2d 282, 287 (1976).
The role of the trial judge during voir dire is as arbiter of a mixed question of fact and law, and that the canvassing of prospective jurors for the possibility of a hardened opinion in derogation of the constitutional imperative of trial by "impartial, `indifferent' jurors," Irvin v. Dowd, supra, 366 U.S. at 722, 81 S.Ct. 1639 at 1642, 6 L.Ed.2d at 755, is to be performed before the trial judge is not an empty requirement. The opportunity to observe the demeanor of the prospective juror and the tenor of the juror's answers is indispensable to the judge in determining whether a fair trial can be had in the community. Claims of impartiality by prospective jurors are subject to scrutiny for credibility and reliability as is any testimony and the judgment of the trial court is necessarily accorded great weight. As stated in United States v. Wood:
Impartiality is not a technical conception. It is a state of mind. For the ascertainment of this mental attitude of appropriate indifference, the Constitution lays down no particular tests and procedure is not chained to any ancient and artificial formula.
*410 Id. 299 U.S. 123, 145-146, 57 S.Ct. 177, 185, 81 L.Ed. 78, 87 (1936) reaffirmed in Irvin v. Dowd, supra 366 U.S. at 725-726, 81 S.Ct. 1639 at 1644, 6 L.Ed.2d at 757. "After the voir dire a judge can determine which description of the publicity's impact is accurate; before the voir dire a judge could only have guessed." United States v. Haldeman, 559 F.2d 31, 62, n. 37 (D.C.Cir. 1976) (en banc), cert. denied, 431 U.S. 933, 97 S.Ct. 2641, 53 L.Ed.2d 250 (1977).
Accordingly, this combined factual and legal determination, addressed to the sound discretion of the trial court, will not be disturbed on appeal in the absence of an abuse of discretion. Commonwealth v. Scott, 469 Pa. 258, 365 A.2d 140 (1976); Commonwealth v. Martinolich, 456 Pa. 136, 318 A.2d 680 (1974) appeal dismissed, 419 U.S. 1065, 95 S.Ct. 651, 42 L.Ed.2d 661 (1974). After a review of the transcript of the voir dire in this case, we discern no record of actual prejudice in the seated jurors which would serve as basis for the substitution of the judgement of this Court for that of the trial court.
In selecting twelve jurors and two alternates, seventy-one potential jurors were individually examined during pre-trial voir dire. Of these seventy-one, fifty-three indicated they knew something about the case, twelve said they knew nothing of the case, and six were not asked whether they had previous knowledge of the case. All jurors who said they had read something about the case in the newspaper and had formed a fixed opinion as to defendant's guilt were excused for cause. Defendant argues that the fact that ten of the fourteen finally chosen had either read in local newspapers or heard on radio or television about the case, establishes the need for grant of a new trial. We need only restate the following oft-quoted portion of Irvin v. Dowd, supra, to rebut this assertion.
It is not required . . . that the jurors be totally ignorant of the facts and issues involved. In these days of swift, widespread and diverse methods of communication, an important case can be expected to arouse the interest of the public in the vicinity, and scarcely any of those best *411 qualified to serve as jurors will not have formed some impression or opinion as to the merits of the case. This is particularly true in criminal cases. To hold that the mere existence of any preconceived notion as to the guilt or innocence of an accused, without more, is sufficient to rebut the presumption of a prospective juror's impartiality would be to establish an impossible standard. It is sufficient if the juror can lay aside his impression or opinion and render a verdict based on the evidence presented in court.
Id. 366 U.S. at 722-723, 81 S.Ct. 1639 at 1642, 6 L.Ed.2d at 756.
The trial judge participated in the examination of the jurors, and, to his satisfaction, all who were selected pledged ability to give fair and impartial consideration to the evidence, and none expressed an inability to set aside any impression gained from media coverage. While several potential jurors were dismissed because they indicated an opinion as to defendant's guilt, this by no means suggests a community so immured with sentiment against defendant as to "impeach the indifference of jurors who displayed no animus of their own." Murphy v. Florida, supra, 421 U.S. at 803, 95 S.Ct. 2031 at 2037, 44 L.Ed.2d at 596.
Also in Murphy v. Florida, supra, the United States Supreme Court referred to a class of cases involving pre-trial publicity in which the coverage is so "inherently prejudicial" that prejudice is presumed.
Prejudice was presumed in the circumstances under which the trials in Rideau, [Rideau v. Louisiana, 373 U.S. 723, 83 S.Ct. 1417, 10 L.Ed.2d 663 (1963)], Estes, [Estes v. Texas, 381 U.S. 532, 85 S.Ct. 1628, 14 L.Ed.2d 543 (1965)], and Sheppard [Sheppard v. Maxwell, 384 U.S. 333, 86 S.Ct. 1507, 16 L.Ed.2d 600 (1966)] were held. In those cases the influence of the news media, either in the community at large or in the courtroom itself, pervaded the proceedings. In Rideau the defendant had "confessed" under police interrogation to the murder. . . . A 20-minute film of his confession was broadcast three times by a television station *412 in the community. . . . [rendering] the trial under review "but a hollow formality" the real trial had occurred when the tens of thousands of people, in a community of 150,000, had seen and heard the defendant admit his guilt before the cameras.
The trial in Estes had been conducted in a circus atmosphere. . . . Similarly, Sheppard arose from a trial infected not only by a background of extremely inflammatory publicity but also by a courthouse given over to accommodate the public appetite for carnival. . . .
Murphy v. Florida, supra at 798-799, 95 S.Ct. 2031 at 2035, 44 L.Ed.2d at 594.
We recognize that in certain cases there "can be pretrial publicity so sustained, so pervasive, so inflammatory, and so inculpatory as to demand a change of venue without putting the defendant to any burden of establishing a nexus between the publicity and actual jury prejudice." Commonwealth v. Frazier, 471 Pa. 121, 127, 369 A.2d 1224, 1227 (1977). However, "[i]t is trite but true to note that a presumption of prejudice pursuant to this exception requires the presence of exceptional circumstances." Commonwealth v. Casper, supra, 481 Pa. at 151, 392 A.2d at 291 (emphasis supplied.) The defendant attempts to bring this case within this latter class of cases by directing attention to the coverage of the trial of his cohort Webber, who pleaded guilty to murder of the second degree on the eve of defendant's trial. The fact of Webber's plea, however, was brought out at defendant's trial when Webber was placed on the stand. Defense counsel, after eliciting Webber's account of the events of February 1, consisting essentially of an account of a partial blackout due to excessive consumption of alcohol, asked Webber:
Q Were you subsequently arrested along with Mr. Bachert for the murder of Thomas Welsh?
A Yes.
Q Have you been tried on that?
A Yes, sir.
*413 Q What was the outcome of that trial?
A I pleaded guilty to murder of the second degree.
Q Why did you plead guilty?
A They told me that ballistics showed that the bullet came from that gun and since it was my gun, I figured I must have killed him.
In the present case, any harm inuring to the defendant by the inclusion of his principal's plea of guilt in pre-trial news coverage is de minimis since the same information was presented to the jury at trial. Cf. Marshall v. United States, supra (where jurors were exposed through news accounts to information not admissible at trial, conviction was set aside). Furthermore, no claim is made that the publicity surrounding the investigation of the crime and Webber's trial was so extensive, sustained, pervasive or inclusory of highly inflammatory and prejudicial information, as to have created a climate in which a fair trial was impossible. Accordingly, the Superior Court's affirmance of the trial court's denial of application for a change of venue is affirmed.
Next, defendant contends that the trial court, in sentencing him on May 26, 1978, failed to comply with Commonwealth v. Riggins, 474 Pa. 115, 377 A.2d 140 (1977), which requires that the sentencing judge provide a "statement of reasons" for the sentence imposed.
We have reviewed the record of the sentencing proceeding in this case and find that the judge correctly proceeded in sentencing defendant within statutory limits. The concerns expressed by this Court in Riggins are not applicable here. In Riggins, there was, of record, a serious misapprehension by the sentencing judge of the sentencing subsection applicable to the defendant; he repeatedly mistated the maximum sentence applicable as fifteen years when it was five years, evidently misreading the Code. Here, no such misapprehension was present; the judge clearly understood the maximum and minimum sentence applicable. Furthermore, in Riggins, no presentence report was ordered, although the defendant was in jeopardy of a sentence of total confinement in excess of one year. Here, a presentence report was *414 ordered, examined by the court in advance of sentencing, offered to the defendant, and reviewed by his counsel for accuracy.
The defendant was invited to, and did in fact, make a statement, exercising his right of allocution. Both defense counsel and the prosecutor made statements, vying for leniency and severity respectively. In compliance with the requirement set forth in Riggins, the trial court stated:
[T]he Court would like to state its reasons for the sentencing in these cases. First of all, the court took into consideration the (1) gravity of the offenses; (2) punishment; (3) deterrents [sic]; (4) protection of the public and society; (5) prevention of further crime; (6) rehabilitative need of the defendant.
The brutal, unprovoked slaying of a truly innocent man led the court, after announcing and imposing the jury's recommended sentence of life imprisonment for murder, to sentence the defendant to ten to twenty years imprisonment for kidnapping to run consecutively to the murder sentence, ten to twenty years imprisonment for robbery to run consecutively to the kidnapping sentence, five to ten years imprisonment for criminal conspiracy to run concurrently with the robbery sentence, and three and one-half to seven years imprisonment for theft to run concurrently with the robbery and conspiracy sentences, for a total sentence of imprisonment for life plus twenty to forty years. Defendant was so sentenced, as the judge clearly stated, due to the gravity of the offense, for punishment, deterrence of crime, protection of the public and society, prevention of further crime, and rehabilitation. We do not believe that any additional explanation was necessary for the defendant to understand why he was so sentenced. Order of the Superior Court denying relief is affirmed.
We have also reviewed, but find no merit in, defendant's assertions that trial counsel was ineffective in that he (1) was not adequately prepared for trial; (2) failed to adequately prepare a motion for change of venue; (3) failed to object to allegedly prejudicial prosecutorial remarks; (4) *415 failed to request that opening and closing remarks be recorded; (5) failed to challenge the qualifications of a firearms examiner who testified as an expert in ballistics; (6) failed to object to the trial court's alleged failure to specifically instruct the jury concerning the limited purpose for which evidence of a prior criminal record is admissible; (7) failed to investigate whether documentation of date of receipt of a certain bank draft, which would have accounted for defendant's possession of cash referred to in testimony at trial, could be acquired to rebut at trial any inference that the cash belonged to the victim.
Defendant further claims that trial counsel "failed to object at crucial points in the testimony, failed to highlight the inconsistent statements of the witnesses, . . . failed to object to illegal evidence used against [him], . . . failed to object to errors made in the jury charge." These claims are dismissed for lack of specificity.
The defendant also appeals from that part of the Superior Court opinion denying relief on defendant's claim of improper restriction of participation of co-counsel. We have reviewed this allegation and determine that it is without merit.
Accordingly, the order of the Superior Court, insofar as it vacates the judgement of sentence as to murder of the first degree and remands for a new trial on the murder indictment, is reversed. The order of the Superior Court affirming the judgements of sentence as to all other charges is affirmed.[2] The denial of relief on defendant's claim of improper restriction of participation by co-counsel is affirmed.
*416 The order of the Superior Court remanding for appointment of counsel to aid defendant in preparation of his pro se allegations of ineffective assistance of counsel is obviated by the appointment of new counsel to pursue this appeal, and subsequent presentation, on this appeal, of claims of ineffectiveness of trial counsel and, therefore, is reversed.
NIX, J., did not participate in the consideration or decision of this case.
ROBERTS, J., files a Concurring Opinion in which O'BRIEN, C.J., joins.
ROBERTS, Justice, concurring.
It is well settled that the use of a gun on a vital part of the deceased's body raises the presumption of a specific intent to kill. See Commonwealth v. Thornton, 494 Pa. 260, 431 A.2d 248 (1981); Commonwealth v. Ewing, 439 Pa. 88, 264 A.2d 661 (1970). Here the Commonwealth's evidence established that the cause of the victim's death was a gunshot wound to the chest inflicted by appellant's accomplice. This evidence, together with the evidence of the actors' shared intent, amply permitted the jury to find appellant guilty of murder of the first degree.
As to the claim of error in refusing to grant appellant's motion for a change of venue, the record of voir dire reveals that, although the community was quite familiar with the killing, the percentage of prospective jurors excused because of a fixed opinion on guilt did not rise to a level indicative of prejudice. Compare Commonwealth v. Cohen, 489 Pa. 167, 413 A.2d 1066 (1980). Thus the court did not commit reversible error in denying the requested motion.
As the judgment of sentence of murder of the first degree was properly imposed, I concur in the reinstatement of that judgment.
O'BRIEN, C.J., joins in this concurring opinion.
NOTES
[1] Commonwealth v. Bachert, 271 Pa.Super. 72, 412 A.2d 580 (1979).
[2] Defendant challenges, on sufficiency of the evidence grounds, the judgements of sentence as to kidnapping, robbery, theft, and conspiracy. We regard the evidence as recounted, including defendant's admissions, viewed in the light most favorable to the Commonwealth as verdict winner, to be sufficient to sustain convictions of these offenses. Thus, the order of the Superior Court, insofar as it affirms the judgements of sentence as to these convictions, is affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1568797/ | 48 F.2d 771 (1931)
HARRIS et al.
v.
UNITED STATES.
No. 6283.
Circuit Court of Appeals, Ninth Circuit.
March 30, 1931.
*772 *773 John L. McNab, George N. Crocker, and Louis L. Jaffe, all of San Francisco, Cal., for appellant.
Anthony Savage, U. S. Atty., and Tom De Wolfe, Asst. U. S. Atty., both of Seattle, Wash.
Before RUDKIN, WILBUR, and SAWTELLE, Circuit Judges.
WILBUR, Circuit Judge.
The appellants, Harold Harris and Meyer Morris, appeal from a judgment and sentence imposed for a conspiracy to defraud and for the use of the mails to defraud. They were jointly indicted with Daniel A. Levy, who was convicted and has not appealed, Walter D. Forsyth and Ernest R. Heath, who were tried and acquitted, Samuel C. Sugarman and Earl Sacks, who were not tried, and Ward Williams and Charles L. Gillis, against whom the case was dismissed. The indictment contained six counts. One count was dismissed, appellants were convicted on each of the remaining five counts and sentenced to thirteen months' imprisonment upon each count, the sentences to run concurrently, and to pay a fine of $500.
The fraudulent scheme alleged, and developed by the evidence, was one for the sale of the stock of the General Mining, Milling & Power Company, a corporation organized under the laws of the state of Delaware with offices in New York City. It appears from the evidence that certain mines in the Mogollon mining district, N. M., known as the Mogollon mine, had been operated more than twelve years and had produced gold and silver valued at over $7,500,000. In 1926 practically all the known ore bodies had been exhausted. The equipment of the mines was removed in 1926-1927. The mining property was subsequently sold to W. A. Cochrane of New York, and was thereafter acquired by the General Mining, Milling & Power Company, whose stock is involved in this case. After 1927 apparently other exploratory work was undertaken so that E. D. Godfrey, a mining engineer who had worked on the property from October, 1924, until January, 1926, and who, under the employment by the General Mining, Milling & Power Company, was familiar with the situation in the latter part of 1928 and the first part of 1929, was able to state that in his opinion the value of the property and the equipment of the General Mining, Milling & Power Company, which will hereinafter be referred to as "the company," was $275,000. It was capitalized for $3,500,000. In the latter part of 1928 and first part of 1929, this witness estimates that there were approximately 1,392,000 tons of ore available in the company's mines at Mogollon; that the average value of this ore was $4.48 per ton, and that the average cost of removing the ore from the mines was between $5 and $6 per ton, so that an attempt to mine the entire ore body would result in a loss. There was, however, about 480,000 tons of this ore estimated to carry about $7.89 per ton. The gross value of this ore is $3,700,000, and the net profit in mining the same would be about $900,000, but before the ore could be mined at a profit it would be necessary to invest about $350,000 in capital. If this statement of the corporation's mining engineer is correct, the value of the stock is about 7 cents a share, and it would be necessary to spend more than that amount per share in order to operate the plant successfully. By the expenditure of this additional amount ($350,000) the total amount invested would be $625,000, the total amount to be realized by the mining of 480,000 tons of ore would be $900,000, which would represent $275,000 more than the total investment, which would be 7 cents per share, or, to put it differently, people who purchased stock at 7 cents a share could, by obligating themselves or their company for indebtedness of slightly more than 7 cents per share, hope to recover the investment, plus the additional outlay, plus an amount equivalent to the original outlay. In other words, the stock had a potential value of 14 cents a share which could be realized by the expenditure of the large amounts of money needed to actually recover the values from the mine. In this brief statement we omit reference to the values of machinery, etc., which would be on hand at the conclusion of the operations.
*774 Defendant Levy entered into a contract with Ward Williams wherein Williams, who claimed to have an option on stock of the corporation, gave an option to Levy for the purchase of 1,000,000 shares of the stock of the company at 40 cents per share. One hundred thousand shares of this stock was to be purchased before December 1, 1928, 100,000 before January 1, 1929, and 200,000 shares monthly thereafter. The option was to expire if the minimum amount specified was not purchased and paid for within ten days after the date fixed for the completion of the purchase. Twenty thousand shares of this stock were turned over to Levy to cover expenses incurred in making the sales, the unexpended portion of which is to be returned in the event the 100,000 shares of stock were not sold. It was agreed that the balance of the stock of the company (2,500,000 shares) should remain unregistered and unissued until the fulfillment or cancellation of the agreement between Williams and Levy.
The fraudulent scheme charged in the indictment was one for the sale of this corporate stock at inflated values, by the manipulation of the price of the stock on the San Francisco Mining Exchange and the Spokane Mining Exchange and the circulation of false reports concerning the mine through the mails. To effect this scheme it is alleged that the defendants organized the stock brokerage concern known as the Pulp & Paper Securities Company, another known as the West Coast Finance Company, another known as L. F. Pearson & Co., all located in the Dexter-Horton building, in Seattle. At this juncture we will not attempt to distinguish between the activities of these concerns or the various defendants, but will refer to them all as defendants.
The defendants made arrangements by which they would report to the Spokane Mining Exchange alleged sales of stock. These sales were reported in the regular bulletins of the Spokane Mining Exchange and were wired back to the defendants to circularize thousands of prospective investors; that these daily market reports purported to show activity on the floor of the Spokane Mining Exchange. Although these reports covered thousands of shares of stock, the actual sales made on the floor of the exchange were confined to 100 shares sold by defendant Gillis to an outsider, who resold the same on the exchange to defendant Gillis, who purchased for the defendants. Arrangements were also made to have the stock listed on the San Francisco Mining Exchange. This was done through defendant Forsyth. The method of operating in San Francisco was for Forsyth to give one broker a commission to buy a certain number of shares and another a commission to sell the same number. The purchase and sale price on the San Francisco Mining Exchange was fixed with reference to the prices furnished the Spokane Mining Exchange by the defendants. That is to say, the defendants sold and purchased their own stock on the San Francisco Exchange at the prices they had furnished the Spokane Exchange at the particular time of the sale and purchase. By this method of fixing the market price a steady rise from the initial price of $1 per share to the price of $2.30 per share was shown by the reports. The only difficulty with this scheme was the fact that purchasers of stock might desire to realize profits shown by the market returns, and, as there was no real market for this stock, it would require the defendants to repurchase this stock at the advance price shown by the market returns. This hazard was largely eliminated by the failure of the defendants to deliver to the purchaser the stock they had purchased by falsely representing that it would take two or three weeks to secure the certificates from New York, and also by attempts to dissuade the purchasers from selling the stock by representation that it was rising so rapidly in value that it would soon be worth $5 a share. By this means it was assured that very little stock would be offered by those who had purchased the only available stock from the defendants. In order to make it appear that the stock was very active on the market, the reports were manipulated so as to show a large number of sales daily. As these sales were all reported by the defendants to the exchange, of course they could be arranged in any manner that the defendants saw fit. But to save the telegraph tolls the defendants devised the scheme of reporting to the mining exchange a single block of stock as sold at a single price, and when they issued purported copies to prospective purchasers the stock was subdivided into blocks purporting to have been purchased by a number of purchasers. In order to maintain the price arbitrarily fixed in the office of the defendants, instructions were given to the brokers in San Francisco and Spokane to purchase all stock offered on the floor of the exchange. Reports and statements concerning the value of a mine and its prospects were prepared and mailed by the defendants to their prospective purchasers. Throughout these reports the idea is presented in various forms that these *775 properties had been continuously operated and are now being operated, and that they had produced $7,500,000 in values. In one circular it is stated that 1,500,000 tons of ore was blocked out and the value is given as $15,000,000, although, according to the engineer of the company, the value of the 1,500,000 tons was less than the cost of mining. It is stated that assays show values running from $6 to $130 per ton, and the average value was $15 per ton. It is estimated that 7,500 tons gross could be produced per annum, yielding a net profit of $750,000 per annum. Other misstatements were contained in the circulars mailed by the defendants, but they relied, in the advertisements and in their representations, upon the general proposition that here was an extremely attractive mine that had been in continuous operation for many years with large resources of ore, a completely equipped and operating plant, and a ready sale for its stock upon well-established mining exchanges at prices rapidly increasing in value. The man who was induced to buy the stock as an investment, and it was so represented, was thus assured that there was actual value behind the stock which would render him a fair profit on his investment, and the man who purchased for speculation was assured of a speedy turnover, whereas, in fact, there was no market whatever for the stock and there was no stock available for purchasers, except the small amount being manipulated by the defendants in the manner above stated. The evidence makes it perfectly apparent that as soon as the defendants withdrew their support from the artificially created market value of the stock it would immediately become worthless. That is to say, its intrinsic value of 7 cents per share would depend for realization upon a capital investment which there is little likelihood of securing, and, even if secured, this amount would be a small comfort to investors who had paid from $1 to $2.30 a share. That the scheme was one artfully designed to impose upon that portion of the public inclined to speculate upon market fluctuations of stock is obvious, and, when fortified by persistent representations of actual value exceeding the market value, the assurances of increased market value were well calculated to effect the object of the defendants. With this general statement of the facts developed by the evidence, we will proceed to consider the appellants' assignment of errors.
At the close of the testimony a motion was made for instructed verdict, and the failure of the court to instruct the jury to acquit the defendant was assigned as error. Appellants' contention is largely based upon the theory that, if the scheme alleged in the indictment and shown by the evidence was fraudulent, they were innocent participants therein. Both appellants took the stand and testified that they believed that the method of operations, so far as they knew it, was bona fide, and that they acted in good faith. We will not undertake to distinguish between the three organizations under which the defendants operated other than to say that the L. F. Pearson Company, as shown by the written agreement between the defendant Levy and the appellants, was one of copartnership. The primary purpose of this copartnership was to manipulate the stock upon the stock exchanges so that it would have an apparently steadily increasing market value. The appellants in charge of this scheme admit their purpose to create and maintain a stock market value by the method of reporting sales and by the purchase of stock offered for sale by any outsiders at the current market quotations. The defendants both testified that they believed the sales reported to them by Levy and Fitzpatrick, their codefendants, were actual bona fide sales made by them. They claim that as these sales were actually made or believed by them to have been made they were fully justified in reporting them as having been made upon the floor of the stock exchange, as this was in pursuance, they claim, of the usual practice. The jury were not required to believe the protestation of innocence of these defendants. In fact, the whole scheme centered around the establishment of an alleged stock exchange value which is in fact wholly fictitious. It appears that in reports of sales sent out by the appellants to prospective investors and to those who had already purchased stock, it was shown that 151,425 shares were sold on the Spokane Mining Exchange, whereas the only stock sold on this exchange was a block of 100 shares. The number of shares reported sold on the San Francisco Mining Exchange was 51,900 shares, whereas no shares were bought and sold upon that exchange. The actual number of shares sold by the defendants, according to their books, was 95,300 shares, while the total number of shares available for sale, that is, shares actually paid for by the defendants, was only 22,500 shares. It was part of the fraudulent plan, as alleged in the indictment and shown by the evidence, that certificates of stock for the shares sold were not to be delivered, if it could be avoided, and that purchasers should be persuaded to refrain *776 from selling. Both appellants were active in these endeavors.
Appellant Harris prepared a prospectus and letter for mailing to those on a selected mailing list. Without attempting to analyze these communications other than to point out that they convey the idea of a valuable mining property operated by an experienced and capable organization directed by responsible and honorable business men whose stock had a well-established market value which was rapidly increasing, and that the capitalization of the company was small compared to the assets, there is no suggestion in these communications that the mine had ever been worked out or abandoned or dismantled by its owners. These communications are as follows:
"In accordance with your request, I take pleasure in sending you, under separate cover, a booklet containing facts and data pertaining to the more permanent features of the corporation, such as financial structure, holdings, geology, and developments.
"The properties embraced in General Mining, Milling & Power Company holdings have already produced upwards of $7,500,000.00 of gold, silver, and copper. Ore is being mined, and, according to the management's plans, a regular shipping schedule is to be inaugurated. Early dividends are certainly a logical expectation under these conditions.
"The stock of the General Mining, Milling & Power Company, listed in San Francisco and on the Spokane Stock Exchange, is in very strong demand, having a very large distribution. I want to call your attention to the fact that this security is fully paid, nonassessable, and carries full voting power very important features that must impress you.
"L. F. Pearson & Company in fact, all of us who are associated with the sponsorship of General Mining, Milling & Power stock, feel that in recommending this issue to our customers, we are rendering real service. It's the best looking deal I have ever come across, and I'm sure that coming months will bear me out in all I have said and will say regarding the stock and its possibilities.
"General Mining, Milling & Power stock has been steadily advancing since its listing, to the present price of _____. It is my opinion that this security will be selling, before very long, at $3.00 a share, or perhaps more.
"This is not an issue that will appeal to market scalpers. The character of the management assures real action at the mine. The natural sequence would be market activity which will reflect in dollars and cents the management's experience, energy and ability, and the mine's actual and intrinsic merit. However, profit on General Mining, Milling & Power stock cannot be obtained in 24 hours, but only when and as production increases, giving added value to the stock. Therefore, after buying General Mining, Milling & Power, don't expect miracles. Be loyal to your company by supporting the management in the carrying out of development plans which are designed to enable shareholders to make money by holding for greatly enhanced values, and dividends, which I believe are sure to come.
"The progress of the General Mining, Milling & Power Company is impressive. It is already at a stage which generally requires years to achieve. In other words, it is not a prospect, nor a promotion. The million and one-half tons of ore blocked out, and the hundreds of thousands of tons of rich unworked tailings, are, in our opinion, sufficient to convince you of the stability of the project.
"Two water power grants on White Water Creek are in themselves, we believe, of tremendous value. The development of this hydro-electric power will be a source of additional large profits to the General Mining, Milling & Power Company.
"The expensive equipment now on the properties is fully detailed in the prospectus. Assays which are on file at this office disclose values from $23.06 per ton to $131.52 per ton. The results, however great they may be, are only for those who become actively identified with the enterprise. You, I feel sure, will be one of those.
"Your General Mining, Milling & Power account is going to have my personal attention, I'm going to keep it right here before me, on my desk, so that I can give you the best of service, and handle correspondence myself, instead of turning it over to the Trading Department. For I realize that if I make you a substantial profit on your General Mining, Milling & Power transactions, you will be a regular customer of this firm, and that is what I am after.
"L. F. Pearson & Company, and all the other brokers who are sponsoring General Mining, Milling & Power stock are creating a very large demand for this security, and naturally the price should advance very rapidly.
"Your order will be executed at market through the Stock Exchange. The stock can *777 be bought in lots of 100 shares and upwards. The commission is $2.50 per 100 shares.
"I feel that General Mining, Milling & Power at $3.00 would be cheap, but I'd rather see you buy at the present market, because the difference between what you pay now, and what you will most likely have to pay if you wait, would in itself be a profit well worth having. At this point take my advice don't hesitate wire me your order at once.
"I'm determined to do all in my power to make you some money. So take my advice, and follow me through and I feel sure you will have good reason to be glad you did.
"Very truly yours,
"Manager, L. F. Pearson & Company."
"L. F. Pearson & Company take pleasure in announcing that after a careful and thorough investigation covering a period of several months analyzing companies of various kinds we are now in a position to make a most attractive investment offer.
"This offer will appeal to you as being distinctly different from any other proposition in that the company is an operating concern, and its properties have a past production record of $7,500,000. 1,500,000 tons of ore are now blocked out, and upon most conservative assay we are advised that this ore has a value of almost five (5) times the capitalization of the company earnings conservatively estimated based on present operations, and ore blocked out warrant very substantial early dividends.
"The purchase of stock of the General Mining, Milling & Power Company gives you an opportunity to become identified with an operating, mining and milling company, with vast holdings of water power capable of developing twenty thousand (20,000) horse power, that has taken considerable time and money to develop. The character and calibre of the company's management is such that successful, economical operation is a foregone conclusion. The management is made up of men who have made an outstanding success for over fifty (50) years, nationally known and rated the highest credit. These men constitute the management of John Simmons Company, 110 Center street, New York City.
"L. F. Pearson & Company feel particularly proud of the fact that it is to participate in the distribution of an issue of such outstanding merit, and looks upon this distribution as an opportunity to make hundreds of friends among those who will welcome an opportunity to become interested in a stock which, within a comparatively short time, should enhance greatly in value. This stock is listed in San Francisco and on the Spokane Stock Exchange.
"A comprehensive booklet, containing a full description of the properties embraced in the holdings, excerpts from state and U. S. Government reports, maps and other interesting details, is now being prepared.
"Inasmuch as the current edition of the descriptive booklet will be small, it is suggested that you fill out and return the enclosed card at once, providing you want a chance to go over the details of an exceptional and very unusual security. Your sending for the booklet implies no obligation whatever.
"Respectfully,
"L. F. Pearson & Company,
"Dexter Horton Building,
"Seattle, Washington.
"November 21, 1928."
Without further discussion of the evidence it is sufficient to say that there was ample evidence to go to the jury upon the question of the guilty participation of the appellants in the conspiracy alleged in the indictment. In this connection it should be stated that the account books of the three organizations were introduced in evidence and brought here as exhibits. Defendants objected to an expert testifying with relation to the facts shown by these books, upon the ground that the books were the best evidence. The objection was sustained, although, under the well-established rule, such evidence was proper. Lewis v. U. S. (C. C. A.) 38 F.(2d) 406. In view of the fact that these books are presented without any effort to summarize their contents, without the advantage of expert testimony concerning them, we might well decline to consider a claim of the insufficiency of the evidence on appeal, for the burden on appeal is on the appellant to show the insufficiency of the evidence to justify the verdict. It is true that this court, in the exercise of its appellate power, might submit such books to experts. Such a course is unusual, and, in view of the presumptions against the appellants, entirely unnecessary. We do not base our conclusion, however, upon this presumption, but upon affirmative evidence called to our attention by the parties.
Appellants objected to the sufficiency of the indictment and presented their objection to the trial court on motion in arrest of judgment and assigned the denial of that motion as error. Neither the appellant nor the appellee *778 seemed to have any difficulty on appeal in stating the purport of the indictment. In the briefs of both appellants and appellee it is stated that the gist of the indictment is a manipulation of stock prices on the San Francisco and Spokane Stock Exchange, and the circulation of false reports through the mails concerning fictitious and fraudulent stock transactions, and to this appellee adds the statement that part of the fraudulent scheme was to fail to deliver the stock purchased by the investors and the conversion of the proceeds therefrom. It is sufficient upon a motion in arrest of judgment if the indictment substantially states the elements of the crime charged. Cyc. of Fed. Proc., § 2433; Banta v. U. S. (C. C. A.) 12 F.(2d) 765; Gibson v. U. S. (C. C. A.) 31 F.(2d) 19.
The indictment covers twenty-two pages of the transcript and appellants' analysis thereof thirteen pages of their brief. In view of the substantial agreement between the parties as to the nature of the offense charged, we need only say that the indictment is clearly sufficient to charge a crime.
Appellants assign as error the ruling of the trial court admitting a letter written by defendant Levy to Richard Sheffield on June 28, 1928. As this evidence was clearly admissible as to defendant Levy, the objection of appellants to its introduction, on the ground that the evidence was incompetent and in no way connected with the issues, was properly overruled. If the appellants desired to limit the effect of this evidence to defendant Levy, they should have requested an instruction to that effect. Robinson v. U. S. (C. C. A.) 33 F.(2d) 238.
The government offered the testimony of N. H. Seil for the purpose of showing a telephonic conversation between N. H. Seil, who is a broker in Seattle, with defendant Heath, who was acquitted, in which the witness stated to Heath that he would not handle transactions of that kind through his office, that is to say, a transaction for the purchase and sale of the same amount of stock of the corporation on the same day. The question was not objected to, and for that reason the motion to strike out was properly denied. Moreover, the evidence is clearly admissible against the defendant Heath.
The witness Epstein, the president of the San Francisco Mining Exchange, was called in the first instance by the government, to identify lists of the reported sales of the San Francisco Mining Exchange in the months of October and December, 1928, and January, 1929. He was recalled by the defendants and testified that there was nothing in the rules of the San Francisco Exchange to prevent a broker giving an order to another broker to sell certain stock and approximately at the same time give another order to another broker to buy the same stock, and that this is the usual and customary procedure. In rebuttal, John Swenson testified for the government that Mr. Epstein had told him on April 21, 1930: "That if as president of the San Francisco Exchange, he knew one broker sold certain stock through another broker and immediately after said sale procured a third broker to repurchase it, the practice would not be permitted." The evidence of witness Epstein for the defense was directed principally to the question of operations of defendant Forsyth in San Francisco. It was, however, offered in behalf of all the defendants. If the rules of the stock exchange were as Epstein testified them to be, it would not in any wise alter the guilt of the appellants, who had originated and co-operated in the scheme of misrepresenting to the public the market value and salability of the mining stock in question. A wash sale, whether or not it was permitted by the rules of the exchange, would, under the circumstances disclosed by the evidence, be equally effective to carry out the scheme of the defendants. Its only possible relevancy would be to sustain the contention of defendant Forsyth that he was acting in the usual and customary way. Forsyth was acquitted.
The bill of exceptions, which is in narrative form, makes it uncertain as to whether or not the objection to Swenson's testimony was interposed before the testimony was given. The government contends that the objection was made after the testimony was adduced in that regard. In case of doubt the record would have to be construed favorably to the ruling of the trial court and thus to sustain the judgment, but we find no assignment of error based on this ruling, and, in the absence of such assignment, the ruling cannot be considered by us.
Frank Hammond, a witness called for the defense, testified that, as receiver for the West Coast Finance Company, a certain book which is marked Defendants' Exhibit A-43 had come into his possession. He testified: "This exhibit is a securities guide of stocks used for trading on the New York Produce Exchange." The court refused to admit this book in evidence, on the ground it was incompetent. Thereupon appellants "offered to show by the book rejected that the stock of *779 the General Mining, Milling & Power Company was listed on the New York Produce Exchange during the year 1929, and that there was a market there during the year 1929 for the sale of stock of the mining company and that that condition continued throughout the year 1929 and through the early part of the year 1930. This offer of proof by the said defendants was rejected by the court and an exception allowed and entered in favor of the defendants Harris and Morris to the ruling." The book in question has not been forwarded to this court with the exhibits. The offer does not disclose the alleged market prices, nor is it clear from the record just why the evidence was rejected. The appellants rely upon the rule stated by the Supreme Court in Virginia v. West Virginia, 238 U.S. 202, 212, 35 S. Ct. 795, 800, 59 L. Ed. 1272, as follows: "It is unquestioned that, in proving the fact of market value, accredited price-current lists and market reports, including those published in trade journals or newspapers which are accepted as trustworthy, are admissible in evidence. Cliquot's Champagne, 3 Wall. 114, 141, 18 L. Ed. 116, 120; Fennerstein's Champagne, 3 Wall. 145, 18 L. Ed. 121; Chaffee v. U. S., 18 Wall. 516, 542, 21 L. Ed. 908, 912; Sisson v. Cleveland & Toledo Ry., 14 Mich. 489, 90 Am. Dec. 252; Cleveland & Toledo Ry. v. Perkins, 17 Mich. 296; Whitney v. Thacher, 117 Mass. 523; Fairley v. Smith, 87 N. C. 367, 42 Am. Rep. 522; Moseley v. Johnson, 144 N. C. 257, 56 S.E. 922, 929; Nash v. Classen, 163 Ill. 409, 45 N.E. 276; Washington Ice Co. v. Webster, 68 Me. 449; Harrison v. Glover, 72 N.Y. 451. We need not stop to review the decisions that are cited with respect to the extent of the preliminary showing of authenticity that is required (Whelan v. Lynch, 60 N.Y. 469, 19 Am. Rep. 202; Norfolk & W. R. Co. v. Reeves, 97 Va. 284, 33 S.E. 606; Fairley v. Smith, supra). * * *"
The first question presented is whether or not the above statement of the witness is sufficient foundation for admitting the guide book. In Whelan v. Lynch, 60 N.Y. 474, 19 Am. Rep. 202, dealing with the admissibility of shipping and price current list, cited by the Supreme Court, as above stated, and also referred to by Wigmore in his work on Evidence, vol. 3, § 1703, it was said: "The court was also in error, I think, in admitting the Shipping and Price Current List as evidence of the value of the wool, without some proof showing how or in what manner it was made up; where the information it contained was obtained, or whether the quotations of prices made were derived from actual sales, or otherwise. It is not plain how a newspaper, containing the price current of merchandise, of itself, and aside from any explanation as to the authority from which it was obtained, can be made legitimate evidence of the facts stated. The accuracy and correctness of such publications depend entirely upon the sources from which the information is derived."
We would probably be justified in holding that without more substantial evidence as to the authenticity and reliability of the publication offered in evidence it was properly excluded, but in this case there was a much more cogent reason for excluding it. It appears from the evidence that the defendants were in a position to control the entire issue of stock of the company, defendant Levy having an option upon a million shares and an agreement that the balance would be neither issued nor registered. It is obvious that during the period covered by the conspiracy there could be no market value thereof in New York City, regardless of the entries which might have appeared in the excluded book. Moreover, it appears from the evidence that the defendants were prepared to carry on in New York a similar campaign to affect the reports of the New York Stock Exchange. The telegram from the appellants signed L. F. Pearson & Co., directed to E. O. Fitzpatrick, president of the West Coast Finance Company, at Port Angelus, Washington, states: "Eastern pool operations on general now strongly organized. Will undoubtedly commence operations immediately after the first of the year. Should undoubtedly result in substantial appreciation of market prices; therefore advise that you be prepared to benefit through this information."
In view of the proof before the court with reference to the utter unreliability of the reports of the Spokane Mining Exchange and the San Francisco Mining Exchange as showing market value of stock of this corporation, it is manifest that, without further proof than the general statement that a book found in the custody of the defendants was a securities guide of stocks used for trading on the New York Produce Exchange, there is an insufficient foundation for the admission thereof, as it also appeared from the evidence that the intrinsic value of the property owned by the mining company did not exceed 7 cents per share, and there is no showing of any change in value during the continuance of the conspiracy. The appellee supports the ruling of the trial court in excluding this evidence *780 by claiming that the conspiracy terminated on January 14th and erroneously asserting that the offer did not cover the whole of the year of 1929, but the foregoing quotation shows the offer covered the entire year of 1929. The appellee also contends that the market value of the stock in 1929 is immaterial, for the reason that the conspiracy charged is not based upon actual loss suffered by those defrauded by reason of the fact that the property was worth less than they paid for it, but on the proposition that the scheme was designed to obtain money from investors which they would not part with except for the fictitious values established on the Spokane and San Francisco Stock Exchanges, and misrepresentations made in connection therewith. In view of the showing of the government, however, that the mining properties were of so little value, as disclosed by its witnesses, it would undoubtedly be proper for the defendants in rebuttal to show that the property itself was more valuable than claimed by the government's witnesses. The showing of market quotations of stock in New York, however, would not rebut the evidence offered by the government with relation to the actual and intrinsic value of the stock, and furthermore, as we have said, the publication was properly rejected because, under the circumstances disclosed by this case, no proper foundation was laid for the admission of the book offered by the defendants to prove the market value of the stock.
Appellants offered to prove that John A. Swenson, post office inspector assigned to investigate charges against the defendants, had on October 23, 1929, long after the filing of the indictment in this case (March 27, 1929), written a letter to W. A. Cochran, president of the company, stating that it was hoped that the case against the defendants could be brought to trial soon after the first of the year 1930, and that he would be glad to have the company withhold any steps for a general sales campaign until that time, "since the defendants in the case are going to take as great a comfort as they can out of anything done by you." Defendants offered to prove by the witness that the purpose of the letter was to have the stock "redrawn" (withdrawn) from the market, to the end that it would appear that it had no market value, and that, because of the action of the government agents, the market for this stock was deliberately destroyed. The offer to prove was elaborated by the additional offer, "and that as result of said letter the market for the disposition of this stock was destroyed by the action of the Government itself." If the defendants had desired to present to the jury these alleged activities of this witness, it could have been done on his cross-examination, when he testified for the government, to show his interest in the case. This was not done. Proof that the market value of the stock had been destroyed by the witness long after the indictment would not tend to prove that the defendants were not guilty of the conspiracy to obtain money by false pretenses, which was fully accomplished before the indictment in March, 1929. It is doubtful if the offer should be construed to be any broader than an offer of the letter itself, for certainly the offer to show that as result of the letter the market had been destroyed would be an offer to prove a mere conclusion. However that may be, the objection to the offer was properly sustained.
Appellants present forty-nine assignments of error with relation to the instructions to the jury given and refused by the trial court. It is first claimed that the entire charge was argumentative, misleading, and discriminatory. The charge covers thirty pages of the transcript. We have read this charge with care, and in its entirety it is eminently fair. The jury were carefully instructed that they were the sole judges of the facts, that the court intended to refrain from expressing an opinion on the facts, and that, if in the course of the instructions it did so, such opinion was not binding on the jury. Throughout the instructions, the court, after informing the jury that the good faith of the defendants was a vital question in the case, couched his instructions in the form of questions. The apparent purpose of these questions was to call the attention of the jury to certain factors in the case without intimating to the jury the view of the court as to the effect of the answer to the question. One quotation will illustrate the nature of the questions: "Did they cause reported sales on the Spokane Stock Exchange for block of stock or cause to be split up in smaller denominations and listed in the literature sent out for the purpose of showing an increased number of investors?"
Now, it was admitted by the defendants that they had done exactly the thing which the court asked the jury to consider, as hereinbefore stated. The court would have been justified in stating directly to the jury that in his opinion the evidence showed that they did what in fact they admitted that they did do. At the conclusion of twelve of these questions the court said: "These are matters *781 for your consideration and upon which you must conclude to determine the plan or scheme under which the defendants operated and the intent, purpose and motive prompting it." It is clear from this conclusion that the answer to these questions was left entirely to the jury. Thereafter three other questions were asked. These were directed especially to the question of the guilt of the defendant Levy.
There was no assignment of error based upon the claim that the instructions were argumentative or misleading or discriminatory. While an objection to the instructions upon the ground that as a whole they were argumentative may be considered without an assignment of error, this case does not present a situation where the court would be either justified or required to consider the question without an assignment of error. However, as we have said, the instructions were, as a whole, fair.
Assignments 8 to 29 are argued together under the heading "Numerous erroneous instructions were given by the court and certain requested instructions were erroneously refused." Assignment No. 29 is based upon the refusal of the court to give the following instruction: "I instruct you that no defendant can be guilty of making a false and fraudulent representation because he expresses an opinion. The expression of an opinion can never be a false and fraudulent representation. A defendant who represented that it was a good investment; a defendant who represented that in his opinion the stock would increase in value; a defendant who represented that it would become a profitable investment, is either expressing an opinion or is making a statement of a future event, and in neither instance is he guilty of making a false pretense or a false representation." This instruction was properly refused. It does not state the law correctly. If the defendants in this case stated that stock worth 7 cents was a good investment at $2.30, and they knew at the time the statement was made that the stock was not worth more than 7 cents, the representation is clearly fraudulent under the circumstances of this case, where the buyers have no independent knowledge of any of the facts with relation to the distant mine. Sacramento Suburban Fruit Lands Co. v. Nelson (C. C. A.) 36 F.(2d) 929; Sacramento, etc., v. Melin (C. C. A.) 36 F.(2d) 907. The court gave an instruction upon this subject which the appellants complain of in their brief. We find no exception to the giving of this instruction nor any assignment of error based upon the giving of the instruction, and the instruction was more favorable to the appellants than they were entitled to, for in conformity with the request of the appellants the jury were instructed that expressions of opinions were not false and fraudulent representations.
Assignments of error as to instructions given, Nos. XII, XIII, XIV, XVI, XX, and XXVI, are argued together. Appellants say: "The instructions seem to rest the guilt of the defendants upon the reporting and circularizing of sales `at advancing prices' when advances in prices were caused and `inspired' by the defendants themselves rather than by any `new discoveries in the mines' or `added intrinsic value to the stock'. The court paid no heed whatsoever to the fact that a representation of advancing prices is a representation of advancing prices and nothing more nor less." This indicates the general line of the argument of the appellants directed against the instructions given.
It is difficult to epitomize the instructions thus objected to. Their general purport is that a mere belief on the part of the defendants in their power to arbitrarily advance stock market quotations was not sufficient to establish good faith where the purpose was to arbitrarily advance such market values without reference to any increase in the intrinsic value of the stock. We see no objection to this instruction. It amounted to little more than informing the jury that appellants' belief in their ability to successfully defraud the public was not a defense to the charge of conspiring to obtain money under false pretenses.
Assignment of error XXIV to an instruction give by the court on the subject of intent is not well taken. The instruction was proper. Agnew v. U. S., 165 U.S. 36, 53, 17 S. Ct. 235, 41 L. Ed. 624. The gist of the instruction was that the jury might infer a man's intent from his acts.
Assignment of error No. XXV deals with the interrelation of the five counts of the indictment charging mail frauds with the sixth count charging a conspiracy to violate section 215 of the Penal Code (18 USCA § 338). The gist of the instruction to the jury was that, if it found that a conspiracy existed as specifically charged in count 6, and if such conspiracy involved a plan or scheme to defraud, and if the conspirators used the mails in carrying out the conspiracy, those joining in the conspiracy would be guilty of the overt *782 acts by coconspirators in pursuance thereof, whether or not they immediately participated therein. Appellants' claim of error is thus stated: "Thus the court practically directed the jury to find the defendants guilty on `one or all' of the substantive counts if they found them guilty of the conspiracy."
We think this criticism is not justified. It is fundamental in the law of conspiracy that, when the conspiracy is shown to exist, all conspirators are responsible for the acts of their coconspirators in carrying out the conspiracy. Belden v. U. S. (C. C. A.) 223 F. 726; Robinson v. U. S. (C. C. A.) 33 F.(2d) 238. Moreover, appellants testified that they engaged in a mailing campaign and themselves committed the various overt acts charged.
In the instructions to the jury the court called attention to the argument, which is not set out in the record, to the effect that the parties were operating under a pool which was legal. The court correctly instructed the jury that there was no evidence of any pool formed by the defendants with the purchasers of stock.
The appellants seek to take advantage of certain instructions or statements by the court in its charge to the jury which related specifically to the conduct of the defendant Levy, who is not appealing. The court asked the jury to consider whether or not the plan conceived by Levy in the organization of the Pulp & Paper Securities Company and the West Coast Finance Company and the securing of local persons as trustees "was a scheme to camouflage the public and lull investors into a feeling of security because of the reputation of local men, or was his plan at its inception bona fide, and, if so, why was the stock placed on the Spokane and San Francisco Exchanges and not on the Seattle Exchange, where the offices were located and it is shown an exchange was operated or, was his purpose to have distance lend enchantment?"
The attention of the court was called to the instruction by the exceptions to the charge in which it was claimed that there "was no evidence that there was any mining exchange in Seattle or any testimony that there was any exchange on which mining stock could be listed outside the city of San Francisco and Spokane." Appellant Morris, on his cross-examination, had testified that the stock "was not listed on the Seattle Exchange so that no sales could be made here except privately." It was a reasonable inference from this testimony that that stock could have been listed on the Seattle Exchange if parties had desired. The court, however, accepted counsel's statement made in the exception and withdrew that portion of the charge and instructed the jury to disregard it. Even if there was any error in giving the instruction, it was cured by its prompt withdrawal.
In the charge to the jury the following passage occurs to which appellants object: "If Levy was acting in good faith, why did he dictate letters on important matters and have Helma Campbell, his stenographer, sign instead of signing them himself? Why did he dictate a letter March 26th, 1928, and send advertising matter to `The Star', Toronto, Canada, offering a block of Pulp & Paper Securities at attractive prices in the name of his stenographer, Miss Kennedy, and direct her to simulate a male handwriting?"
The exception to this instruction by defendant Levy, and concurred in by the appellants, is as follows: "Mr. Dore: In calling the attention of the jury to why Levy dictated letters and did not sign them himself, having them signed by Helma Campbell why the letter that went to the newspaper in Canada was signed with a simulated handwriting of a girl or lady stenographer in the office."
It will be observed that in the exception it is not claimed that the implied statement of the court was not borne out by the evidence, namely, that defendant Levy had his stenographer sign important matters instead of signing them himself, and had her offer stock of the Pulp & Paper Securities Company in her own name, signed in simulated handwriting. We may therefore assume that the ground of the exception indicated by the court was the mere fact that the court had called attention in this manner to such evidence. In view of the fact that the court left all questions of fact wholly to the determination of the jury, and that the comment of the court was justified by the evidence, we cannot say that the instruction was either erroneous or prejudicial as to the appellants. The most that can be said of the instruction is that the court felt that the methods of defendant Levy shown by the evidence in regard to the matter in question were worthy of the attention of the jury in arriving at its verdict.
Judgment affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2470925/ | 314 F. Supp. 2d 1333 (2004)
Shirley WILLIAMS, Gale Pelfrey, Bonnie Jones, and Lora Sisson, individually and on behalf of a class, Plaintiffs,
v.
MOHAWK INDUSTRIES, INC., Defendant.
No. CIV.A.4:04-CV-0003-H.
United States District Court, N.D. Georgia, Rome Division.
April 12, 2004.
*1334 *1335 *1336 *1337 John Earl Floyd, Joshua F. Thorpe, Ronan P. Doherty, Nicole G. Iannarone, Bondurant Mixson & Elmore, Atlanta, GA, Bobby Lee Cook, Cook & Connelly, Summerville, GA, Howard Foster, phv, Johnson & Bell, Chicago, IL, Matthew Daniel Thames, Goddard Thames Hammontree & Bolding, Dalton, GA, for Plaintiffs.
Robert Carl Cannon, Rosemary C. Lumpkins, Constangy Brooks & Smith, Atlanta, GA, Steven Thomas Cottreau, phv, Juan P. Morillo, phv, Virginia A. Seitz, phv, Sidley Austin Brown & Wood, Washington, DC, for Defendant.
ORDER
MURPHY, District Judge.
This is a class action alleging violations of the federal and Georgia Racketeer Influenced and Corrupt Organizations Acts ("RICO"). The case is before the Court on Defendant's Motion to Dismiss [25].
I. Background
A. The Parties
Plaintiffs are current and former hourly employees of Defendant who claim that Defendant's alleged employment and harboring of illegal aliens has depressed their wages. (Compl.¶ 1.) Plaintiffs Gale Pelfrey, Shirley Williams, Bonnie Jones, and Lora Sisson are citizens of Georgia and reside in the Northern District of Georgia. (Id. ¶¶ 5-8.) Plaintiffs Pelfrey, Williams, and Sisson are former hourly employees of Defendant. (Compl.¶¶ 5, 6, 8.) Plaintiff Jones is currently an hourly employee of Defendant. (Id. ¶ 7.) Plaintiffs Pelfrey, Williams, Sisson, and Jones are eligible to be employed in the United States. (Id. ¶¶ 5-8.) Plaintiffs seek certification of a class consisting of all current and former employees of Defendant legally authorized to be employed in the United States who are or have been employed in hourly wage positions at any time since January 5, 1999, to the present (the "Class").[1] (Id. *1338 ¶ 39.)
Defendant is the second largest carpet and rug manufacturer in the United States. (Compl.¶ 2.) Defendant employs approximately 31,780 persons, most of whom are employed in Northwest Georgia. (Id.) Defendant owns or leases at least twenty-six facilities in Georgia. (Id.) Defendant is a Delaware corporation with its principal place of business in Calhoun, Georgia. (Id. ¶ 9.)
B. Plaintiffs' Allegations
Plaintiffs allege that Defendant has engaged in illegal hiring of persons who are not eligible for employment in the United States in an effort to keep costs of labor as low as possible. (Compl.¶ 14.) According to Plaintiffs, Defendant has accepted for employment and continues to employ workers that it knew or had reason to know were not authorized to work in the United States. (Id. ¶ 15.) Plaintiffs allege that Defendant has knowingly and recklessly accepted false documents or documents that do not match the identity of the person presenting the documents as proof of eligibility for employment. (Id. ¶ 16.) Additionally, Plaintiffs claim that Defendant has knowingly and recklessly accepted proof of eligibility for employment documents reflecting successive different names for a single person. (Id. ¶¶ 17, 19.) Indeed, Plaintiffs allege that when some illegal workers have informed Defendant that they would return to their countries of origin, supervisors employed by Defendant have encouraged those employees to return to the United States and illegally reapply for work at Defendant. (Id. ¶ 18.)
Plaintiffs claim that in an effort to conceal Defendant's employment and harboring of illegal workers, Defendant's employees have destroyed eligibility documents indicating that workers have employed different names and identification papers. (Compl.¶ 20.) Furthermore, according to Plaintiffs, Defendant's employees and supervisors have stated that they are aware that illegal workers can easily obtain false identification and work authorization documents. (Id. ¶ 21.)
Plaintiffs claim that Defendant's employees have traveled to the United States border to recruit illegal aliens. (Compl.¶ 22.) According to Plaintiffs, those employees and other persons then transported the illegal aliens to North Georgia for employment at Defendant's facilities. (Id.) Plaintiffs allege that Defendant has provided incentive to its employees and other recruiters by paying for locating illegal workers that Defendant eventually employs and harbors. (Id.) Plaintiffs contend that Defendant's employees and recruiters have provided housing for illegal workers when the workers arrived in North Georgia, and have aided those illegal workers in finding employment with Defendant. (Id. ¶ 23.)
Occasionally, Defendant audits its workforce and discovers illegal workers are employed with Defendant. (Compl.¶ 24.) According to Plaintiffs, Defendant has not increased the frequency of such audits despite the fact that the audits reveal that a large number of illegal workers are employed at Defendant. (Id.) Furthermore, Plaintiffs allege that when Defendant terminates an illegal worker after discovering that the illegal worker is not authorized to work in the United States, the worker frequently returns to work under a different name. (Id. ¶ 25.) Plaintiffs claim that this practice, termed "recycling," is widespread at Defendant. (Id. ¶ 26.) According to Plaintiffs, Defendant has been further put on notice of illegal workers because many illegal workers artificially inflate their claimed exemptions, *1339 thus avoiding paying federal income tax. (Id. ¶ 32.)
Plaintiffs allege that law enforcement authorities have raided Defendant's facilities in search of illegal workers. (Compl.¶ 27.) Plaintiffs claim that when such raids have occurred, illegal workers have hidden in barrels or other containers or have fled. (Id.) According to Plaintiffs, the number of illegal workers who run or hide has put Defendant on notice that it employs a large number of illegal workers. (Id.) Moreover, Plaintiffs contend that Defendant's employees and supervisors have assisted illegal workers in evading the law enforcement authorities. (Id. ¶ 28.)
Plaintiffs state that law enforcement authorities have arrested some illegal workers at Defendant's facilities. (Compl.¶ 29.) Plaintiffs further allege that law enforcement authorities have discovered undocumented aliens in possession of paychecks issued by Defendant or identification badges and fraudulent identification documents. (Id. ¶ 30.)
According to Plaintiffs, Defendant's supervisors have stated that illegal workers are preferable because those workers are more tolerant of working conditions and do not submit claims for workers' compensation. (Compl.¶ 31.) Plaintiffs contend that because many of Defendant's workers are undocumented aliens, Defendant knows that those workers are beholden to Defendant, and thus are unlikely to complain about working conditions or file workers compensation claims. (Id. ¶¶ 36-37.) Consequently, Plaintiffs believe that Defendant saves a considerable amount of money by employing undocumented aliens. (Id. ¶ 37.)
According to Plaintiffs, Defendant's practice of employing and harboring large numbers of illegal workers has allowed Defendant to depress wages; consequently, the wages paid to hourly employees, including the legally employed hourly employees who are members of the Class, are lower than those wages would be if Defendant did not employ and harbor illegal workers. (Compl. ¶ 33.) Plaintiffs allege that Defendant employs tens of thousands of hourly workers in North Georgia (id. ¶ 34), and Defendant's widespread employment and harboring of illegal workers has substantially increased the supply of workers from which Defendant hires its hourly workers (id. ¶ 35). Plaintiffs contend that because of the increased size of the labor pool, Defendant has depressed the wages it pays to all of its hourly employees, including members of the Class. (Id.) In other words, Plaintiffs claim that Defendant had only hired persons legally authorized to work in the United States, Defendant would have had to pay higher wages to Plaintiffs and the members of the Class. (Id.) Thus, according to Plaintiffs, as a direct and proximate result of Defendant's employment and harboring of illegal workers, the wages that Plaintiffs and the members of the Class have earned have been depressed.
C. Plaintiffs' RICO Claims
1. Pattern of Racketeering Activity
Plaintiffs first allege that Defendant is engaged in an ongoing pattern of racketeering activity as defined by 18 U.S.C.A. § 1961(5) & (8). (Compl.¶¶ 54, 56.) According to Plaintiffs, Defendant has engaged in racketeering activity, namely, an open and ongoing pattern of violations of Section 274 of the Immigration and Nationality Act, 8 U.S.C.A. § 1324(a), more than twice, and the most recent occurrence took place within ten years after the commission of a prior act of racketeering activity. (Id. ¶ 55, 57, 58.) In particular, Plaintiffs allege that Defendant has violated and continues to violate: (1) 8 U.S.C.A. § 1324(a)(3)(A), which makes it a federal crime to "knowingly hire[ ] for employment *1340 at least 10 individuals with actual knowledge that the individuals are aliens" during a twelve month period (id. ¶ 59); (2) 8 U.S.C.A. § 1324(a)(1)(A)(iii), which makes it a federal crime to "conceal[ ], harbor[ ] or shield from detection, or attempt[ ] to conceal, harbor or shield from detection" aliens that have illegally entered the United States (id. ¶ 60); and (3) 8 U.S.C.A. § 1324(a)(1)(A)(iv), which makes it a federal crime to "encourage[ ] or induce[ ] an alien to come to, enter, or reside in the United States, knowing or in reckless disregard of the fact that such coming to, entry, or residence is or will be in violation of law" (id. ¶ 61). Plaintiffs contend that each violation of 8 U.S.C.A. § 1324 constitutes an act of "racketeering activity" as defined by 18 U.S.C.A. § 1961(1)(F). (Id. ¶ 62.)
According to Plaintiffs, the "racketeering activity" also includes Defendant's open and ongoing violations of 18 U.S.C.A. § 1546(a) by knowingly accepting various false identification documents and other false documents indicating authorization for legal employment, and Defendant's continued violations of 18 U.S.C.A. § 1546(b) by using such documents to fill out I-9 forms. (Compl.¶¶ 63-64.) Plaintiffs allege that each violation of 18 U.S.C.A. § 1546 constitutes an act of "racketeering activity" as defined by 18 U.S.C.A. § 1961(1)(B) as well as O.C.G.A. § 16-14-3(9)(A)(xxix). (Id. ¶¶ 65-66.)
Plaintiffs claim that the acts of Defendant's racketeering activity have the same or similar methods of commission in that those acts involve the knowing employment of illegal workers, the concealment, harboring, and shielding from detection of illegal workers, and the acceptance or use of fraudulent documents in connection with the hiring of illegal workers. (Compl. ¶ 67.) According to Plaintiffs, the acts of racketeering activity have the same or similar objective i.e. the reduction of wages paid to Defendant's workforce. (Id. ¶ 68.) Plaintiffs allege that the victims of those acts of racketeering activity are the same or similar. (Id. ¶ 69.) Plaintiffs also contend that the distinguishing characteristics of the acts of racketeering activity include the involvement of Defendant, illegal workers, and other third parties who assist in the recruitment and transportation of undocumented aliens. (Id. ¶¶ 70, 76-84.)
According to Plaintiffs, those acts of racketeering activity have occurred over a long period of time, and have become a part of Defendant's regular way of doing business. (Compl.¶¶ 71-73.) Plaintiffs assert that Defendant has committed hundreds, and perhaps thousands, of violations of 8 U.S.C.A. § 1324 and 18 U.S.C.A. § 1546 as part of its racketeering activity. (Id. ¶ 74.) Indeed, Plaintiffs claim that Defendant's racketeering activity has been so pervasive that illegal workers currently constitute a majority of the workforce in many of Defendant's facilities in North Georgia. (Id. ¶ 75.)
2. Enterprise
Plaintiffs also allege that Defendant has engaged in its pattern of racketeering activity through its participation in an association-in-fact enterprise, as defined by 18 U.S.C.A. § 1961(4), with third party employment agencies and other recruiters who supply Defendant with illegal workers. (Compl.¶¶ 76, 79.) Plaintiffs claim that one such recruiter is Temporary Placement Services ("TPS"), which has a formal relationship with Defendant in that TPS employs illegal workers and then loans those workers to Defendant for a fee. (Id.) According to Plaintiffs, other recruiters simply find workers in an area surrounding Brownsville, Texas, and then transport those workers to Georgia. (Id.) Plaintiffs contend that TPS and other recruiters *1341 also occasionally assist current and prospective illegal workers in assuming new identities. (Id.) Plaintiffs allege that those recruiters share the common purpose of obtaining illegal workers for employment with Defendant. (Id. ¶ 77.) Additionally, Plaintiffs contend that Defendant participates in the operation and management of the affairs of the enterprise, which exists for Defendant's benefit. (Id. ¶ 78.)
Plaintiffs allege that the enterprise affects interstate commerce in that the illegal workers employed by Defendant travel in international and interstate commerce to reach Defendant's facilities in North Georgia. (Compl.¶¶ 80, 81.) According to Plaintiffs, the enterprise also affects interstate commerce in that the wages of legal workers employed with Defendant are depressed. (Id. ¶ 82.) Furthermore, Plaintiffs state that because Defendant is a member of the enterprise and is directly engaged in the production, distribution, and acquisition of goods and services in interstate commerce, the enterprise affects interstate commerce. (Id. ¶ 83.)
According to Plaintiffs, Defendant, by accepting and retaining the benefits of the racketeering activity, ratified the conduct of Defendant's managers, employees, and the members of the enterprise who assisted Defendant in committing those acts of racketeering activity. (Id. ¶ 84.)
3. Causation
Plaintiffs next allege that Defendant's violations of federal and Georgia RICO proximately caused the wages of Plaintiffs and the members of the Class to be lower than their wages otherwise would have been had the labor pool consisted solely of legally employed workers. (Compl.¶ 85.) Thus, Plaintiffs and the Class claim that they have suffered an injury to their business or property. (Id. ¶ 86.) As a result, Plaintiffs contend that Defendant has earned or retained significant funds to which it is not entitled. (Id. ¶ 87.)
D. Procedural Background
On January 6, 2004, Plaintiffs filed this lawsuit. Plaintiffs assert the following claims: (1) a claim that Defendant's conduct violates 18 U.S.C.A. § 1962(c) (Compl. ¶¶ 88-92); (2) a claim that Defendant's conduct violates O.C.G.A. § 16-14-4(a) (id. 93-98); (3) a claim that Defendant's conduct violates O.C.G.A. § 16-14-4(c) (id. 99-105); and a claim for unjust enrichment arising under Georgia law (id. ¶¶ 106-110). Plaintiffs also seek certification of a class pursuant to Federal Rule of Civil Procedure 23. (Id. ¶ 46.)
On February 9, 2004, Defendant filed its Motion to Dismiss pursuant to Federal Rules of Civil Procedure (12)(b)(6) and (12)(b)(1),[2] in which Defendant requests that the Court dismiss Plaintiffs' federal and state RICO claims. Defendant also requests that the Court decline to exercise its pendent jurisdiction over Plaintiffs' state law claims.
*1342 II. Standard Governing Motions to Dismiss
The standard for a court to dismiss a claim is whether "it appears beyond doubt that the plaintiff can prove no set of facts to support his claim." GSW, Inc. v. Long County, 999 F.2d 1508, 1510 (11th Cir.1993) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957)). When considering a motion to dismiss, the Court "must accept the allegations in the complaint as true, construing them in the light most favorable to the plaintiffs." White v. Lemacks, 183 F.3d 1253, 1255 (11th Cir.1999). However, "[a]s a general rule, conclusory allegations and unwarranted deductions of fact are not admitted as true in a motion to dismiss." S. Fla. Water Mgmt. Dist. v. Montalvo, 84 F.3d 402, 408 n. 10 (11th Cir.1996).
III. Discussion
A. Plaintiffs' Federal RICO Claim
18 U.S.C.A. § 1962(c) provides: "It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt." 18 U.S.C.A. § 1962(c). RICO establishes both civil remedies and criminal penalties for violations of § 1962. See 18 U.S.C.A. §§ 1963-1964. In particular, § 1964(c) provides that "[a]ny person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains and the cost of the suit, including a reasonable attorney's fee ...." 18 U.S.C.A. § 1964(c). Thus, for a plaintiff to have standing to pursue a private civil cause of action under RICO, the plaintiff must prove the following elements: (1) that the defendant violated § 1962; (2) that the plaintiff sustained an injury to his business or property; and (3) that the violation of § 1962 caused the injury. Avirgan v. Hull, 932 F.2d 1572, 1577 (11th Cir.1991) (citing O'Malley v. O'Neill, 887 F.2d 1557, 1560-61 (11th Cir.1989)). Likewise, to prevail on a civil RICO claim under § 1962(c), the plaintiff must show: (1) the existence of an enterprise; (2) that the enterprise affected interstate commerce; (3) that the defendant was employed by or associated with the enterprise; (4) that the defendant participated, either directly or indirectly, in the conduct of the affairs of the enterprise; and (5) that the defendant participated through a pattern of racketeering activity. United States v. Starrett, 55 F.3d 1525, 1541 (11th Cir.1995).
18 U.S.C.A. § 1961 provides definitions for some of the terms used in § 1962(c). "Racketeering activity" includes a number of "predicate acts" that the racketeer must commit for a violation of RICO. 18 U.S.C.A. § 1961(1). Notably, violations of 8 U.S.C.A. § 1324 and 18 U.S.C.A. § 1546, the predicate acts that Plaintiffs allege Defendant committed, are among those predicate acts listed in § 1961(1). 18 U.S.C.A. § 1961(1)(B) & (F). A "pattern of racketeering activity" is defined as at least two acts of racketeering activity that occurred within ten years after the commission of a prior act of racketeering activity. 18 U.S.C.A. § 1961(5); see Pelletier v. Zweifel, 921 F.2d 1465, 1496 (11th Cir.1991) ("A `pattern' of racketeering activity is shown when a racketeer commits at least two distinct but unrelated predicate acts."). Section 1961 also provides that an "`enterprise' includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." 18 U.S.C.A. § 1961(4). Likewise, a "person" liable under § 1962(c) *1343 is defined as "any individual or entity capable of holding a legal or beneficial interest in property." 18 U.S.C.A. § 1961(3).
Defendant contends that the Court should dismiss Plaintiffs' Complaint because: (1) the Complaint does not sufficiently allege the elements of the RICO predicate action; (2) the Complaint fails to identify a legally sufficient RICO enterprise; and (3) Plaintiffs lack standing to assert their RICO claims. The Court addresses each of those arguments in turn.
1. Sufficiency of Pleadings
a. Whether Plaintiffs Failed to Plead Predicate Acts with Particularity
As a threshold matter, the Court addresses Defendant's contention that Plaintiffs' Complaint fails to meet the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). When pleading a RICO action, it is well-settled that where the predicate act sounds in fraud (e.g. mail fraud, wire fraud, or securities fraud), the plaintiff must plead that predicate act with particularity as required by Federal Rule of Civil Procedure 9(b). Byrne v. Nezhat, 261 F.3d 1075, 1109-10 (11th Cir.2001) (mail fraud); Republic of Panama v. BCCI Holdings (Lux.), 119 F.3d 935, 949 (11th Cir.1997) (wire fraud); Brooks v. Blue Cross & Blue Shield of Fla., Inc., 116 F.3d 1364, 1380-82 (11th Cir.1997) (mail fraud and wire fraud); Durham v. Bus. Mgmt. Assocs., 847 F.2d 1505, 1511-12 (11th Cir.1988) (securities fraud); see also 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1251.1 n. 13 (citing cases finding that fraud claims brought under RICO must comply with pleading requirements of Rule 9(b)).
As the United States Court of Appeals for the Eleventh Circuit has not yet addressed whether the heightened pleading requirement of Rule 9(b) applies to RICO causes of action premised on non-fraud predicate acts, some ambiguity exists as to whether the particularized pleading requirements of Rule 9(b) apply in all RICO actions. Compare Taylor v. Bear Stearns & Co., 572 F. Supp. 667, 682 (N.D.Ga.1983) (Forrester, J.) ("It seems, however, to this court at least that there are many sound reasons for requiring that, like fraud, [RICO] must be pled with particularity.") and Helicopter Support Sys., Inc. v. Hughes Helicopters, Inc., No. 83-1450-Civ.-T-15, 1984 WL 3238, at *1 (M.D.Fla. June 22, 1984) (same) with Planned Parenthood of Columbia/Willamette, Inc. v. Am. Coalition of Life Activists, 945 F. Supp. 1355, 1380 n. 25 (D.Or.1996) (finding Rule 9(b) inapplicable where predicate acts are extortion and coercion); and United States v. Int'l Bhd. of Teamsters, 708 F. Supp. 1388, 1395-96 (S.D.N.Y.1989) ("This court is not persuaded by the reasoning of the courts that have applied Rule 9(b) to RICO actions not sounding in fraud, and adopts the reasoning of courts that limit the application of Rule 9(b) to fraud based RICO claims."); and United States v. Bonanno Organized Crime Family of LaCosa Nostra, 683 F. Supp. 1411, 1426-27 (E.D.N.Y.1988) (finding "no basis for extending the reach of Rule 9(b) to all RICO cases"). Those courts holding that Rule 9(b) applies in all RICO actions reason such heightened pleading is appropriate in light of the in terrorem effect of pleading RICO and in order to put the RICO defendant on notice of the claim against him. See Taylor, 572 F.Supp. at 682 ("First, the mere invocation of the statute has such an in terrorem effect that it would be unconscionable to allow it to linger in a suit and generate suspicion and unfavorable opinion of the putative defendant unless there is some articulable factual basis which, if true, would warrant recovery under the statute. Second, the concepts within the statute are so nebulous *1344 that if the cause of action were only generally pled, a defendant would have no effective notice of a claim showing that the pleader is entitled to relief.")
Plaintiffs urge the Court to find that the appropriate pleading standard for non-fraud RICO predicate activities is the standard provided in Rule 8(e)(1). See Fed. R. Civ. Proc. 8(e)(1) ("Each averment of a pleading shall be simple, concise, and direct. No technical forms of pleading or motions are required."). Specifically, Plaintiffs contend that the reasoning underlying Taylor is inapplicable in light of Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 105 S. Ct. 3275, 87 L. Ed. 2d 346 (1985). In Sedima, the United States Supreme Court held that a plaintiff in a RICO action need not allege and prove that the defendant had previously been convicted under RICO. 473 U.S. at 492, 105 S. Ct. 3275. In reaching that conclusion, the Supreme Court dismissed the argument that a RICO conviction should be required to pursue a civil RICO action, stating, "[a]s for stigma, a civil RICO proceeding leaves no greater stain than do a number of other civil proceedings." Id. Plaintiffs urge the Court to conclude that in light of the foregoing language from Sedima, Rule 9(b) is limited to cases that actually involve fraud or mistake, and does not apply in every case where the defendant claims it is stigmatized.
The Court finds Plaintiffs' reasoning persuasive, and finds that the better approach, and certainly the majority approach, is to apply the liberal pleading standards of Rule 8 to RICO actions involving non-fraud predicate activities. Additionally, the Court notes Taylor and Helicopter Support Sys. are distinguishable because the predicate activities in those cases were mail fraud and wire fraud, rather than a non-fraud predicate act.[3] Accordingly, the Court finds that where a predicate act does not sound in fraud, the plaintiff asserting a RICO claim need only comply with the general pleading requirements of Rule 8(e)(1), rather than the heightened pleading requirements of Rule 9(b).[4]
Having determined that Rule 9(b) is inapplicable in cases involving non-fraud RICO actions, the Court next addresses Defendant's argument that the predicate acts enumerated in Plaintiffs' Complaint sound in fraud, and must therefore be pled with particularity. In support of its position, Defendant cites to a string of criminal cases where courts referred to the predicate acts alleged in the instant lawsuit as "acts of fraud." See, e.g., United States v. Rodriguez-Suazo, 346 F.3d 637 (6th Cir.2003); United States v. Thiongo, 344 F.3d 55, 58 (1st Cir.2003); United States v. Hendricks, No. 99-4562, 2000 WL 341914, at *2 (4th Cir. Apr.3, 2000); United States v. Yum, 776 F.2d 490, 491 (4th Cir.1985). Those cases, however, do not require a finding that the predicate acts based on violations of 8 U.S.C.A. § 1324(a) and 18 *1345 U.S.C.A. § 1546 sound in fraud. The cases relied upon by Defendant involve defendants who were charged with making false representations, or conspiring to make false representations, to the federal government. By contrast, Plaintiffs do not allege that Defendant made false representations to Plaintiffs or the government; rather, Plaintiffs allege that Defendant has employed and harbored illegal workers. The predicate acts in this case consequently do not sound in fraud. Because the predicate acts in this case do not sound in fraud, the Court finds that Rule 9(b) is inapplicable to this case. Instead, Plaintiffs need only satisfy the requirements of Federal Rule of Civil Procedure 8.
The Court further notes that it has evaluated the Complaint, and finds that it satisfies the requirements set forth in Rule 8. Accordingly, the Court cannot dismiss the Complaint on the ground that Plaintiffs failed to plead the predicate acts adequately.
b. Whether Plaintiffs Failed to Allege All the Elements Required to Plead a Violation of 8 U.S.C.A. § 1324(a)(3)
Defendant also contends that Plaintiffs have failed to plead sufficiently the violation of 8 U.S.C.A. § 1324(a)(3), one of the predicate acts alleged in the Complaint. Specifically, Defendant claims that the Complaint fails to allege all the required elements of § 1324(a)(3), which provides:
(A) Any person who, during any 12-month period, knowingly hires for employment at least 10 individuals with actual knowledge that the individuals are aliens described in subparagraph (B) shall be fined under Title 18 or imprisoned for not more than 5 years, or both.
(B) An alien described in this subparagraph is an alien who
(i) is an unauthorized alien (as defined in section 1324a(h)(3) of this title), and
(ii) has been brought into the United States in violation of [8 U.S.C.A. § 1324(a)].
8 U.S.C.A. § 1324(a)(3). Defendant contends that to plead a violation of § 1324(a)(3) adequately, Plaintiffs must allege that Defendant knowingly hired ten or more aliens and that Defendant itself brought those aliens into the United States.
In support of its position, Defendant relies on System Management, Inc. v. Loiselle, 91 F. Supp. 2d 401 (D.Mass.2000). The Court, however, does not agree that the holding of Loiselle is as limited as Defendant insists. In Loiselle, the defendant owner and chief executive officer of a janitorial and custodial services company was sued by two competitor corporations and four former employees. Loiselle, 91 F.Supp.2d at 404. The plaintiffs alleged that the defendant had violated RICO by engaging in racketeering activity including "knowingly hiring at least ten individuals with knowledge that they were `aliens' as described in 8 U.S.C. § 1324(a)(3)(A)." Id. at 408. The defendant argued, and the court agreed, that the RICO claim premised on § 1324(a)(3) should be dismissed because the plaintiffs failed to allege "how the aliens entered the country or whether [the defendant] had knowledge of the purpose for which they entered." Id. The court reasoned that the language of § 1324(a)(3)(B)(ii) "seems to require, in order for liability to attach, that the aliens have been brought into the country by an employer for the purpose of illegal employment." Id. In other words, "the Plaintiffs must allege that [the defendant] had knowledge of how the aliens had been brought into the United States and that they were brought into the United States in violation of this employment provision." Id. Thus, Loiselle holds that simple allegations that the defendant knowingly hired undocumented aliens are insufficient to *1346 state a claim under § 1324(a)(3); rather, a plaintiff must additionally allege that the defendant knew that the aliens were brought into the United States for the purpose of illegal employment. Loiselle, however, did not hold that the employer itself must have brought the aliens into the United States for a claim to arise under § 1324(a)(3). Accordingly, the Court concludes that for a plaintiff to plead a violation of § 1324(a)(3) adequately, the plaintiff must simply allege that the aliens were brought into the United States in violation of subsection (a), but there is no requirement that the employer must have brought the aliens into this country.
Turning to the Complaint, the Court concludes that Plaintiffs have pleaded adequately the elements of § 1324(a)(3). Specifically, Plaintiffs have alleged that Defendant has hired illegal workers knowing that those workers were "smuggled or otherwise brought" into the United States illegally. (Compl.¶ 59.) See Mendoza v. Zirkle Fruit Co., No. CS-00-3024-FVS, 2000 WL 33225470, at *4 (E.D.Wash. Sept.27, 2000) (finding "the plaintiffs have adequately pled a predicate act ... by alleging that the defendants knew that some of their workers were unlawfully brought into the United States"). Accordingly, the Court denies Defendant's Motion to Dismiss as to this ground.
2. Enterprise
The Court next determines whether the Complaint adequately alleges the existence of a RICO enterprise. Defendant contends that Plaintiffs' Complaint fails as a matter of law to allege that a RICO enterprise existed and that the Court thus must dismiss Plaintiffs' Complaint. Specifically, Defendant claims: (1) that Plaintiffs have not and cannot allege that Defendant participated in the affairs of a RICO enterprise, rather than its own affairs, through the alleged immigration law violations; (2) that Plaintiffs have failed to allege a RICO enterprise distinct from Defendant; and (3) that Plaintiffs have failed to allege the existence of a common purpose and unified structure.
As explained supra Part III.A., a RICO "`enterprise' includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity," 18 U.S.C.A. § 1961(4), and a RICO "person" is "any individual or entity capable of holding a legal or beneficial interest in property," 18 U.S.C.A. § 1961(3). "For the purposes of [§ 1962(c)], the indictment [or complaint] must name a RICO person distinct from the RICO enterprise. The plain language of the statute requires that [those] entities be distinct." United States v. Goldin Indus., Inc., 219 F.3d 1268, 1271 (11th Cir.2000) (hereinafter "Goldin I"). The Eleventh Circuit does not require a strict, formal association of participants; rather, "the existence of an enterprise `is proved by evidence of an ongoing organization, formal or informal, and by evidence that the various associates function as a continuing unit.'" United States v. Goldin Indus., Inc., 219 F.3d 1271, 1275 (11th Cir.2000) (hereinafter "Goldin II") (quoting United States v. Turkette, 452 U.S. 576, 583, 101 S. Ct. 2524, 69 L. Ed. 2d 246 (1981)). "[T]he definitive factor in determining the existence of a RICO enterprise is the existence of an association of individual entities, however loose or informal, that furnishes a vehicle for the commission of two or more predicate crimes, that is, the pattern of racketeering activity requisite to the RICO violation." Id.; United States v. Elliott, 571 F.2d 880, 897-98 (5th Cir.1978);[5]see also United States v. *1347 Hawes, 529 F.2d 472, 479 (5th Cir.1976) (recognizing that Congress gave the term "enterprise" a very broad meaning). Indeed, "a RICO enterprise may be an `amoeba-like' structure or a loose informal association." Avirgan v. Hull, 932 F.2d 1572, 1578 (11th Cir.1991) (citing United States v. Cagnina, 697 F.2d 915, 921 (11th Cir.1983)).
Notably, the existence of an enterprise is a separate element that the plaintiff must prove i.e. although a pattern of racketeering activity must be shown by pointing to evidence of the requisite number of racketeering acts by participants in the enterprise, such evidence does not necessarily establish the existence of an enterprise. Turkette, 452 U.S. at 583, 101 S. Ct. 2524. Indeed, "[t]he `enterprise' is not the `pattern of racketeering activity'; it is an entity separate and apart form the pattern of activity in which it engages." Id. Nevertheless, the Eleventh Circuit recognizes that "under our case law, a RICO enterprise need not possess an `ascertainable structure' distinct from the associations necessary to conduct the pattern of racketeering activity." Goldin II, 219 F.3d at 1274-75 (quoting United States v. Weinstein, 762 F.2d 1522, 1537 n. 13 (11th Cir.1985)).
In support of its position that the Complaint fails to allege the existence of an enterprise adequately, Defendant relies heavily on a similar opinion issued by the Seventh Circuit, Baker v. IBP, Inc., 357 F.3d 685 (7th Cir.2004). In Baker, unionized current and former employees of one of the defendant's meat-processing plants filed a class action lawsuit on behalf of all current and former hourly employees at that plant who were authorized to work in the United States. Baker, 357 F.3d at 686. Specifically, the complaint in Baker alleged that nearly half of the employees at the defendant's plant were aliens who were unauthorized to work legally in the United States. Id. The plaintiffs claimed that the defendant turned a blind eye to bogus identification documents, alerted its illegal workers when immigration officials were about to conduct inspections, and paid recruiters to smuggle captured illegal workers back into the United States for re-employment under pseudonyms. Id. at 687. The complaint further alleged that the defendant had arrangements with immigrant welfare organizations, who referred known undocumented aliens to the defendant for employment. Id. Plaintiffs alleged that as a result of that activity, wages at the defendant's plant were depressed compared with what the defendant would have had to pay if the labor pool consisted only of persons legally authorized to work in the United States. Id.
In affirming the district court's dismissal of the complaint, the Seventh Circuit first concluded that the union representing the plaintiffs was the proper representative with respect to the wages issue rather than the employees individually. The court also concluded that "there [was] another fatal problem in [the] complaint: specification of the `enterprise.'" Baker, 357 F.3d at 691. The complaint alleged that the "enterprise" was the defendant plus the persons and organizations who assisted the defendant in recruitment of illegal workers. The court first noted that the complaint came "perilously close to alleging that [the defendant] plus its agents and employees is the `enterprise,' a theory that won't fly." Id. (citing Bucklew v. Hawkins, Ash, Baptie & Co., 329 F.3d 923, 934 (7th Cir.2003)).
*1348 The court also found that the complaint was flawed for failure to identify a common purpose: "it is not altogether clear how this `association in fact' has a common purpose, an essential ingredient." Id. (citing Turkette, 452 U.S. at 583, 101 S. Ct. 2524). The court took a conservative reading as to whether the members of the "association in fact," had a common purpose concluding that their goals were divergent because the defendant wanted to pay lower wages, the recruiters wanted to be paid for their recruitment services, and the immigrant welfare organizations wanted to assist members of the ethnic group. Id. Consequently, the court found that no common purpose existed. Id.
Finally, the Baker court found that the plaintiffs failed to allege that the defendant operated or managed the purported enterprise through a pattern of racketeering. Baker, 357 F.3d at 692. The court explained that the complaint was insufficient because "[t]he nub of the complaint [was] that [the defendant] operate[d] itself unlawfully it is [the defendant] that supposedly hires, harbors, and pays the unlawful workers, for the purpose of reducing its payroll." Id. at 361. Specifically, the court stated that "[the defendant] does not manage or operate some other enterprise by violating [8 U.S.C.A. § 1324]; the complaint does not allege and on appeal plaintiffs do not seek an opportunity to show that [the defendant] ha[d] infiltrated, taken over, manipulated, disrupted, or suborned a distinct entity or even a distinct association in fact." Id. The Court therefore found that the plaintiffs failed to allege that the defendant operated an enterprise through a pattern of racketeering activity. Id.
Turning to the instant case, the Court first considers Defendant's argument that Plaintiffs have failed to allege that Defendant operated or participated in the affairs of an enterprise through a pattern of racketeering activity. Specifically, Defendant contends that Plaintiffs have failed to allege that Defendant, through its allegedly illegal conduct, operated or participated in the affairs of an "association in fact" as opposed to Defendant's own affairs. In support of its position, Defendant points to various paragraphs in the Complaint that allege that Defendant, as opposed to the purported enterprise, harbored and employed illegal workers in order to reduce the cost of its workforce. (See Compl. ¶¶ 3, 14, 16-18, 59-61; 63-64, 67.)
In response, Plaintiffs argue that the Complaint alleges that Defendant "participates in the affairs of an enterprise that transcends [Defendant] itself and that consists of [Defendant] and various other persons and entities." (Def. Br. Resp. at 7 (emphasis deleted).) Specifically, Plaintiffs point to the following language in the Complaint:
Mohawk has engaged in an open and ongoing pattern of violations of 8 U.S.C. § 1324 and 18 U.S.C. § 1546 during the last five years through its participation in an association-in-fact enterprise with third party employment agencies and other recruiters, including Temporary Placement Services ("TPS"), that supply Mohawk with illegal workers. Each recruiter is paid a fee for each worker it supplies to Mohawk, and some of those recruiters work closely with Mohawk to meet its employment needs by offering a pool of illegal workers who can be dispatched to a particular Mohawk facility on short notice as the need arises. Some recruiters find workers in the Brownsville, Texas area and transport them to Georgia. Others, like TPS, have relatively formal relationships with the company in which they employ illegal workers and then loan or otherwise provide them to Mohawk for a fee. These recruiters are sometimes assisted *1349 by Mohawk employees who carry a supply of social security cards for use when a prospective or existing employee needs to assume a new identity.
(Compl.¶ 76.) Plaintiffs maintain that given the nature of an association-in-fact enterprise, it is to be expected that the defendant will be engaged in the management of its own affairs what is most important, however, is that the defendant also participates in the affairs of an enterprise.
Defendant correctly asserts that "liability `depends on showing that the defendants conducted or participated in the conduct of the enterprises's affairs, not just their own affairs.' "Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 163, 121 S. Ct. 2087, 150 L. Ed. 2d 198 (2001) (quoting Reves v. Ernst & Young, 507 U.S. 170, 185, 113 S. Ct. 1163, 122 L. Ed. 2d 525 (1993)) (internal quotation omitted) (emphasis deleted). The Eleventh Circuit has nevertheless recognized that "the definitive factor in determining the existence of a RICO enterprise is the existence of an association of individual entities, however loose or informal, that furnishes a vehicle for the commission of two or more predicate acts." Goldin II, 219 F.3d at 1275; Weinstein, 762 F.2d at 1537. Here, the Complaint alleges that Defendant participated in the conduct of an enterprise's affairs by paying recruiters for illegal workers and by maintaining a formal relationship with TPS, and that those parties, as an association-in-fact, provided the means for the commission of a number of immigration law violations. Consequently, the Court finds that Plaintiffs' Complaint sufficiently alleges that Defendant operated or participated in the affairs of an enterprise through a pattern of racketeering activity.
The Court next addresses whether Plaintiffs have failed to allege an enterprise distinct from Defendant itself. Although the Complaint clearly alleges that the other members of the alleged enterprise are independent third parties rather than employees or agents of Defendant (Compl.¶ 76.), Defendant urges the Court to follow Baker, and to find that the Complaint fails to allege the existence of an enterprise.
At this stage in the litigation, however, the Court need only determine whether the Complaint sufficiently alleges the existence of an enterprise separate from Defendant. After consideration of the allegations in the Complaint, the Court concludes that for the purposes of this Motion to Dismiss, Plaintiffs have adequately alleged that the recruiters are separate and independent entities from Defendant. Whether the third party recruiters are in fact agents of Defendant is a factual issue, but for the purposes of the instant Motion Plaintiffs have met their burden to allege that the association-in-fact enterprise consisted of Defendant and separate entities. See Cedric Kushner Promotions, 533 U.S. at 164, 121 S. Ct. 2087 (citing Riverwoods Chappaqua Corp. v. Marine Midland Bank, N.A., 30 F.3d 339, 344 (2d Cir.1994)); In re Managed Care Litig., 298 F. Supp. 2d 1259, 1276-77 (S.D.Fla.2003) (finding complaint sufficiently alleged control and participation in association-in-fact enterprise). Cf. Fitzgerald v. Chrysler Corp., 116 F.3d 225, 228 (7th Cir.1997) ("[W]here a large, reputable manufacturer deals with its dealers and other agents in the ordinary way, so that their role in the manufacturer's illegal acts is entirely incidental, differing not at all from what it would be if these agents were the employees of a totally integrated enterprise, the manufacturer plus its dealers and other agents ... do not constitute an enterprise within the meaning of [RICO]."). Accordingly, the Court cannot conclude that Plaintiffs have failed to allege *1350 the existence of an enterprise district from Defendant itself.
Defendant next argues that Plaintiffs have failed to allege the existence of an enterprise because the Complaint does not adequately allege the existence of a common purpose among the members of the association-in-fact. Specifically, Defendant claims that rather than alleging a common purpose between Defendant and the recruiters, Plaintiffs' Complaint indicates that the members of the purported enterprise had divergent goals and purposes. (See Compl. ¶ 22 ("Mohawk has made various incentive payments to employees and other recruiters for locating workers that Mohawk eventually employs and harbors.").) Defendant therefore contends that as a matter of law, no enterprise exists. Defendant cites to the following language in Baker in support of its argument: "[the employer] wants to pay lower wages; the recruiters want to be paid more for services rendered (though [the employer] would like to pay them less); and the [immigrant welfare organizations] want [ ] to assist members of [their] ethnic group." Baker 357 F.3d at 691. Thus, because the members of the enterprise have divergent goals, Defendant concludes that no association-in-fact enterprise exists.
Plaintiffs respond that in this case, the members of the enterprise indeed share a common purpose namely, "the common purpose of obtaining illegal workers for employment by Mohawk." (Compl.¶ 77.) Moreover, Plaintiffs maintain that no authority exists in the Eleventh Circuit for the proposition that divergent individual goals of persons in a purported association-in-fact enterprise precludes the existence of such enterprise as a matter of law.
The Eleventh Circuit takes a broad approach as to what qualifies as an enterprise. See United States v. Hewes, 729 F.2d 1302, 1310-12 (11th Cir.1984) (upholding jury determination that "`informal, de facto association' existed among the defendants that united them in the common purpose of making money from repeated criminal activity") (quoting Elliott, 571 F.2d at 898); Cagnina, 697 F.2d at 921-922 (finding evidence sufficient to support jury's finding of enterprise where common purpose of making money existed). Because the Complaint in this case explicitly alleges that a common purpose exists obtaining illegal workers for employment by Defendants the Court cannot agree with Defendant that Plaintiffs' Complaint is deficient.
In sum, the Court finds that the Complaint adequately sets forth allegations concerning the existence of an enterprise. Specifically, Plaintiffs have sufficiently alleged that Defendant participated in the affairs of a RICO enterprise as opposed to its own affairs, that a RICO enterprise exists distinct from Defendant, and that a common purpose and unified structure exists among the participants in the purported enterprise. Consequently, the Court denies Defendant's Motion to Dismiss on the ground that the Complaint fails to allege the existence of an enterprise.
3. Standing Under RICO
Defendant also argues that Plaintiffs do not have standing to sue because (1) Plaintiffs failed to allege injury to a concrete interest in business or property; and (2) Plaintiffs cannot show that Defendant's alleged violations of 8 U.S.C.A. § 1324 proximately caused Plaintiffs' injuries. The Court discusses each of those arguments in turn.
a. Whether Plaintiffs Have Alleged Injury to their "Business or Property"
The Court turns first to whether Plaintiffs have alleged an injury to their *1351 business or property. Defendant argues that each Plaintiff accepted employment with Defendant at an agreed-upon wage rate, and that Plaintiffs cannot allege an injury to their business or property because Defendant paid each Plaintiff in accordance with those wage rates. In other words, Defendant claims that because it compensated Plaintiffs as the parties agreed, no injury has occurred, and Plaintiffs thus lack standing to pursue this action.
The Court cannot agree that as a matter of law Plaintiffs have failed to allege an injury to their business or property. The premise of Defendant's argument is that Defendant and Plaintiffs were able to bargain freely on a fair wage rate; however, assuming that Plaintiffs have been injured by reason of Defendant's alleged racketeering activities, the presence of illegal workers in the labor pool adversely has affected Plaintiffs' ability to command higher wage rates. In other words, if Plaintiffs are correct regarding issues of causation, Plaintiffs had no power to command higher wage rates due to the influx of illegal workers. Consequently, Plaintiffs' acceptance of lower wages could not act as a waiver of their alleged injuries. See Mendoza, 301 F.3d at 1168 n. 4. ("[W]hat is required is precisely what the employees allege here: a legal entitlement to business relations unhampered by schemes prohibited by the RICO predicate statutes."). Thus, the Court cannot agree with Defendant that Plaintiffs have failed, as a matter of law, to allege an injury to Plaintiffs' business or property. The Court therefore cannot find that Plaintiffs lack standing based on this argument.
b. Whether Plaintiffs Have Alleged Injury "By Reason of" a Violation of § 1962(c)
Defendant further argues that Plaintiffs have not alleged an injury "by reason of" a violation of § 1962(c) and that Plaintiffs consequently cannot show that Defendant's alleged violations caused Plaintiffs' injuries. Section 1964(c) requires a plaintiff to show that he sustained injury "by reason of" the defendant's violation of § 1962. The Supreme Court, in Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 112 S. Ct. 1311, 117 L. Ed. 2d 532 (1992), held that the "by reason of" language of § 1964(c) requires a showing of both direct and proximate causation. 503 U.S. at 268-69, 112 S. Ct. 1311. "In order for a pattern of racketeering activity to be a cognizable cause of civil RICO injury to a private plaintiff, one or more of the predicate acts must not only be the `but for' cause of the injury, but the proximate cause as well." Green Leaf Nursery v. E.I. DuPont De Nemours & Co., 341 F.3d 1292, 1307 (11th Cir.2003) (citing Holmes, 503 U.S. at 268, 112 S. Ct. 1311). Thus, for a plaintiff to have standing under RICO, he must allege and prove that "`his injury flowed directly from the commission of the predicate acts.'" Bivens Gardens Office Bldg., Inc. v. Barnett Banks of Fla., Inc., 140 F.3d 898, 906 (11th Cir.1998) (quoting Pelletier, 921 F.2d at 1499).
In analyzing whether a plaintiff has adequately alleged an injury "by reason of" a violation of § 1962(c), the Supreme Court in Holmes recognized that "`the infinite variety of claims that may arise make it virtually impossible to announce a black-letter rule that will dictate the result in every case.'" Holmes, 503 U.S. at 272 n. 20, 112 S. Ct. 1311 (quoting Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 536, 103 S. Ct. 897, 74 L. Ed. 2d 723 (1983) (footnote omitted)). Thus, "use of the term `direct' should merely be understood as a reference to the proximate-cause enquiry that is informed by the [policy] considerations set out in the text [of the Holmes opinion]." Id. In conducting proximate cause analysis under RICO, a court must *1352 therefore consider the following policy considerations on a case-by-case basis: (1) whether other parties are in a more suitable position to vindicate the law i.e. whether the plaintiff is the direct victim of the alleged illegal conduct; (2) whether the court can identify a method to apportion possible recoveries; and (3) whether the damages alleged by the plaintiff are too speculative, that is, whether the court has the ability to identify what portion of the plaintiff's damages arose from the defendant's alleged RICO violations as opposed to other independent conditions. Id. at 273, 112 S. Ct. 1311.
In its Motion to Dismiss, Defendant first contends that Plaintiffs cannot show, and thus cannot allege, that Plaintiffs are the direct victims of Defendant's alleged wrongdoing, and that Plaintiffs consequently are not the best-suited persons to maintain this action. Defendant next contends that Plaintiffs' theory of damages is simply too speculative to support a finding that Defendant's conduct proximately caused Plaintiffs' injuries.[6] The Court addresses each of those arguments in turn.[7]
i. Direct Injury
In the instant action, Defendant first claims Plaintiffs lack standing because the legally authorized hourly workers constituting the putative class are not the direct victims of Defendant's alleged pattern of racketeering activity i.e. Plaintiffs are not the best persons to vindicate RICO. Defendant relies primarily on Holmes for the proposition that where a plaintiff's injury is derived from a direct injury to a third party, that plaintiff lacks standing to bring an action pursuant to RICO for such "passed-on" injury. Defendant argues that Plaintiffs are not the "first victims" of Defendant's alleged immigration law violations; rather, the direct victims are the undocumented aliens who, because of their status, cannot command equal wages or enjoy equal benefits, such as workers' compensation.
Plaintiffs cite Mendoza v. Zirkle Fruit Co., 301 F.3d 1163 (9th Cir.2002), in which *1353 the Ninth Circuit found that a putative class of legal hourly workers had standing to bring a RICO action against two agricultural companies that had allegedly hired illegal workers, thereby depressing the wages paid to documented workers. 301 F.3d at 1166. Like Defendant in the instant matter, the defendants in Mendoza urged the court to find that the plaintiffs were not the "first victims" of the alleged illegal conduct. The court in Mendoza concluded that because the defendants engaged in illegal conduct to gain "disproportionate bargaining power in employment contracts" with their workers, the legal, documented employees were the direct victims of the defendants' illegal conduct. Because "the [illegal conduct] had the purpose and direct result of depressing the wages paid to [the documented employees] by the growers," the court could not "discern a more direct victim of the illegal conduct." Id. at 1170. The court further explained: "Neither the government nor the undocumented workers are an intervening third party in this scheme, despite the [defendants'] arguments to the contrary." Id.
Plaintiffs also rely on Commercial Cleaning Services, LLC v. Colin Service Systems, Inc., 271 F.3d 374 (2d Cir.2001), in which the Second Circuit held that the plaintiffs, who were competitors of the defendant, adequately stated a direct proximate relationship between their injuries and the defendant's alleged illegal conduct. 271 F.3d at 381. In that case, a cleaning service brought a RICO class action, alleging that the defendant, also a cleaning service, hired undocumented aliens in violation of 8 U.S.C.A. § 1324, thereby driving down the defendant's cost of employment. Id. at 378. The plaintiff claimed that the defendant's illegal conduct allowed the defendant to charge lower prices for its services, thereby undercutting its competition. Id.
The Commercial Cleaning court applied the Holmes policy considerations, and found that the plaintiffs had suffered direct injury due to the defendant's alleged racketeering activity. Commercial Cleaning, 271 F.3d at 385. Specifically, the Second Circuit reasoned that no class of persons would "have a greater incentive to ensure that a RICO violation does not go undetected or unremedied, and whose recovery would cure the loss suffered by there plaintiffs." Id.
The Court finds Mendoza persuasive, and applies the Mendoza court's reasoning to this case. Here, Plaintiffs clearly allege that their injury is the result of Defendant's attempt to gain a commercial advantage over the employment of its workforce, which directly causes harm to Plaintiffs. Accordingly, the Court finds that the Complaint alleges a direct injury to Plaintiffs. Plaintiffs therefore do not lack standing based on the failure to allege a direct injury.
ii. Speculative Nature of Damages
The Court next considers whether the damages theory alleged in Plaintiffs' Complaint is too speculative to permit Plaintiffs to have standing to pursue their claims. Defendant sets forth a number of arguments in support of its position that the calculation of damages is exceedingly tenuous and speculative. Specifically, Defendant claims that there are numerous other factors that could affect Plaintiffs' wages, such as the demand for labor in the relevant market, the supply of qualified workers, the overall profitability of the industry, and the status of the local, state, national, and international economies.
Defendant also submits that Plaintiffs have failed to allege that Defendant employs a sufficient number of illegal workers or has such a large presence in the labor market to support a conclusion that any *1354 pay discrepancies can be attributed to Defendant's allegedly illegal conduct. In particular, Defendant contends that Plaintiffs' allegation that Defendant has assisted "hundreds" of illegal workers is insufficient as a matter of economic sense to cause depressed wages. (See Compl. ¶ 61.) Defendant further submits that if it were paying depressed wages to its employees, Plaintiffs could simply seek employment elsewhere.
Defendant also claims that Mendoza is distinguishable because the defendants in that case enjoyed market power sufficient to give them the power to "define wages in this labor market, akin to a monopsony or oligopsony." Mendoza, 301 F.3d at 1171. Defendant maintains that Plaintiffs have not, and cannot, allege that Defendant has such market power to dictate unilaterally the labor market. Thus, Defendant contends that it is too speculative to gauge the difference between the current level of compensation and the level of compensation that would have existed but for Defendant's alleged illegal conduct.
At this stage in the litigation, however, the Court cannot agree that the damages attributable to Plaintiffs' RICO claims are so tenuous and speculative that the Court should dismiss the Complaint for lack of standing. Simply put, at this point, the Court cannot say that as a matter of law, Plaintiffs have failed to establish that Defendant's alleged RICO violations were the proximate cause of Plaintiffs' depressed wages. Of course, after some discovery it may appear that Plaintiffs' theory is too speculative. At this early juncture, however, the Court cannot dismiss the Complaint for lack of standing on this ground.
iii. Summary
In sum, the Court denies Defendant's Motion to Dismiss on the grounds that Plaintiffs lack standing under RICO to pursue their claims. Specifically, the Court finds that Plaintiffs have sufficiently alleged an injury to their "business or property" and that such injury was proximately caused by Defendant's allegedly illegal conduct. The Court next addresses Defendant's arguments in support of dismissal of Plaintiffs' state law claims.
B. Plaintiffs' Georgia RICO Claims
Plaintiffs' Complaint also includes claims for violations of Georgia RICO, O.C.G.A. § 16-14-4(a) & (c). (Compl.¶¶ 93-105). Defendant contends that Plaintiffs' Georgia RICO claims fail as a matter of law because Defendant, as a corporation, is incapable of violating that statute.
The Eleventh Circuit has recognized that "[u]nder Georgia law, a corporation qua corporation, cannot be held to answer for a crime, and therefore could not violate the Georgia RICO statute." Byrne v. Nezhat, 261 F.3d 1075, 1105 (11th Cir.2001) (citing Cobb County v. Jones Group, 218 Ga.App. 149, 153, 460 S.E.2d 516, 521 (1995)). "This is not to say that a corporation may disregard the law with impunity. If a crime has been committed, the agents of the corporation who are responsible are subject to prosecution." Id.
Because RICO predicate acts are actually criminal offenses, O.C.G.A. § 16-2-22, entitled "Criminal responsibility of corporations," applies when determining whether a corporation is vicariously liable for the actions of its employees. O.C.G.A. § 16-2-22; Cobb County, 218 Ga.App. at 153, 460 S.E.2d at 521. Section 16-2-22 provides that a corporation may be prosecuted for a criminal act or omission only if:
(1) The crime is defined by a statute which clearly indicates a legislative purpose to impose liability on a corporation, and an agent of the corporation performs the conduct which is an element of the crime while acting within the scope of his office or employment and in behalf of the corporation; or
*1355 (2) The commission of the crime is authorized, requested, commanded, performed, or recklessly tolerated by the board of directors or by a managerial official who is acting within the scope of his employment in behalf of the corporation.
O.C.G.A. § 16-2-22(a)(1) & (2).
Defendant first contends that Plaintiffs cannot pursue a Georgia RICO action under § 16-2-22(a)(1) because nowhere in the Georgia RICO statute does any indication of legislative purpose to impose liability on a corporation exist.
The weight of authority supports Defendant's argument. See Clark v. Sec. Life Ins. Co. of Am., 270 Ga. 165, 167 n. 11, 509 S.E.2d 602, 604 n. 11 (1998) ("A corporation may also face prosecution under O.C.G.A. § 16-2-22(a)(1) for a crime if the statute defining the crime clearly indicates a legislative purpose to impose liability on a corporation. RICO, however, in not such a statute because O.C.G.A. § 16-4-4 prohibits only `persons' from engaging in racketeering activity."); Cobb County, 218 Ga.App. at 153, 460 S.E.2d at 521 ("`RICO does not contain in its definition any indication of a legislative purpose to impose criminal liability on a corporation."') (quoting incorporated language of trial court's order). Accordingly, the Court concludes that because the Georgia RICO statute does not expressly and clearly indicate a legislative purpose to impose liability on a corporation for violations of the statute, Plaintiffs cannot avail themselves of § 16-2-22(a)(1) to impose liability for Georgia RICO violations on Defendant.
Notwithstanding the inapplicability of § 16-2-22(a)(1), the Court finds that Plaintiffs may pursue their Georgia RICO claims against Defendant under § 16-2-22(a)(2). As the Georgia Supreme Court held: "criminal liability will attach to the employer for the acts of the employee only if the `crime is authorized, requested, commanded, performed, or recklessly tolerated by the board of directors or by a managerial official who is acting within the scope of his employment in behalf of the corporation.'" Clark, 270 Ga. at 167, 509 S.E.2d at 604 (quoting O.C.G.A. § 16-2-22(a)(2).) It is not fatal to Plaintiffs' Complaint that they have not alleged that Defendant's board of directors or any corporate officers acting within the scope of employment authorized, requested, commanded, performed, or recklessly tolerated violations of Georgia RICO. On the contrary, such facts are a matter of proof; thus, Plaintiffs simply must set forth the necessary proof at trial. State v. Military Circle Pet Ctr., No. 94, Inc., 257 Ga. 388, 389-90, 360 S.E.2d 248, 249 (1987) ("Although the state must prove the applicable provisions of [§ 16-2-22(a)(2)] at trial against a criminal defendant, it is not necessary that the state allege these provisions in the accusation."). At this point, therefore, the Court cannot hold that Plaintiffs' Georgia RICO claims fail as a matter of law for failure to name any managerial official, officer, or similar person of Defendant who would satisfy the requirements of § 16-2-22. Accordingly, the Court denies Defendant's Motion to Dismiss with respect to Plaintiffs' Georgia RICO claims.[8]
*1356 C. Plaintiffs' Unjust Enrichment Claim
Finally, the Court addresses whether Plaintiffs have stated a claim for unjust enrichment arising under Georgia law (Compl.¶¶ 106-110). Specifically, Plaintiffs claim that Defendant's illegal conduct permits Defendant "to reap substantial wage savings" because Defendant pays Plaintiffs lower wages than what Defendant would otherwise be forced to pay. (Id. ¶ 107). Plaintiffs also claim that Defendant has been unjustly enriched because the hiring of illegal workers has led to a reduced number of worker's compensation claims; therefore, Defendant retains money it otherwise would have to spend on responding to worker's compensation claims. Plaintiffs further allege that Defendant, through the employment of illegal workers and at the expense of Plaintiffs, enjoys larger profits than Defendant would earn if it used legal, authorized workers. (Id. ¶ 109.) Consequently, Plaintiffs claim that Defendant has been unjustly enriched, and that the Court should order Defendant "to disgorge its unlawful profits or otherwise return the full amount of any wage savings and worker's compensation savings that are the direct and proximate result of [Defendant's] unlawful conduct." (Id. ¶ 110.)
Unjust enrichment has been defined in the following manner:
The concept of unjust enrichment in law is premised upon the principle that a party cannot induce, accept, or encourage another to furnish or render something of value to such party and avoid payment for the value received; otherwise the party has been unjustly enriched at the expense of another and, in fairness and good conscience, must reimburse the other to the extent of the value conferred. Inherent in unjust enrichment is the requirement that the receiving party knew of the value being bestowed upon them by another and failed to stop the act or to reject the benefit.
Reidling v. Holcomb, 225 Ga.App. 229, 232, 483 S.E.2d 624, 626 (1997); see also Larkins, Ga. Contracts, § 12-3 (discussing generally unjust enrichment remedy). Recovery under a theory of unjust enrichment "presupposes the absence of a contractual agreement." Fed. Ins. Co. v. Westside Supply Co., 264 Ga.App. 240, 248, 590 S.E.2d 224, 232 (2003) (citing Ga. Tile Distribs., Inc. v. Zumpano Enters., Inc., 205 Ga.App. 487, 488, 422 S.E.2d 906 (1998)). "`The measure of damages under ... unjust enrichment is based upon the benefit conferred upon the [recipient] and not the cost to render the service or cost of the goods.'" Hollifield v. Monte Vista Biblical Gardens, Inc., 251 Ga.App. 124, 130-31, 553 S.E.2d 662, 669 (2001) (addition supplied) (quoting Zampatti v. Tradebank Int'l Franchising Corp., 235 Ga.App. 333, 340, 508 S.E.2d 750 (1998)).
Defendant contends that Plaintiffs' unjust enrichment claim fails because Plaintiffs accepted employment at an agreed-upon rate. Plaintiffs have not alleged *1357 that Defendant failed to compensate Plaintiffs in accordance with that rate.[9] In other words, Defendant submits that unjust enrichment is inapplicable where an express contract exists for payment of an item or service, and the defendant avoids payment for that item or service. Defendant notes that in this case, the parties entered into a contract for a certain wage rate and Defendant paid wages in accordance with that contract. At this point in the litigation, however, the Court cannot agree that as a matter of law Defendant has been unjustly enriched by suppressing Plaintiffs' wages. Accordingly, the Court denies Defendant's Motion to Dismiss as to Plaintiffs' unjust enrichment claim as it relates to Defendant's savings in employing Plaintiffs at a diminished wage rate.
The Court notes, however, that Plaintiffs cannot base their claim of unjust enrichment on Defendant's alleged savings with respect to worker's compensation claims. Defendant argues, and the Court agrees, that Plaintiffs lack standing to assert a claim of unjust enrichment as to the amount of money Defendant did not have to spend in dealing with worker's compensation claims. Essentially, the Complaint alleges that because illegal workers tend to refrain from filing worker's compensation claims, and because Defendant consequently spent less money dealing with worker's compensation claims, Defendant enjoyed higher profitability. The Court cannot fathom how higher profit margins due to lower worker's compensation costs are connected in any way to Plaintiffs' receiving lower wages. That is to say, Plaintiffs' labor in no way caused lower worker's compensation costs. Consequently, the Court finds that Plaintiffs cannot claim unjust enrichment as to worker's compensation claims.
IV. Conclusion
ACCORDINGLY, the Court DENIES IN PART and GRANTS IN PART Defendant's Motion to Dismiss [25]. Specifically, the Court DENIES Defendant's Motion to Dismiss as to all Federal and Georgia RICO allegations in Plaintiff's Complaint, DENIES Defendant's Motion to Dismiss as to Plaintiffs' unjust enrichment claim as it relates to Defendant's wage savings in employing Plaintiffs at a diminished wage rate, and GRANTS Defendant's Motion to Dismiss as to Plaintiff's unjust enrichment claim as it relates to Defendant's savings with respect to worker's compensation claims.
NOTES
[1] Plaintiffs' Complaint also sets forth a number of allegations relating to the certification of a class of Defendant's former and current hourly employees. (See Compl. ¶¶ 39-53.) Those allegations are not relevant to the instant Motion.
[2] Defendant moves to dismiss pursuant to Rules 12(b)(1) and 12(b)(6) only with respect to the elements of 18 U.S.C.A. § 1964(c), which provides the requirements for a plaintiff to have standing to pursue a civil private right of action under RICO. Apparently, some question exists as to whether a motion to dismiss under § 1964(c) is properly characterized as a 12(b)(6) motion (i.e. failure to state a claim upon which relief can be granted) or a 12(b)(1) motion (i.e. lack of jurisdiction over the subject matter). See Moore v. PaineWebber, Inc., 189 F.3d 165, 169 n. 3 (2d Cir.1999) (applying 12(b)(6), but expressing belief that 12(b)(1) was more appropriate ground for dismissal). The Court appreciates the distinction between 12(b)(1) and 12(b)(6), but concludes that for the purposes of the instant Motion, an analysis under 12(b)(6) suffices.
[3] In Helicopter Support Sys., the plaintiff also asserted a claim for commercial bribery. Helicopter Support Sys. at *1. The court found that the plaintiff failed to show that commercial bribery was a predicate offense under § 1961(1); thus, it was unnecessary to address whether that offense required heightened pleading under Rule 9(b). Id.
[4] Defendant's reliance on Club Car, Inc. v. Club Car Import, Inc. 276 F. Supp. 2d 1276 (S.D.Ga.2003), is misplaced. In that case, the plaintiff was required to plead predicate acts of extortion and mail fraud with particularity simply because Local Rule 9.1 for the United States District Court for the Southern District of Georgia requires such specificity. See L.R.S.D. Ga. 9.1 ("All pleadings which allege violations of ..., RICO, and other similar statutes, whether federal or state, shall specifically state each alleged violation.") This Court, however, has no such provision in its Local Rules. Consequently, the Court does not find Club Car applicable in this case.
[5] Opinions of the Fifth Circuit issued prior to October 1, 1981, the date marking the creation of the Eleventh Circuit, are binding precedent on this Court. See Bonner v. City of Prichard, 661 F.2d 1206, 1209-11 (11th Cir.1981) (en banc).
[6] Defendant does not contend that other parties are better-situated to vindicate the aims of RICO. Because the Court concludes that Plaintiffs' injuries, as alleged, are not derivative of injury to a third party, the Court sees no reason why a party other than Plaintiffs should instead pursue this action.
[7] As an initial matter, the Court addresses Defendant's argument that Plaintiffs have standing as to pursue their federal RICO action only as to the predicate act of employing illegal workers. Specifically, Defendant claims that because Plaintiffs cannot show that the predicate acts of harboring and transporting illegal aliens and the use and acceptance of fraudulent documents caused injury to Plaintiffs, Plaintiffs lack standing with respect to those predicate acts.
The Eleventh Circuit has stated that "[i]f no injury flowed from a particular predicate act, no recovery lies for the commission of that act." Pelletier, 921 F.2d at 1497-98 (finding no standing as to predicate act of bankruptcy fraud where predicate act actually benefitted plaintiff). However, "a wrongful act `is a proximate cause if it is a substantial factor in the sequence of reasonable causation.'" Maiz v. Virani, 253 F.3d 641, 675 (11th Cir.2001) (quoting Cox v. Adm'r U.S. Steel & Carnegie, 17 F.3d 1386, 1399 (11th Cir.1994)) (internal quotation marks omitted). Thus, while a predicate act may not be a "but for" cause of a plaintiff's injuries, the plaintiff may nevertheless have standing to pursue a RICO claim where that predicate act was a substantial factor "in perpetuating [the racketeer's] scheme and in causing significant injury to [the plaintiff]." Id.
With respect to the predicate acts of harboring and inducing illegal aliens and the use and acceptance of bogus identification documents, the Court cannot conclude at this point that those predicate acts do not constitute substantial factors in causing injury to Plaintiffs. Accordingly, the Court concludes that Plaintiffs do not lack standing to claim that those predicate acts proximately caused their injuries.
[8] Defendant also contends that Plaintiffs' Georgia RICO claims fail because Plaintiffs' Complaint fails to allege that violations of 8 U.S.C.A. § 1324 constituted "racketeering activity" for purposes of Georgia RICO. (See Compl. ¶ 62 ("Each violation of 8 U.S.C. § 1324 constitutes an act of `racketeering activity' under [federal RICO], 18 U.S.C. § 1961(F) [sic].").) Plaintiffs respond that Defendant has misread the Complaint, but nonetheless request leave to amend their Complaint to clarify that their Georgia RICO claims are indeed predicated on violations of § 1324.
The Court agrees with Defendant that Plaintiffs' Complaint does not state a cause of action under Georgia RICO with respect to violations of § 1324, but for a different reason than that advanced by Defendant. O.C.G.A. § 16-14-3(9)(A)(xxix) defines "racketeering activity" as including "[a]ny conduct defined as `racketeering activity' under 18 U.S.C. Section 1961(1)(A), (B), (C), and (D)." O.C.G.A. § 16-14-3(9)(A)(xxix). That definition of racketeering activity, however, does not include those acts falling under § 1961(1)(F). Violations of § 1324 appear in subsection (F), thus acts violating § 1324 cannot qualify as predicate acts for purposes of Georgia RICO. Accordingly, the Court finds that Plaintiffs' Complaint can only allege a claim based on Georgia RICO as to 18 U.S.C.A. § 1546. The Court denies Plaintiffs' request to amend their Complaint to clarify that Plaintiffs' Georgia RICO claims are predicated on violations of § 1324 as futile.
[9] This argument is similar to Defendant's argument with respect to whether Plaintiffs alleged an injury to their business or property. See supra Part III.A.3.a. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1963346/ | 304 B.R. 360 (2002)
In re Paige Ann SWEENEY, Debtor.
Paige Ann Sweeney, Plaintiff,
v.
Educational Credit Management Corporation, Defendant.
No. 8:02CV238.
United States District Court, D. Nebraska.
December 12, 2002.
*361 Stephanie W. Milone, Omaha, NE, for Plaintiff.
Donald B. Stenberg, Attorney General's Office, Gary L. Young, Keating, O'Gara Law Firm, Lincoln, NE, for Defendants.
MEMORANDUM AND ORDER
SHANAHAN, District Judge.
Before the court is the Defendant's "Notice of Appeal" (Filing No. 2) and the Defendant's "Addendum to Notice of Appeal" (Filing No. 3). The Defendant is appealing an order and judgment of the United States Bankruptcy Court for the District of Nebraska. In an Order dated March 5, 2002 ("Order"), Bankruptcy Judge Timothy J. Mahoney ruled in favor of the Plaintiff, Paige Ann Sweeney ("Sweeney"), thereby discharging her student loans. Pursuant to 28 U.S.C. § 158, NELR 76.1(c), and Bankruptcy Rules of Procedure 8001 ff, this court has reviewed Judge Mahoney's Order and the record, including the transcript of the hearing before Judge Mahoney.
The Defendant, Educational Credit Management Corporation ("ECMC"), has appealed on the following grounds: one, the Bankruptcy Court's determination that Sweeney's student loans would create an undue hardship was erroneous; two, the Bankruptcy Court's holding that a loan might impose a hardship on the debtor's marriage is an inappropriate basis for finding undue hardship; three, the Bankruptcy Court committed error in not considering Sweeney's total family income, in particular, the income of Sweeney's husband; four, the Bankruptcy Court's finding that the debtor is generally the sole support for herself and her two children who live with her was erroneous; five, the Bankruptcy Court's finding that the debtor solely pays for her living expenses was erroneous; six, the Bankruptcy Court erred in utilizing as a basis the conclusion that the debtor has an arrangement between the debtor and her spouse about how much household income she contributes; and seven, the Bankruptcy Court erroneously credited Sweeney's testimony that her husband's monthly expenses were similar to hers without an accounting for those expenses.
For the reasons stated herein, the court affirms the Bankruptcy Court's Order.
I. ANALYSIS AND DISPOSITION
Appellate courts review bankruptcy court's factual findings for clear error. The determination of whether excepting a student loan from discharge will result in undue hardship is a question of fact. Therefore, a bankruptcy's determination of undue hardship is reversible only for clear error. See In re Andresen, 232 B.R. 127, 128 (8th Cir. BAP 1999). However, the court does conduct a de novo review of a bankruptcy court's conclusions *362 of law. See Eilbert v. Pelican, 162 F.3d 523, 525 (8th Cir.1998).
A. Applicable Law and Facts
This case involves the question whether the Bankruptcy Court should discharge Sweeney's student loans. Student loans are non-dischargeable, unless the debtor establishes that excepting the loan from discharge would impose an undue hardship on the debtor or his dependants. See 11 U.S.C. § 523(a)(8). Congress adopted § 523(a)(8) principally for two reasons: 1) Congress was concerned with students abusing the bankruptcy system, and 2) Congress wanted to protect the solvency of the student loan program. See In re Andresen, 232 B.R. 127, 130 (8th Cir. BAP 1999) citing Raymond L. Woodcock, Burden of Proof, Undue Hardship, and Other Arguments for the Student Debtor Under 11 U.S.C. § 523(a)(8)(B), J.C. & U.L. 377, 381-384, (1998).
An illustration of a student abusing the system is the student who is on the cusp of a lucrative career and then, upon graduation, declares bankruptcy. See Johnson v. Missouri Baptist College (In re Johnson), 218 B.R. 449, 451 (8th Cir. BAP 1998). Sweeney, however, presents the situation of a woman who is starting her life over again without the prospects of substantial future earnings.
To determine whether a debtor or a debtor's family is experiencing undue hardship from a student loan, courts have adopted various tests in light of the fact that "undue hardship" is not defined in § 523(a)(8). In the Eighth Circuit, the test for undue hardship is the Andrews v. South Dakota Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702 (8th Cir.1981) test as recently interpreted by Andresen. The Andrews/Andresen test for undue hardship is a totality of the circumstances inquiry "with special attention to the debtor's current and future financial resources, the debtor's necessary reasonable living expenses for the debtor and the debtor's dependents, and any other circumstances unique to the particular bankruptcy case." See Andresen at 140.
B. Application of Andrews/Andresen Test
In this case, the Bankruptcy Court applied the Andrews/Andresen totality of the circumstances test. However, in applying the preceding test, it is somewhat unclear to what degree the Bankruptcy Court considered the income of Sweeney's present husband, Jay Young. See Order at 2-3. Whether the Bankruptcy Court is required to consider the husband's income in determining whether Sweeney presents a situation of undue hardship is a question of law for this court.
The Bankruptcy Court recognized that ". . . there is a requirement that the total family income situation be considered when determining whether a requirement of payment of a student loan debt would place an undue burden upon the debtor or her dependants. . . ." Order at 3, citing Dolan v. American Student Assistance (In re Dolan), 256 B.R. 230, 236 (Bank.D.Mass.2000). However, the exact manner in which the Bankruptcy Court considered Jay Young's income is unclear inasmuch as Judge Mahoney writes: "[T]he evidence in this case is convincing on the issue of whether or not her husband's income should need to be considered when determining whether the debtor has the ability to pay the debt." Order at 3.
In this court's view, no evidence can change the requirement that a court must consider a spouse's income in deciding whether a student loan constitutes an undue burden. Overwhelming authority requires that a court consider the spouse's *363 income. This court finds no published opinion of a court that holds to the contrary. The court in White v. United States Department of Education, et al., 243 B.R. 498 (Bankr.N.D.Ala.1999) cites no less than forty-nine (49) cases in which courts have held that a court must consider the earnings of both the debtor and his spouse in evaluating whether a student loan creates an undue hardship. See White at n. 9. For reasons of sound authority and sound public policy, the court must view undue hardship in light of the total income of the family.
The outstanding balance on Sweeney's student loan is over $45,000.00. Sweeney has recently remarried. Presently, both Sweeney and her husband, Jay Young, are employed by a title insurance company. Her net income is $1,750.00 per month, while Jay Young's net monthly income is $1,600.00. Sweeney has four children: Shane Hanzlik 18 years of age; Nathanael Sweeney, age 9; Nicolas Sweeney, age 8; and Echo, a daughter who will soon be four years old. Shane and Echo reside with Sweeney, while Nathanal and Nicholas live with Sweeney's former husband. According to Sweeney, she has about "$150 a month left after all my bills are paid." Transcript ("TR") at 15:11-16. Even with her present husband's income, the family is unable to make ends meet or, as Sweeney testified: "We have no money left over. . . ." TR at 15:20-24.
Sweeney's monthly expenses include the following: $350.00 for court-ordered child support; $400.00 child care; $50.00 car insurance; $150.00 groceries; $500.00 for her share of household expenses (rent and utilities). Additionally, Sweeney pays for her transportation (which includes the use of her 1992 Saturn with 115,000 miles),[1] for her children's clothing ($42.00 per month), for her children's school activities, and for a portion of health care obligations for her children who live with her husband. She has no savings and no retirement fund. Additionally, she owes her former husband $5,000.00 as her share of medical expenses for Sweeney's two sons in the custody of Sweeney's former husband. This $5,000.00 accrued debt is in addition to the court-ordered child support of $350.00 per month. Also, Sweeney is paying $12.50 per month for dental and medical expenses in addition to the accrued $5,000.00 in expenses for the children living with her former husband. Additionally, Sweeney pays $16.00 per month as a gym fee and a monthly car tax of $7.00 as well as $2.50 monthly for disability insurance. She also has an outstanding credit card debt of approximately $200.00. It appears that child support paid by Sweeney ($350.00) may be increased to $525.00 to conform with the "Nebraska Guideline Schedule" for child support.
Although Sweeney's testimony is not in the form of a precise arithmetic analysis and list of family expenses, the court notes that the expenditures mentioned are common expenses that anyone with children would pay. An exact accounting for these expenses is unnecessary to determine whether Sweeney's student loan is an undue burden under the Andrews/Andresen totality of the circumstances test.
In addition to Sweeney's income and expenses, the court must also evaluate the situation regarding income and expenses pertaining to Sweeney's husband, Jay *364 Young. The court agrees with the Bankruptcy Court that "[the court] does not believe for one minute" that Sweeney and her husband, who have a joint income of a little over $3,000 per month and who support four children, have $1,800 left at the end of the month. See TR at 46:13-16. The foregoing is a rather emphatic statement that the Bankruptcy Court did consider the income of Sweeney's husband, Jay Young. Nearly as incredulous is ECMC's argument in its brief to this court that this family has a monthly surplus of $1,466.00. See Defendant's brief at 5. ECMC apparently comes to these figures by incorporating Mr. Young's income without recognizing that at the end of the month, Mr. Young "doesn't have very much money left over." TR at 38:18-21.
The Bankruptcy Court did not actually engage in a debit and credit accounting of Young's expenses. Part of the reason is that Sweeney was not married when she filed for bankruptcy. The marriage being so recent makes it difficult for a court to engage in a "normal" total family accounting. However, no dollar-for-dollar accounting for the husband's expenses is needed. Sweeney's uncontested testimony is that her husband, after paying all of his expenses, "doesn't have much money left over" at the end of the month. TR at 38:18-21. No evidence in the record refutes this fact. On its face, Sweeney's testimony is quite reasonable inasmuch as Mr. Young only makes net wages of approximately $1600.00 a month. See TR 30:15-20.
This court finds the above evidence is sufficient, in light of the requirement that the husband's income must be considered, in order to judge whether repayment of Sweeney's student loans, in light of the total family income, is an undue burden. Even if her husband has "a little bit of money left over," such extra money does not make up for the fact that Sweeney's expenses (none of which is for luxury items) are likely equivalent to, if not more than, her income. This court finds the Dolan court persuasive inasmuch as that court concluded: "[T]he Court views the Debtor's spouse's income as, at best, an economic buffer between the Debtor and unforeseen drains on his own monetary resources. The Court, therefore, does not view the Debtor's spouse as a significant economic resource upon which he can draw in retiring these student loans." Dolan at 238-39. Young's net income, likewise, is not a significant resource upon which Sweeney can draw upon in order to pay off her student loans.
The Bankruptcy Court's Order is accurate and consistent with applicable law since Judge Mahoney did apply the Andrews/Andresen test for undue hardship. In applying that test, the Bankruptcy Court credited Sweeney's testimony that her husband's monthly expenses were similar to hers without a mathematically precise accounting for those expenses.
The Bankruptcy Court did state, as ECMC contends, that the loan might impose a hardship on the debtor's marriage. Under the Andrews/Andresen test, the court may look at "any other circumstances unique to the particular bankruptcy case." See Andresen at 140. That is what the Bankruptcy Court did in this case. The new marriage and the fact that the bankruptcy was declared before Sweeney was ever even married to Mr. Young are factors unique to Sweeney's bankruptcy case, and the Bankruptcy Court properly considered these circumstances in light of the Andrews/Andresen test.
The Bankruptcy Court did not err in finding that the debtor is generally the sole support for herself and her two children and that the debtor solely pays for her living expenses. Also, the Bankruptcy *365 Court did not err in utilizing as a basis for its conclusion that the debtor has an arrangement between the debtor and her spouse regarding Sweeney's contribution to her family's support.
The Bankruptcy Court ruling of undue burden based on these facts Sweeney supporting 4 children and with a total family monthly income of about $3,350 and a student loan debt of over $45,000 is consistent with other courts' findings of undue burdens. See In re Cline, 248 B.R. 347 (8th Cir. BAP 2000) (no children/not married; $1,578 monthly income; $53,500 student loans); In re Coats, 214 B.R. 397 (Bankr.N.D.Okla.1997) (3 children; $4,218 monthly income, including social security and child support; $39,000 student loans); In re Skaggs, 196 B.R. 865 (Bankr.W.D.Okla.1996) (3 children; $3,000 monthly income; $47,000 student loans); and In re Cooper, 167 B.R. 966 (Bankr.D.Kan.1994) (3 children; $2,600 income; $9,000 student loans).
In summary, Sweeney, at the present time, is unable, for practical purposes, to pay her court-ordered child support obligation regarding accrued medical and dental expenses of $5,000. Surely, Sweeney's basic obligations to her children trump her obligations to repay her student loan. Sweeney's present standard of living is anything but lavish. The Bankruptcy Court is not clearly erroneous in its finding that Sweeney's repaying her student loan is an undue burden on Sweeney; rather, such finding is clearly the correct decision under all the circumstances. Thus, when accounting for Sweeney's total family income, including the income of Jay Young, this court finds that there is no clear error in the Bankruptcy Court's finding that repaying the student loans presents an undue burden on Sweeney.
II. CONCLUSION
IT IS HEREBY ORDERED:
(1) That Defendant's "Notice of Appeal" (Filing No. 2) and the Defendant's "Addendum to Notice of Appeal" (Filing No. 3) are denied; and
(2) That the Bankruptcy Judge's Order and Judgment discharging Sweeney's student loan is affirmed.
NOTES
[1] Although Sweeney did not assign a dollar value to transportation costs, the court in In In re Cline, 245 B.R. 617, 621 (Bankr.W.D.Mo.2000) affirmed In re Cline, 248 B.R. 347 (8th Cir. BAP 2000), found that for a debtor who drives a 1992 Nissan Sentra with 103,000 miles "an allowance of $250.00 per month for maintenance and/or payments is reasonable." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1792892/ | 715 So. 2d 819 (1998)
Ex parte Holly WOOD.
(Re Holly Wood
v.
State).
1960659.
Supreme Court of Alabama.
March 13, 1998.
Rehearing Denied May 22, 1998.
*820 Ellen L. Wiesner, Montgomery; Frank Ralph of Cervera & Ralph, Troy; and Cary Dozier, Troy, for petitioner.
Bill Pryor, atty. gen., and Tracy M. Daniel, asst. atty. gen., for respondent.
ALMON, Justice.[*]
A jury convicted Holly Wood of murder made capital because it was committed during the course of burglary in the first degree. See Ala.Code 1975, § 13A-5-40(a)(4). The jury, by a 10-2 vote, recommended the death sentence. The circuit court accepted the recommendation and imposed the death penalty. The Court of Criminal Appeals affirmed Wood's conviction and sentence. Wood v. State, 715 So. 2d 812 (Ala.Crim.App.1996).
In his petition for the writ of certiorari, Wood has raised 26 issues for this Court's review; many of these were not presented to the Court of Criminal Appeals. This Court *821 has reviewed each of the arguments presented by Wood and has searched the record for plain error not raised; it has found no error that would support a reversal of the judgment. We have found only one issue that warrants discussion: whether the circuit court plainly erred during the sentencing phase of Wood's trial by charging the jury that it "may" consider mitigating circumstances.
Before the jury began deliberations in the sentencing phase of Wood's trial, the circuit court gave general instructions regarding the jury's duty to consider aggravating circumstances and mitigating circumstances in rendering its advisory verdict either for capital punishment or for life imprisonment without parole. The court's jury instructions included this statement:
"The law of this state provides a list of some of the mitigating circumstances which you may consider. But that list is not a complete list of the mitigating circumstances you may consider. I will now read to you a list of some of the mitigating circumstances that you may consider."
(Emphasis added.)
Wood argues that this portion of the court's sentencing-phase jury charge was erroneous and misleading because, he says, it is contrary to Ala.Code 1975, § 13A-5-51. That section, which sets out a list of mitigating circumstances to be considered in the sentencing phase of a capital case, states that "[m]itigating circumstances shall include, but not be limited to, the following...." (Emphasis added.) Focusing on the mandatory language of § 13A-5-51, Wood contends that the circuit court erred by not instructing the jury that it must consider the mitigating circumstances contained in the statute.
Wood contends that the circuit court made the jury's consideration of mitigating circumstances permissive rather than mandatory, and he argues that he was therefore deprived of the reliable and individualized sentencing procedure required in capital cases. Specifically, Wood points to Woodson v. North Carolina, 428 U.S. 280, 96 S. Ct. 2978, 49 L. Ed. 2d 944 (1976), in which the United States Supreme Court held:
"[I]n capital cases the fundamental respect for humanity underlying the Eighth Amendment, see Trop v. Dulles, 356 U.S. [86], at 100, 78 S. Ct. 590, 2 L. Ed. 2d 630 (plurality opinion), requires consideration of the character and record of the individual offender and the circumstances of the particular offense as a constitutionally indispensable part of the process of inflicting the penalty of death."
428 U.S. at 304, 96 S.Ct. at 2991, 49 L.Ed.2d at 961. The Woodson Court further stated:
"Death, in its finality, differs more from life imprisonment than a 100-year prison term differs from one of only a year or two. Because of that qualitative difference, there is a corresponding difference in the need for reliability in the determination that death is the appropriate punishment in a specific case."
428 U.S. at 305, 96 S.Ct. at 2991, 49 L.Ed.2d at 961.
Initially, we note that Wood's reliance on the United States Supreme Court's holding in Woodson has been largely undermined by that Court's recent decision in Buchanan v. Angelone, ___ U.S. ___, 118 S. Ct. 757, 139 L. Ed. 2d 702 (1998). Writing for a six-member majority in Buchanan, Chief Justice Rehnquist held that the Eighth and Fourteenth Amendments of the United States Constitution do not mandate that a trial court give any instruction to a capital jury concerning mitigating circumstances. According to Buchanan, all that is constitutionally required in a capital sentencing-phase instruction is that a jury not be precluded from considering mitigating circumstances. Thus, while a trial court cannot instruct a capital jury in such a way that it is prevented from considering mitigating circumstances, Buchanan does not require a trial court to give any instructions whatever regarding either the concept of mitigation generally or particular statutory mitigating circumstances.
In Buchanan, the United States Supreme Court found no reversible error in a Virginia trial court's sentencing-phase jury instructions, even though mitigating circumstances were not mentioned at all during the charge. In light of this holding, it would seem that *822 the sentencing-phase instruction in Wood's casewhich, Wood argues, made the jury's consideration of mitigating circumstances permissivewould not be held deficient on federal constitutional grounds. In fact, the Buchanan decision indicates that Wood never had a federal constitutional right to an instruction on mitigating circumstances at all, so long as the jury in his case was not precluded in some way from being able to consider mitigating circumstances.
However, nothing in Buchanan changes the fact that Alabama law does entitle capital defendants to a sentencing-phase instruction on mitigating circumstances. It is well settled that "every accused is entitled to have charges given, which would not be misleading, which correctly state the law of his case, and which are supported by any evidence, however weak, insufficient, or doubtful in credibility." Chavers v. State, 361 So. 2d 1106, 1107 (Ala.1978), citing Burns v. State, 229 Ala. 68, 155 So. 561 (1934). Although this maxim has been used most frequently to grant defendants jury charges on lesser-included offenses and affirmative defenses, it is equally applicable to entitle capital defendants to a jury instruction on mitigating circumstances, so long as some evidence has been presented to support a finding of mitigating circumstances. Therefore, because Wood presented some evidence of mitigating circumstances, he was entitled to an appropriate jury instruction on mitigating circumstances.
In addition to being entitled to a jury instruction on mitigating circumstances, Wood was also entitled to have the jury given a charge that was not misleading. See Page v. State, 487 So. 2d 999, 1008 (Ala.Crim.App. 1986). In that regard, Wood correctly asserts that the portion of the jury instructions excerpted above is an incorrect statement of law. While that instruction stated that Wood's jury "may" consider mitigating circumstances, Ala.Code 1975, § 13A-5-51, requires that the jury consider mitigating circumstances.
Nonetheless, despite the fact that one segment of the circuit court's jury instructions contained some ambiguity, the law does not necessarily require a reversal of Wood's sentence. In reviewing jury instructions to determine if they correctly set forth the applicable law, a reviewing court must consider the entire charge. Volkswagen of America, Inc. v. Marinelli, 628 So. 2d 378, 384-85 (Ala.1993).
We note that, in addition to being given that portion of the charge highlighted by Wood, the jury was also given this instruction:
"It is the duty of the jury to weigh the mitigating and aggravating circumstances in its decision. The jury is not free to arbitrarily ignore any factor, positive or negative, in arriving at the correct sentence."
The circuit court also gave the jury this instruction:
"[I]f there is a factual dispute over the existence of a mitigating circumstance then you should find to [sic] consider that mitigating circumstance, unless you find the evidence is such that it is more likely than not that the mitigating circumstance did not exist."
In light of these additional sentencing-phase instructions, we hold that the jury was sufficiently charged that it must consider mitigating circumstances in rendering its advisory verdict. A reasonable reading of the circuit court's entire charge makes it clear that the judge told the jury that it had a duty to weigh the aggravating circumstances and the mitigating circumstances.
Moreover, the fact that the circuit court, in a certain part of its jury charge, used the phrase "may consider" could have properly referred to a capital defendant's burden of proving mitigating circumstances. See Ala. Code 1975, § 13A-5-45(g). In many cases, the defendant fails to establish, by the measure of proof required, the existence of mitigating circumstances. In other words, the jury may consider the circumstance if it is properly proved. In fact, it was likely that Wood did not properly prove the existence of mitigating circumstances; we have reviewed the record of the sentencing phase of Wood's *823 trial, and we have found only scant evidence of mitigating circumstances.[1]
Because the jury was sufficiently instructed that it had a duty to consider mitigating circumstances, and because Wood presented little evidence of mitigating circumstances, we find no indication that the jury or the trial judge disregarded any potential mitigating circumstances that were adequately supported by proof.
We also note that, in response to Wood's argument for a reversal of his sentence, the State has asserted that the circuit court could not have erred in charging the jury that it "may" consider mitigating circumstances because that instruction mirrored the pattern charge for mitigating circumstances that is set forth in Alabama Pattern Jury Instructions (Criminal) for use in the sentencing stage of capital cases tried under Ala.Code 1975, § 13A-5-40(a). To support its contention, the State has relied on Ex parte Trawick, 698 So. 2d 162 (Ala.), cert. denied, ___ U.S. ___, 118 S. Ct. 568, ___ L.Ed.2d ___ (1997), in which this Court stated that "this Court has held that no reversible error will be found when the trial court follows the pattern jury instructions adopted by this Court." Trawick, 698 So.2d at 173, citing Kuenzel v. State, 577 So. 2d 474, (Ala.Crim.App.1990), affirmed, 577 So. 2d 531 (Ala.), cert. denied, 502 U.S. 886, 112 S. Ct. 242, 116 L. Ed. 2d 197 (1991).
This language quoted from Trawick implies that a circuit court's jury charge will be unassailable on appeal so long as that charge follows a pattern instruction. However, that would be an improper interpretation of Trawick, because pattern jury instructions may be inapplicable under particular circumstances and may, in fact, be challenged by cogent arguments based upon applicable law. This position is supported by this Court's order of December 6, 1982, recommending the pattern jury instructions for capital cases. That order was quoted in Kuenzel:
"`[T]he use of the pattern jury instructions,... for the trial and sentencing aspect of cases tried under § 13A-5-40(a), Code of Alabama, 1975, is recommended, but without prejudice to the right of any defendant to make and preserve for review in a timely manner any objection thereto either as to form, substance or application.'
Kuenzel, 577 So.2d at 520 (emphasis added).[2]
One reading of Trawick could suggest that this Court's intent in that opinion was to state that no plain error will be found when the circuit court follows a pattern jury instruction. This position would be supported by the scope of review in Trawick, which was limited to plain-error analysis. This view of *824 Trawick would also be buttressed by language in the opinion of the Court of Criminal Appeals in Kuenzel, which Trawick cited, quoting this Court:
"`[W]e do not think we should hold that the trial judge plainly erred when he instructed the jury pursuant to a pattern jury instruction `recommended' by this Court, especially in the absence of an objection or request from the defendant.'"
Kuenzel, 577 So.2d at 520, quoting Ex parte Harrell, 470 So. 2d 1309, 1315 (Ala.), cert. denied, 474 U.S. 935, 106 S. Ct. 269, 88 L. Ed. 2d 276 (1985). (Emphasis in Kuenzel and Harrell.)
However, if we examine only the language of Trawick and Kuenzel, it might yet appear that a trial court could never plainly err by giving a pattern instruction in a capital case. That conclusion would be incorrect because the Harrell decision, which was relied on in Kuenzel, correctly indicated that this state's appellate courts must examine jury instructions, even if they are pattern charges, on a case-by-case basis to determine whether they are plainly erroneous. Despite the fact that in Harrell this Court stated that "we do not think ... the trial judge plainly erred when he instructed the jury pursuant to a pattern jury instruction," 470 So.2d at 1315 (emphasis omitted), this Court had prefaced that statement by stating earlier in Harrell that "the critical question [is] whether we should apply the `plain error' rule in this case." 470 So.2d at 1314 (emphasis in original). Consequently, even though this Court declined to find plain error in Harrell, because the trial court had used a pattern instruction, that case did not hold that the use of a pattern instruction could never constitute plain error. To the contrary, this Court's holding in Harrell was limited to the facts of that case.
In light of Harrell, we conclude that the statement in Trawick that "no reversible error will be found when the trial court follows ... pattern jury instructions," Trawick, 698 So.2d at 173, was overly broad. While most pattern jury instructions may be properly used in the majority of criminal and civil cases, there may be some instances when using those pattern charges would be misleading or erroneous. In those situations, trial courts should deviate from the pattern instructions and give a jury charge that correctly reflects the law to be applied to the circumstances of the case. Similarly, while there will likely be few instances in which the giving of a pattern instruction would be plainly erroneous in a capital case, we do not foreclose that possibility. For that reason, a trial court must diligently scrutinize the jury charges it giveseven pattern chargeson a case-by-case basis to ensure that they properly instruct the jury in accordance with applicable statutes and caselaw.
In Wood's case, however, we have already held that the circuit court's sentencing-phase jury charge, taken in its entirety, was not erroneous. Therefore, Trawick has no application to our decision in this case.
In addition to the issue Wood raises regarding the jury instruction, this Court has reviewed the other issues presented to it; has examined the issues addressed and decided by the Court of Criminal Appeals; has considered the oral arguments made before this Court; and has thoroughly examined the record for plain error. We find no error, plain or otherwise, either in the guilt phase or in the sentencing phase of Wood's trial that so prejudicially affected his rights as to require a reversal of Wood's conviction or sentence. As required by Ala.Code 1975, § 13A-5-53, we have reviewed the record, including the circuit judge's sentencing order and the opinion of the Court of Criminal Appeals upholding the imposition of the death penalty in this case. This review shows that Wood's sentence was not the result of "passion, prejudice, or any other arbitrary factor." § 13A-5-53(b)(1). We conclude that the circuit court and the Court of Criminal Appeals properly weighed the mitigating circumstances and the aggravating circumstances. Finally, we hold that those courts did not err in determining that Wood's sentence of death was properly imposed and was proportional to the penalty imposed in similar cases. Accordingly, the judgment of the Court of Criminal Appeals affirming Wood's conviction and sentence is hereby affirmed.
AFFIRMED.
*825 HOOPER, C.J., MADDOX, SHORES, HOUSTON, KENNEDY, COOK, and SEE, JJ., concur.
BUTTS, J.,[**] concurs specially.
BUTTS, Justice (concurring specially).
I agree that the trial court's sentencing phase jury charge, taken in its entirety, was not erroneous. However, I do not share the majority's concern that Ex parte Trawick, 698 So. 2d 162 (Ala.1997), could be construed to preclude a review for plain error in the trial court's instruction to the jury if the instruction is based upon Alabama Pattern Jury Instructions. In Trawick, I pointed out that, in applying a plain-error standard of review, this Court has held that no reversible error would be found where the trial court follows the pattern jury instructions adopted by this Court. Trawick, 698 So.2d at 173. This did not, however, preclude us from examining the record in Trawick to determine whether the trial court's giving of the pattern jury instruction regarding the jury's weighing of aggravating circumstances and mitigating circumstances could have misguided the jury as to its function and responsibility in weighing these factors. Only after examining the record did we conclude that the trial court's instruction was a clear statement of the applicable law and that there was no plain error in the instruction as given.
NOTES
[*] Although Justice Almon was not present at oral argument, he has listened to the tape of oral argument.
[1] During the sentencing phase, Wood first presented evidence that his family experienced difficult times during his early years. However, no evidence suggested that Wood had suffered abuse as a child.
Second, Wood introduced a copy of the police report that was completed when Wood was arrested in this case. That report described Wood's condition at the time of his arrest as "drinking." However, Wood presented no evidence that he was actually intoxicated, and witnesses for the State testified during the guilt phase that Wood did not appear to be intoxicated when he was arrested.
Third, Wood introduced a report from the State Board of Pardons and Paroles remarking that Wood needed "anger induced, acting out and reality therapy." However, Wood presented no additional evidence to show that he suffered from a mental defect or that he was otherwise mentally incompetent.
Ala.Code 1975, § 13A-5-45(g), requires that a capital defendant prove the existence of a mitigating circumstance by a preponderance of the evidence. Based on the meager amount of evidence presented on the question of mitigating circumstances, we conclude that neither the jury nor the trial judge acted unreasonably by finding that no mitigating circumstances existed in Wood's case.
[2] See also, the "Order of the Supreme Court of Alabama Approving Use of Alabama Pattern Jury Instructions," Alabama Pattern Jury Instructions (Civil) (2d ed.1993) at pp. xix-xxii, suggesting that the Court's Advisory Committee on Civil Practice and Procedure "consider the desirability" of amending the Rules of Civil Procedure to add a rule providing in part as follows:
"The publication by the Alabama Pattern Jury Instructions Committee of Alabama Pattern Jury Instructions in Civil Cases and their use by the trial judges of this state are recommended, but without prejudice to the rights of any litigant to make and reserve for review any objection thereto either as to form, substance or application."
(Emphasis added.)
[**] Justice Butts was not present at oral argument, but on February 25, 1998, he listened to the tape of the oral argument. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1813268/ | 929 F. Supp. 660 (1996)
MARISOL A., et al., Plaintiffs,
v.
Rudolph W. GIULIANI, et al., Defendants.
Application of COURTROOM TELEVISION NETWORK, Proposed Intervenor.
No. 95 Civ. 10533 (RJW).
United States District Court, S.D. New York.
March 1, 1996.
Children's Rights, Inc., New York City (Marcia Robinson Lowry, Craig Levine, Mark G. Peters, Rebecca Kim Kimura, Martha Stone, of counsel), Lawyers for Children, Inc. New York City (Gayle Lerner, Karen Freedman, of counsel), for Plaintiffs.
Corporation Counsel of the City of New York, New York City, Paul A. Crotty, Corporation Counsel (Lorna Goodman, Phyllis Seidman, of counsel), for City Defendants.
Attorney General of the State of New York, New York City, Dennis C. Vacco, Attorney General (Ronald Younkins, Michael Popkin, of counsel), for State Defendants.
Cahill Gordon & Reindel, New York City (Floyd Abrams, Jonathan Sherman, of counsel), for Proposed Intervenor.
MEMORANDUM AND ORDER
ROBERT J. WARD, District Judge.
Proposed Intervenor, Courtroom Television Network ("Court TV"), moves by order to show cause pursuant to Rule 24, Fed. R.Civ.P., to intervene in this case for the limited purposes of (a) persuading this Court to allow Court TV to televise the March 4, 1996 oral argument on plaintiffs' motion for class certification and defendants' partial motions to dismiss ("March 4 Argument") and *661 (b) obtaining the Court's written permission, pursuant General Rule 7 of the Local Rules of this Court ("Rule 7"), to televise that hearing. Inasmuch as the Court heard counsel for the Proposed Intervenor on February 28, 1996, the portion of the motion seeking to intervene is moot. For the reasons hereinafter stated, the portion of the motion seeking to televise the March 4 Argument is granted.
DISCUSSION
On June 30, 1988, the Board of Judges of this Court adopted amended Rule 7, which is entitled "Photographs, Radio, Recordings, Television" and remains in effect. The Rule provides in pertinent part:
No one other than court officials engaged in the conduct of court business shall bring any camera ... into any courthouse or its environs without written permission of a judge of that court.
Environs as used in this rule shall include the entire United States Courthouse property, including all entrances to and exits from the buildings.
The Judicial Conference of the United States ("the Conference") subsequently considered the propriety of televising adversarial civil proceedings in federal court. On September 20, 1994, the Conference rejected an unambiguous recommendation in favor of televised proceedings by its Committee on Court Administration and Case Management and adopted a policy opposing the use of cameras to televise civil proceedings in the federal courts.
The threshold question, therefore, is whether this Court has discretion to allow Court TV to televise the March 4 Argument pursuant to Rule 7 or whether the Court is bound by the policy of the Conference. After careful consideration, it is the opinion of this Court that the policy of the Conference does not overrule or supplant the Local Rules adopted by the Board of Judges of this District Court. See 28 U.S.C. §§ 331, 2071(c) (1988). Rather, Rule 7 empowers the Court to grant written permission to televise a civil proceeding and the Court should consider the Conference policy only as a persuasive factor in the exercise of that power.[1]
The discretionary power of this Court thus having been established, the Court must next consider whether this is an appropriate case in which to exercise that power and allow televised coverage. Plaintiffs' counsel support the application to televise the oral arguments. The City defendants oppose the application and urge the Court not to exercise its discretion because of the prejudice it argues will result from the public's alleged inability to comprehend the technical aspects of defendants' motion to dismiss. The State defendants take no position on the application.
After considering the arguments of counsel, this Court has determined that the public interest would be served in this case by granting the application. Recognizing that the policy of the Judicial Conference must be given considerable weight when deciding an application to televise federal court proceedings, this Court nevertheless finds that the profound social, political, and legal issues raised by the instant case make it appropriate for broadcast.
One factor persuading the Court is Court TV's representation that it intends to televise "gavel to gavel" the entire March 4 Argument. The Court is further persuaded to allow such coverage by the fact that there will be no jury and no witnesses present at that hearing. It is also the Court's view that the City defendants will not be prejudiced in connection with their motion to dismiss because of the public's inability to comprehend the technical aspects of that motion. This Court is unwilling to deny access to information based on the perceived inability of the public to grasp such information. Not only has Court TV represented that it will employ commentators to explain the nature of the proceeding, but counsel for the City defendants is free to state on the record that the allegations of the complaint are only to be taken as true in connection with the motion to dismiss and are not admitted by the defendants. Under the circumstances, this Court *662 can perceive no prejudice to the parties in the granting of this application.
CONCLUSION
For the foregoing reasons, Court TV is hereby granted leave, pursuant to Rule 7, to televise the oral arguments to be held before this Court on March 4, 1996.
It is so ordered.
NOTES
[1] It should be noted that, at oral argument held on February 28, 1996, all of the parties agreed that this Court has the discretion to authorize the broadcast of the March 4 Argument. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2462734/ | 34 F. Supp. 2d 188 (1999)
Bobbie J. ELL and Thomas McVeigh, Plaintiffs,
v.
S.E.T. LANDSCAPE DESIGN, INC., Glenn Nixon and Lesco, Inc., Defendants.
No. 98 Civ. 5911(WCC).
United States District Court, S.D. New York.
January 25, 1999.
*189 *190 Grogan, Souto & Schonberg, P.C., Goshen, NY, Edward P. Souto, of counsel, for plaintiffs.
Law Offices of Robert P. Augello, Middletown, NY, Robert P. Augello, of counsel, for defendant S.E.T. Landscape Design, Inc.
Law Offices of Marc D. Orloff, P.C., Goshen, NY, Anthony J. Perna, Jr., of counsel, for defendant Glenn Nixon.
Clemente, Dickson & Mueller, P.A., Morristown, NJ, William F. Mueller, Lori Anne Fee, Caroline L. Feeney, of counsel, for defendant LESCO, Inc.
OPINION AND ORDER
WILLIAM C. CONNER, Senior District Judge.
Defendant LESCO, Inc. ("LESCO") removed this action from Supreme Court for the State of New York, County of Orange, claiming federal question jurisdiction under 28 U.S.C. § 1331 as the basis for removal. Pursuant to 28 U.S.C. § 1447(c), defendant Glenn Nixon ("Nixon") has moved for remand of the action to the state court. For the reasons stated herein, defendant Nixon's motion is granted.
BACKGROUND
This action was originally instituted in the Orange County Supreme Court on March 17, 1997. Plaintiffs Bobbie J. Ell and Thomas McVeigh allege that they were residing in a single family home located in Orange County on September 24, 1996 when defendant Glenn Nixon and a co-worker, both employees of defendant S.E.T. Landscape Design, Inc. ("S.E.T."), sprayed a fertilizer on the premises. Plaintiffs claim that as a result of the negligent and reckless spraying of poisonous chemicals, they sustained permanent and disabling physical injuries. Only defendants Nixon and S.E.T. were named in the original complaint.
On February 4, 1998, defendant Nixon impleaded LESCO, in a third party complaint alleging that the product he used, which allegedly injured plaintiffs, was manufactured by LESCO. He asserted claims against LESCO for indemnification and contribution, alleging negligence in manufacturing, designing, distributing, and selling the product.
On July 30, 1998, the Supreme Court of New York granted a motion by plaintiffs to amend their original complaint to assert claims against LESCO as a direct defendant in the action. By their amended complaint, plaintiffs allege causes of action against LESCO for, inter alia, negligent design, failure to warn, and breach of implied and express warranties. On August 19, 1998, LESCO filed a Notice of Removal of the entire action from the Supreme Court of the State of New York to the Southern District of New York, asserting federal question jurisdiction under 28 U.S.C. § 1331 as the basis for removal. On September 16, 1998, defendant Nixon filed a timely motion for remand. Plaintiffs and defendant S.E.T. have subsequently joined in support of Nixon's motion for remand. In opposing this motion for remand, defendant LESCO has also moved, pursuant to Rule 56 of the Federal Rules of Civil Procedure, for summary judgment as a matter of law.
DISCUSSION
A defendant may remove a state court action to federal court only if the action could have originally been filed in federal court. Caterpillar v. Williams, 482 U.S. 386, 391-92, 107 S. Ct. 2425, 96 L. Ed. 2d 318 (1987); 28 U.S.C. § 1441(a). Thus, where there is no diversity jurisdiction (and no such diversity jurisdiction is alleged here), a federal question must be present in order for removal to be proper. Caterpillar, 482 U.S. at 392, 107 S. Ct. 2425; 28 U.S.C. § 1331. In general, questions concerning federal question jurisdiction are resolved by examining the plaintiff's well-pleaded complaint. Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 29 S. Ct. 42, 53 L. Ed. 126 (1908). The well-pleaded-complaint rule provides that the plaintiff's properly pleaded complaint governs the jurisdictional determination, and if, *191 on its face, such a complaint raises no issue of federal law, there is no federal question jurisdiction. Franchise Tax Bd. of Cal. v. Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 10, 103 S. Ct. 2841, 77 L. Ed. 2d 420 (1983); Mottley, 211 U.S. 149, 29 S. Ct. 42, 53 L. Ed. 126.
Because, on its face, all of plaintiffs' claims against each of the three defendants are state claims, LESCO relies on an exception to the well-pleaded-complaint rule in its effort to defeat remand. In Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557, 88 S. Ct. 1235, 20 L. Ed. 2d 126 (1968), the Supreme Court held that federal law can so "completely preempt" a field of state law that the plaintiff's complaint must be recharacterized as stating a federal cause of action. Thus, if a plaintiff files suit in state court based upon a state cause of action, and the defendant removes the case on the basis of a valid complete preemption defense, the federal district court will recharacterize the plaintiff's state cause of action as a federal claim for relief, making removal proper on the basis of federal question jurisdiction. Here, LESCO alleges that the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. § 136 et seq. (hereafter "FIFRA" or the "Act"), by expressly prohibiting states from imposing any requirements for labeling or packaging different from that required by the federal statute, creates such a situation.[1] Relying on § 136v of the Act, LESCO argues that all of the state common law claims against it, despite the well-pleaded-complaint rule, are "really" federal claims, and thus federal question jurisdiction exists. See, e.g., Franchise Tax Bd. of Cal., 463 U.S. at 13, 103 S. Ct. 2841.
Because this exception: (1) "upset[s] the usual constitutional balance of federal and state powers," Gregory v. Ashcroft, 501 U.S. 452, 460, 111 S. Ct. 2395, 115 L. Ed. 2d 410 (1991); (2) overrides the well-pleaded-complaint rule; and (3) abridges the notion that the party who brings a suit "is master to decide what law he will rely upon," Fair v. Kohler Die and Specialty Co., 228 U.S. 22, 25, 33 S. Ct. 410, 57 L. Ed. 716 (1913),[2] complete preemption is extremely rare. Rodriguez v. Shell Oil Co., 818 F. Supp. 1013 (S.D.Tex.1993); 3 JAMES WM. MOORE ET AL., 16 MOORE'S FEDERAL PRACTICE § 107.14 (3d ed.1997).
While many claims inevitably involve ordinary preemption in which the state law claim will require the application of federal substantive law, this is usually insufficient to establish federal question jurisdiction. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S. Ct. 1542, 95 L. Ed. 2d 55 (1987); Franchise Tax Bd. of Cal., 463 U.S. 1, 103 S. Ct. 2841, 77 L. Ed. 2d 420. The mere fact that federal law might "apply," i.e. that Congress intended to provide a federal defense to the application of state law, is insufficient to establish federal question jurisdiction. To find that a complaint alleging only state claims still gives rise to federal question jurisdiction, even if the federal statute is raised only by way of defense, the court must find complete preemption. "In complete preemption a federal court finds that Congress desired to control the adjudication of the federal cause of action to such an extent that it did not just provide a federal defense to the application of state law; rather, it replaced the state law with federal law and made it clear that the defendant has the ability to seek adjudication of the federal claim in a federal forum." 14B CHARLES ALAN WRIGHT, ARTHUR R. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE § 3722.1 (3d ed.1998). Thus, many state law claims, although controlled by federal *192 law, generally are not treated as completely preempted, and therefore cannot provide the basis for removal jurisdiction. In short, an ordinary preemption defense is insufficient to establish a federal question; the defendant must show that Congress intended not merely to "preempt a state law to some degree," but to totally substitute "a federal cause of action for a state cause of action." Schmeling v. NORDAM, 97 F.3d 1336, 1341 (10th Cir.1996).
Applying these principles to FIFRA, the vast majority of district courts have concluded that the Act does not completely preempt state law and thus a "FIFRA defense" is insufficient to establish federal question jurisdiction. See Thigpen v. Cheminova, 992 F. Supp. 864 (S.D.Miss.1997); Martinez v. Dow Chemical Co., Nos. 95-3212, 95-3214, 1996 WL 502461 (E.D.La. Sept 4., 1996); Murray v. Commonwealth Edison, 905 F. Supp. 512 (N.D.Ill.1995); DerGazarian v. Dow Chemical Co., 836 F. Supp. 1429 (W.D.Ark.1993); Rodriguez, 818 F. Supp. 1013. The only circuit court to address this issue has also found that FIFRA does not completely preempt state law. Hurt v. Dow Chemical Co., 963 F.2d 1142 (8th Cir.1992).
Despite these holdings to the contrary, LESCO asserts that because FIFRA preempts state law, it also provides federal question jurisdiction. This assertion blurs the distinction between ordinary and complete preemption. As explained above, ordinary federal preemption of state law claims does not perforce convert them into federal claims. Complete preemption only occurs when the federal statute's preemptive force is "so powerful that in addition to preempting state law causes of action, it also provides federal question jurisdiction." Murray, 905 F.Supp. at 513 (internal citations omitted). LESCO argues that the language in FIFRA forbidding states from "impos[ing] or continu[ing] in effect any requirements for labeling or packaging" of pesticides shows Congress's intent to preempt state authority completely in the area of labeling, packaging, and warning. § 136v(b). We do not agree that this section meets the Supreme Court's definition of complete preemption. The Supreme Court has clearly held that ordinary preemption is insufficient to support removal unless "Congress has clearly manifested an intent to make causes of action [under the statute] `removable to federal court.'" Metropolitan Life Ins. Co., 481 U.S. at 66, 107 S. Ct. 1542. At a minimum, the statute must provide a private right of action and contain a specific grant of federal jurisdiction. Aaron v. National Union Fire Ins. Co., 876 F.2d 1157, 1163-65 (5th Cir.1989). Because FIFRA does not satisfy these requirements, FIFRA preemption will not support removal in this case.
A comparison with the Employee Retirement Income Security Act of 1974 (hereafter "ERISA"), 88 Stat. 829, 29 U.S.C. § 1001 et seq., and the Labor Management Relations Act, 1947 (hereafter "LMRA"), 61 Stat. 156, 29 U.S.C. § 141 et seq., two of the rare federal statutes where the Supreme Court has found complete preemption, illustrates this point. The crux of the finding of federal question jurisdiction under LMRA and ERISA is that in addition to the statutes' ordinary preemptive powers, each contains a section (§ 301 and § 502 respectively) that explicitly provides for civil enforcement of the statute and grants jurisdiction over those claims to the federal court. Section 502 of ERISA, which closely tracks § 301 of the LMRA, states:
The district courts of the United States shall have jurisdiction, without respect to the amount in controversy or the citizenship of the parties, to grant the relief provided for in subsection (a) of this section in any action.
29 U.S.C. § 1132(f). FIFRA contains no such provisions. Consequently, because the Supreme Court requires an explicit statement from Congress in order for the courts to find complete preemption, we are unable to conclude that FIFRA completely preempts state law and creates federal question jurisdiction in this Court. Metropolitan Life Ins. Co., 481 U.S. at 66, 107 S. Ct. 1542.
LESCO's reliance on § 136v does not demonstrate that removal was proper, but only that there may be a good federal preemption defense insofar as the labeling and packaging of LESCO's product comply with federal requirements.[3]*193 Rodriguez, 818 F.Supp. at 1015. This section in no way shows a "manifest intent" by Congress to make claims arising under FIFRA removable, since it neither provides a private right of action nor contains a specific grant of federal jurisdiction. Metropolitan Life Ins. Co., 481 U.S. at 66, 107 S. Ct. 1542; Aaron, 876 F.2d at 1163-65. Section 136v(b)'s prohibition on any state's ability to impose requirements for labeling or packaging may well prove to be an effective defense for LESCO against some of plaintiffs' claims;[4] it does not, however, contain the kind of clear language that the Supreme Court requires to find that a mere preemption defense can actually create federal question jurisdiction. Metropolitan Life Ins. Co., 481 U.S. at 66, 107 S. Ct. 1542.
In fact, in finding that FIFRA does not preempt local ordinances, the Supreme Court explicitly held: "FIFRA ... leaves substantial portions of the field vacant.... Whatever else FIFRA may supplant, it does not occupy the field of pesticide regulation in general. ... Rather, it acts to ensure that the States could continue to regulate use and sales even where, such as with regard to the banning of mislabeled products, a narrow pre-emptive overlap might occur."[5]Wisconsin Public Intervenor v. Mortier, 501 U.S. 597, 613-14, 111 S. Ct. 2476, 115 L. Ed. 2d 532 (1991) (emphasis added). Tellingly, it is precisely this expression, "occupy the field," that courts have repeatedly used to describe complete preemption, and it is exactly this "occupying of the field" which the Supreme Court tells us does not exist in FIFRA. See, e.g., Ceres Terminals, Inc. v. Indus. Comm'n of Illinois, 53 F.3d 183, 185 (7th Cir.1995); Deford v. Soo Line R.R. Co., 867 F.2d 1080, 1084-85 (8th Cir.1989); 16 MOORE'S FEDERAL PRACTICE § 107.14 (3d ed.1997).
We recognize that LESCO has found two cases, both unreported in the Federal Supplement, in which district courts have held that FIFRA does completely preempt state common law actions. LaCoste v. Stamps, No. 95-0779, 1995 WL 442070 (E.D.La. July 25, 1995); Burge v. Jones, No. B-92-022, 1992 WL 415263 (S.D.Tex. Nov.18, 1992). However, subsequent decisions in the same districts have expressly refuted this proposition. Martinez, 1996 WL 502461; Rodriguez, 818 F. Supp. 1013. Moreover, in Burge, the court found that diversity of citizenship provided an alternative ground for exercising jurisdiction. 1992 WL 415263. Additionally, we conclude (as have numerous other courts) that Burge and LaCoste improperly conflate the difference between ordinary and complete preemption. Thigpen, 992 F.Supp. at 869; Murray, 905 F.Supp. at 514. Burge and LaCoste simply cite the undisputed proposition that FIFRA provides a preemptive defense to some state common law claims, but fail to take the additional step of determining whether FIFRA contains sufficient language, like § 301 of LMRA or § 502 of ERISA, to find complete preemption. As explained above, we conclude that it does not.
Finally, even if LESCO were able to establish federal question jurisdiction, remand would still be required because removal was not effected with the unanimous consent of all defendants. Although there is no express statutory requirement that all defendants either join the petition for removal or consent to such removal, there is wide-spread agreement among the district courts, including those in the Second Circuit, that "all named [defendants] over whom the state court acquired jurisdiction must join in the removal petition for removal to be proper." Still v. DeBuono, 927 F. Supp. 125, 129 (S.D.N.Y.1996), aff'd on other grounds, 101 F.3d 888 (2d Cir.1996); see also Codapro Corp. v. Wilson, 997 F. Supp. 322 (E.D.N.Y. 1998); Town of Moreau v. State Dep't of Environmental Conservation, No. 96-983, 1997 WL 243258 (N.D.N.Y. May 5, 1997); *194 Rosendale v. Citibank, No. 94-8591, 1995 WL 329296 (S.D.N.Y. June 1, 1995); Parisi v. Rochester Cardiothoracic Assoc., No. 91-6387T, 1992 WL 470521 (W.D.N.Y. June 29, 1992); Norman v. Cuomo, 796 F. Supp. 654 (N.D.N.Y.1992); see also Fletcher v. Hamlet, 116 U.S. 408, 6 S. Ct. 426, 29 L. Ed. 679 (1886); Akin v. Ashland Chemical Co., 156 F.3d 1030 (10th Cir.1998); Roe v. O'Donohue, 38 F.3d 298 (7th Cir.1994); Shaw v. Dow Brands, Inc., 994 F.2d 364 (7th Cir. 1993).
Exceptions to this general rule that all defendants must join or consent to the petition for removal have been recognized where: (1) the non-joining defendants have not been served with service of process at the time the removal petition is filed; (2) the non-joining defendants are merely nominal or formal parties; and (3) the removed claim is a separate and independent claim as defined by 28 U.S.C. § 1441(c). See, e.g., Courtney v. Benedetto, 627 F. Supp. 523, 526 (M.D.La.1986); 14C CHARLES A. WRIGHT, ARTHUR P. MILLER & EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE § 3731. LESCO makes no argument that any of these exceptions apply to the instant case. Since "unambiguous written evidence of consent" by all defendants is required, the filing of formal opposition papers to removal by defendants Nixon and S.E.T. clearly shows that the "rule of unanimity" has not been satisfied. Codapro, 997 F.Supp. at 325 (internal quotations omitted). Finally, we find no support for LESCO's claim that this rule only applies to cases in which the basis of federal jurisdiction is diversity. See, e.g., Hewitt v. City of Stanton, 798 F.2d 1230, 1232 (9th Cir.1986) (basis of removal is federal question jurisdiction, but "rule of unanimity still applies").
CONCLUSION
Defendant Nixon's motion for remand is granted for lack of subject matter jurisdiction and this case is remanded to the Supreme Court of the State of New York, County of Orange. Defendant LESCO's motion for summary judgment is therefore not reached.
SO ORDERED.
NOTES
[1] 7 U.S.C. § 136v of FIFRA states in full:
§ 136v Authority of the States
(a) In general
A state may regulate the sale or use of any federally registered pesticide or device in the State, but only if and to the extent the regulation does not permit any sale or use prohibited by this subchapter.
(b) Uniformity
Such State shall not impose or continue in effect any requirements for labeling or packaging in addition to or different from those required under this subchapter.
[2] See also Delta Dental v. Blue Cross & Blue Shield, 942 F. Supp. 740, 747-749 (D.R.I.1996) (state anti-trust lawsuit was properly remanded because plaintiff was entitled to plead only state claims even though plaintiff could have brought suit under the Sherman Act).
[3] Other than § 136v, LESCO directs the Court to no other evidence that Congress intended to dominate the field of pesticide regulation so completely that the entirely state law claims of plaintiffs must be read as inherently federal.
[4] See, e.g., Papas v. Upjohn Co., 985 F.2d 516 (11th Cir.1993) (holding that those state law claims specifically related to "labeling and packaging" are preempted by FIFRA).
[5] Note, however, that the Court was assessing ordinary preemption for purposes of local ordinances, not complete preemption for purposes of state law. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2563031/ | 300 F. Supp. 2d 836 (2004)
Sharon WALKER, Plaintiff,
v.
BOARD OF REGENTS OF THE UNIVERSITY OF WISCONSIN SYSTEM and David Markee, Chancellor of the University of Wisconsin-Platteville, Defendants.
No. 03-C-66-C.
United States District Court, W.D. Wisconsin.
January 7, 2004.
*837 *838 *839 *840 David E. Rohrer, for Plaintiff.
Michael J. Losse, Assistant Attorney General, Madison, WI, for Defendants.
OPINION AND ORDER
CRABB, District Judge.
In this civil action for monetary, declaratory and injunctive relief, plaintiff Sharon Walker contends that defendants David *841 Markee and the Board of Regents of the University of Wisconsin System refused to renew her contract because of her race and sex and in retaliation for exercising her First Amendment rights. Plaintiff brings her claims under 42 U.S.C. §§ 1981 and 1983 and Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e.
I conclude that there are genuine issues of material fact with respect to plaintiff's race and sex discrimination claims. A reasonable jury could find the reasons articulated by defendants for terminating plaintiff are pretexts for discrimination. With respect to plaintiff's retaliation claims, I conclude that three of the five statements relied on by plaintiff are matters of public concern and are protected by the First Amendment. However, with one exception, plaintiff has failed to adduce sufficient evidence to allow a reasonable jury to infer that her speech motivated defendant Markee's decision. Accordingly, defendants' motion for summary judgment will be granted in part and denied in part.
Before setting forth the undisputed facts, there are a number of preliminary issues that I must address. First is plaintiff's motion to strike the affidavits of Ann Lydecker, Chancellor of the University of Wisconsin-River Falls, and George Brooks, Associate Vice-President for Human Resources of the University of Wisconsin system. In these affidavits, Lydecker and Brooks give their "expert" opinion on the issue "whether a `reasonable' chancellor could nonrenew the contract of an assistant dean in the circumstances of [this] case, and especially given the tenuous nature of plaintiff's employment." Dfts.' Br., dkt. # 46, at 2. Plaintiff argues that the affidavits should be stricken because Brooks's and Lydecker's opinions are neither relevant nor reliable.
I agree with plaintiff that a third party's assessment of defendants' reasonableness is not relevant, at least for the purpose of defendants' motion for summary judgment. As defendants themselves recognize in their briefs on the merits, it does not matter whether defendant Markee's decision not to renew plaintiff's contract was reasonable. Title VII, § 1981 and § 1983 do not prohibit foolishness or caprice, only discrimination and retaliation for exercising federally protected rights. The Court of Appeals for the Seventh Circuit has held repeatedly that a plaintiff cannot prove an employer's discriminatory intent by adducing evidence that its decision was "mistaken, ill considered or foolish." Jordan v. Summers, 205 F.3d 337, 343 (7th Cir.2000); see also Grayson v. O'Neill, 308 F.3d 808, 820 (7th Cir.2002) ("[W]e are not concerned with the correctness or desirability of reasons offered for employment decisions."); Grube v. Lau Industries, 257 F.3d 723, 730 (7th Cir.2001) ("A pretext for discrimination means more than an unusual act; it means something worse than a business error."); Kulumani v. Blue Cross Blue Shield Association, 224 F.3d 681, 685 (7th Cir.2000) (pretext "means a dishonest explanation, a lie rather than an oddity or an error"); Pryor v. Seyfarth, Shaw, Fairweather & Geraldson, 212 F.3d 976, 979 (7th Cir.2000) ("Title VII is not a `good cause' statute."). If a plaintiff may not buttress her case by demonstrating the objective unreasonableness of the employer's actions, it follows that a defendant is similarly barred from showing nondiscrimination with evidence that its decision was carefully considered or wise. It is notable that defendants have failed to cite any case in which a court held that expert testimony on an employer's reasonableness was appropriate in a discrimination case.
At most, Brooks's and Lydecker's opinions would go to credibility, which cannot be considered on summary judgment. Morfin v. City of East Chicago, 349 F.3d 989, 999 (7th Cir.2003). Thus, at this *842 stage of the proceedings, it is unnecessary to decide whether Brooks's and Lydecker's testimony could be relevant for any purpose. Because Lydecker's and Brooks's opinions may be ignored for the purpose of summary judgment, plaintiff's motion to strike will be denied as unnecessary. If and when defendant indicates its intent to call Brooks and Lydecker as witnesses at trial, plaintiff may move to bar their testimony. Defendants will then have to explain how evidence on the objective reasonableness of their decision is relevant when the ultimate question in this case relates to their subjective intent.
Second, defendants have filed a motion asking the court to take judicial notice of the transcripts of plaintiff's hearing before the State of Wisconsin Personnel Commission. Presumably, defendants are asking the court to take judicial notice of the testimony itself and not the facts on which the testimony is based. (Defendants could not argue seriously that all of the testimony during the hearing was "not subject to serious dispute," as required by Fed.R.Evid. 201(b); see General Electric Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074 (7th Cir.1997).) Courts may take judicial notice of the record of an administrative proceeding. Fornalik v. Perryman, 223 F.3d 523, 529 (7th Cir.2000). Defendants have provided the court with certified copies of the transcripts and plaintiff has not opposed defendants' motion. Accordingly, I will take judicial notice of the transcript of the hearing before the personnel commission.
Third, defendants argue in their reply brief that plaintiff's responses to their proposed findings of fact did not comply with the court's procedures to be followed on summary judgment. Specifically, defendants argue that in many cases, plaintiff did not limit her responses to citing evidence that put defendants' proposed fact into dispute. Instead, she introduced new facts that were not directly responsive to defendants' proposed fact. Defendants are correct that this court's procedures do not permit parties to propose new facts in their responses to proposed factual findings. However, I note that many of defendants' proposed findings of fact were also deficient because they did not include a citation to a page in the record. See Johnson v. Cambridge Industries, 325 F.3d 892 (7th Cir.2003) ("district courts ... are not required to scour every inch of the record for evidence"). To the extent that either side's submissions did not comply with this court's procedures, I have not considered them. Ziliak v. AstraZeneca LP, 324 F.3d 518 (7th Cir.2003) (when parties fail to comply with district court's summary judgment procedures, proper response is to disregard nonconforming submissions).
From the parties' proposed findings of fact and the record, I find that the following facts are undisputed.
UNDISPUTED FACTS
A. Plaintiff's Tenure Under Defendant Markee's Predecessor
Plaintiff Sharon Walker began working at the University of Wisconsin-Platteville in 1994 as the assistant chancellor for student affairs. She is African-American. Before coming to the University of Wisconsin, plaintiff was the chief student affairs officer at Kentucky State University, the assistant dean of students at Iowa State University and the dean of students and vice president for student affairs at Morris Brown College. She was not terminated from any of these positions.
From the time of plaintiff's hire until 1996, Robert Culbertson was the chancellor of the University of Wisconsin. Culbertson appointed plaintiff and was her immediate supervisor. Defendant Board *843 of Regents of the University of Wisconsin System was plaintiff's employer.
The job description for plaintiff's position provided:
The Assistant Chancellor for Student Affairs is the chief administrative officer of the Division of Student Affairs and as such manages and directs the various services, programs, and policies for students that contribute and/or support the educational objectives of U.W.-Platteville. The person will serve the University community as an educator, manager and mediator.
. . . . .
The Assistant Chancellor for Student Affairs is responsible for the effective management of all departments within the Division. The individual who occupies the position is expected to provide leadership and supervision for the division's directors, facilitate programs that meet the needs of a diverse population, work cooperatively with the Student Senate and other student organizations, encourage student involvement in the life of the campus, and promote a campus environment of learning.
Plaintiff's appointment document states that her principal assignment was "administration of the University of Wisconsin-Platteville Office of Student Affairs." Plaintiff's position was a full-time limited appointment. A limited appointee serves at the pleasure of the appointing officer.
Culbertson gave plaintiff merit increases each year. In Culbertson's view, plaintiff did what he had asked her to do. Culberton extended plaintiff's contract to 1996, then to 1997 and finally to July 31, 1999. Culbertson told plaintiff that she had "done an outstanding job for this university in the short time that you have been with us." He wrote, "You have done a spectacular job and I consider you a valuable person, colleague and friend." In February 1996, he wrote, "Thank you very much for your hard work, dedication to task and effort to bring our student affairs units to standards expected in University settings."
B. Defendant Markee Replaces Culbertson
Defendant David Markee became chancellor of the university in August 1996, a few months after Culbertson had extended plaintiff's contract to 1999. Before coming to the University of Wisconsin, defendant Markee was the vice-president of student affairs at the University of Northern Arizona.
Katherine Lyall is the president of the University of Wisconsin system. She supervises the university chancellors within the system. She told Markee when he was hired that "the campus was divided" and "morale was very low." She wanted him to bring the campus together.
Defendant Markee believes that it is important to recruit nontraditional students. When he first came to the university, the admissions office was performing this function, but Markee wanted to reorganize the offices so that the student affairs office was primarily responsible for recruiting nontraditional students. He believed that the "student affairs professionals were the best to do that work."
C. Plaintiff's Relationship with Defendant Markee
In plaintiff's first meeting with defendant Markee, he told her that he wanted to do something with recruitment and he asked her about the relationship between the division of student affairs and the department of admissions and enrollment management. In addition, he told her that Ralph Curtis, the vice chancellor and provost of the university, had commented that plaintiff "micromanaged." However, Curtis does not recall saying that plaintiff had a problem with micromanagement.
*844 Within a month or two after he began work, defendant Markee perceived that morale was low in the student affairs division. He thought that "the student affairs people" were not optimistic or positive. He was also concerned about low enrollment. He wanted to analyze the organizational structure and increase efforts for enrollment management.
Defendant Markee also wanted to change the positions of many of the university's administrators. For example, Markee wanted Michael Viney, who was plaintiff's assistant, to switch positions with Rich Egley, who was the director of student housing. On several occasions in September, October and November 1996, Markee met with plaintiff to discuss how her division could be reorganized. During these discussions, defendant Markee told plaintiff that he wanted her to reduce the number of people reporting directly to her. Plaintiff raised some concerns about defendant Markee's proposed changes. In November, defendant Markee told plaintiff that he accepted her recommendations and would implement them in the reorganization plan. If Markee had not agreed with plaintiff's suggestions, he could have declined to adopt them.
Soon after, the North Central Accrediting Association completed its ten-year review of the university. In its final report, the association gave the office of student affairs a favorable review.
In December 1996, defendant Markee called a retreat for the university's top administrators. Among other things, he announced that the department of admissions and enrollment management would be moved to the office of student affairs. (Previously, the department of admissions and enrollment had been part of the division of academic affairs.) Richard Schumacher, the assistant chancellor for admissions and enrollment management, would report to plaintiff. The reorganization took effect in February 1997.
Defendant Markee's reorganization plan did not reduce the number of people reporting directly to plaintiff. After the reorganization, plaintiff supervised 12 employees, at least one more than before. Defendant Markee learned that part-time employees with no significant budget responsibilities were reporting directly to plaintiff. He believed that too many people were reporting to plaintiff, causing unnecessarily lengthy meetings and taking up too much of plaintiff's time. Markee wanted groups to be represented by one lead person who could report to plaintiff.
In April 1997, defendant Markee asked several top administrators, including plaintiff, to write out five "productivity indicators" as well as ten significant accomplishments. Among her productivity indicators, plaintiff listed "bi-weekly meetings of Student Affairs Directors" and "monthly conferences with individual Program Directors." Among her significant accomplishments, plaintiff listed "divisional reorganization."
During the evaluation conference in May 1997, defendant told plaintiff that the year had gone well. He did not suggest any areas that needed improvement or question any of the accomplishments that plaintiff had listed in her self-evaluation. In November 1997, defendant Markee told plaintiff that she would receive a $3300 raise, which included a base adjustment of $824. Ultimately, plaintiff received a raise of $4150. This amount is comparable to the raises her peers received. For example, the assistant chancellor for business affairs, Steve Zielke, received a raise of $4400 and the assistant chancellor for university advancement, Patrick Hundley, received a $4090 raise. Raises for the assistant chancellors are based on their performance.
*845 In late November or early December 1997, defendant Markee began to consider not renewing plaintiff's contract. In a December meeting with plaintiff, defendant Markee told her, "You know, we're not getting along." He then told her that her staff accused her of "micromanaging," that Al Thompson (one of the employees plaintiff supervised) had complained about her and that she had not demonstrated leadership in a situation involving Sandra Stacy, an administrator whom defendant Markee had evaluated independently. (The parties dispute most of the facts surrounding the reasons for the evaluation and plaintiff's involvement in the situation.) Finally, he told her that she should be involved in the community and that he wanted her "to do something with recruitment." When plaintiff asked what he meant, he responded, "Well, I'm not sure. But I want you to do something with recruitment." Plaintiff told defendant Markee that she was not interested in being a recruiter.
In a letter dated January 8, 1998, defendant Markee wrote that he would like to meet with plaintiff "about a management plan that allows key administrators in student services to feel more responsible and effective at managing their areas." He summarized the "key issues" he would like to discuss:
a) support service issues needed to serve a larger international student population
b) a review of Hazel's report and our Design for Diversity Plan
c) establishing relationships within the community, region, and public schools. Particular attention to those relationships that relate to the quality of the student experiences on the campus and those that encourage applications from individuals who may have concerns about the quality of the experiences at Platteville.
He concluded:
I believe you are perfectly positioned to address off-campus issues related to these areas. Our relationship with key state high schools, including our target high schools, is extremely important. Increasing the matriculation rate at Platteville from those schools must be a high priority.
I know this is a management style change, but I think it is what the institution needs and the division of student services is well positioned to handle the change. There are many strong managers within the division who can address the day-to-day operational issues and directions.
In a letter dated January 16, 1998, plaintiff responded to defendant Markee's letter. She addressed defendant Markee's concern about "establishing relationships" with the community, region and public schools. With respect to the community, plaintiff provided a list of various community programs in which she was involved. With respect to public schools, plaintiff wrote:
I believe that I am being directed to become the minority or rather African-American recruiter for the University. This is not a position which I have ever held, not a position for which I accepted employment at this institution, and not a role I am interested in assuming.
This request appears to blatantly overlook the obvious responsibility of the Dean of Admissions and Enrollment for establishing the very contacts which you describe.
In my more than twenty one consecutive years of employment at colleges and universities in five (5) different states, there have been few occasions when I have been asked or had to assume responsibility *846 for a task within the position description of one of my employees. Those occasions have included illness, vacancies caused by resignation or termination, or absence due to length of contract. I have never been asked to perform the work of a sitting employee hired and paid to perform a job.
Is this directive based on my ethnicity? If not, why has this assignment been given to me?
I look forward to finalizing my work plan for the semester and bringing closure to this matter.
Plaintiff and defendant Markee had a follow-up meeting on January 21. Defendant Markee told plaintiff that he had read her memo several times and thought about her ideas but his position was unchanged. He did not tell plaintiff that her January 16 memo reflected a misunderstanding about what he was asking her to do. After this meeting, defendant Markee sent her two memos suggesting that she participate in two events at Milwaukee area high schools.
In February 1998, defendant Markee told the university president that he had decided not to renew plaintiff's contract. On March 4, 1998, defendant Markee told plaintiff that he was not going to renew her contract when it expired in June 1999. He provided her with the following reasons: a) her lack of significant contribution to a new diversity plan; b) her staff suggestions, which indicated that she did not or would not accept input from others; c) her management style, which was one of maintenance of status quo, maximum control, self-protection and micromanagement causing serious morale problems within her division; d) her refusal to cooperate with defendant Markee's reorganization plan; e) her refusal to cooperate with defendant Markee's enrollment management initiatives requiring community contacts and relationship building; and f) her failure at managing difficult employees or resolving problems, requiring outside intervention. Defendant Markee offered to assist plaintiff in finding another position.
From November 1996 until March 1998, defendant Markee believed that plaintiff was becoming a more effective manager and contributing to his initiatives for the campus.
D. Plaintiff's Relationships with Other Employees
Tony Sherwin was a minority recruiter at the university until 1996 or 1997. During his tenure, plaintiff learned that he had entered into an agreement on behalf of the university with an educational organization in Milwaukee. Plaintiff informed the organization that the university could not honor the agreement because only the chancellor and the provost had the authority to enter into the agreement proposed by Sherwin. Sherwin was not pleased with plaintiff. When plaintiff told defendant Markee about her decision, Markee supported her.
Although defendant Markee never met with Sherwin and does not recall the circumstances that led to Sherwin's departure, he believes that Sherwin was upset with plaintiff. In his exit questionnaire, Sherwin listed several reasons for leaving, including "non-supportive environment" and "racial harassment." In addition, he wrote that the university needed to "get rid of the good ol' boys club." He did not mention plaintiff.
At some point, Jim Mueller, the food services director and a white male, complained to defendant Markee about having to spend too much time responding to minor questions from plaintiff. Mueller had known defendant Markee when both worked at Northern Arizona University. Plaintiff had opposed Mueller's hiring because his references were weak. Under the reorganization in February 1997, *847 Mueller no longer reported to plaintiff. Plaintiff had few contacts with him after the reorganization.
Alfred Thompson was the director of multicultural student services and assistant to the chancellor for minority affairs. Plaintiff was one of Thompson's supervisors. In a letter dated March 24, 1997, Thompson told defendant Markee that he was taking a position with the University of Wisconsin La Crosse. In addition, he wrote:
I would like to thank Dr. Walker for her support over the past three years that I have served as the Director of Multi-Cultural Services and University Tutoring Services. I will miss the many positive interactions that we shared at University of Wisconsin-Platteville. Through her supervision, I have developed into a better administrator.
The personnel director for the university told defendant Markee when Thompson left in June 1997 that Thompson had complained about plaintiff in his exit questionnaire.
Elise Rogers replaced Thompson as the director of multicultural resources. Within two weeks of being hired, she complained to defendant Markee that plaintiff was "mistreating" her. Rogers resigned within 7 to 8 weeks of being hired.
Before Rogers resigned, plaintiff asked her to submit a draft proposal for a grant application. Rogers did not prepare a draft proposal or tell plaintiff that she was unable to do so. When plaintiff asked her about it, Rogers shouted at her. The conversation ended with Rogers's saying, "I want you to leave Dr. Walker! I want you out of here." Rogers continued to shout even after plaintiff went into her office and closed the door. When plaintiff told defendant Markee about the incident, Markee responded that Rogers was "manipulative" and had "gotten away with this kind of behavior for a long time."
E. Recruitment Efforts of Other Administrators
Some of the deans at the university and defendant Markee himself participated in recruiting activity. As far as plaintiff is aware, white and male senior administrators such as Ralph Curtis (the vice chancellor and provost of the university), Steve Zielke (the assistant chancellor for business affairs), Patrick Hundley (the assistance chancellor for university advancement), Judy Paul and Michael Viney never visited any schools for recruiting purposes. (In her proposed findings of fact, plaintiff alleges that these administrators were not even asked to engage in recruiting activities, citing her affidavit as support. Plt.'s PFOF, dkt. # 35, at 43, ¶ 268. However, in her deposition, she testified that she believed they were asked, but they declined to participate. Dep. of Sharon Walker, attached to Aff. of Patricia Brady, Exh. A, dkt. # 21, at 42. Because plaintiff has not attempted to reconcile this discrepancy, I have considered only the testimony from her deposition, which defendants do not dispute. Slowiak v. Land O'Lakes, Inc., 987 F.2d 1293, 1297 (7th Cir.1993)). Richard Schumacher, a white male who is responsible for enrollment, made only a few visits to schools.
F. Plaintiff's Statements
During a cabinet meeting in August 1996 attended by both plaintiff and defendant Markee, plaintiff raised a concern about a newsletter that the university had sent to the students. She stated that she believed the caricatures of racial minorities in the newsletter were offensive and inappropriate; she did not want any more newsletters with similar offensive material to be sent out until they were revised. Defendant Markee used the newsletter as an example of the type of newsletters that the university should be sending to the students. In a later meeting with program *848 directors in the division of student affairs, plaintiff expressed her concern about the newsletter again.
In a March 1997 meeting with the staff members of the admissions and enrollment management group, plaintiff discussed, among other things, her expectation that staff members would not engage in improper fraternizing with the students. A few weeks later, defendant Markee convened a meeting; the agenda included a discussion of dating relationships between faculty and students. After two administrators expressed support for fraternization, plaintiff noted that the University of Wisconsin had a policy that discouraged dating relationships between students and faculty. She stated that she could not support a more "lenient" or "relaxed" approach to fraternization. Defendant Markee did not direct the participants to review the university's policy and monitor its enforcement.
During the fall semester in 1997, Shelly Till, a university basketball coach, was attempting to negotiate accommodations in her schedule because of difficulties with her pregnancy. When Mark Molesworth, the athletic director, expressed reluctance to provide the accommodations, plaintiff reminded Molesworth that the athletic department had earlier made accommodations for another coach, John Dixon. Although Molesworth reported to plaintiff, defendant Markee assumed some supervision responsibilities for Molesworth after the February 1997 reorganization.
Till later raised more general issues with Molesworth such as the funding and staffing of men's sports programs as compared to the women's basketball program. Molesworth forwarded Till's comments to plaintiff, who told Molesworth that she was going to talk to defendant Markee.
Plaintiff spoke with defendant Markee about the situation in late October or early November 1997. She told Markee that Till "might be on the verge of filing some type of Title IX complaint." When plaintiff asked Markee if she could seek advice from the university's legal counsel, he told her that she could not.
Defendant Markee directed Molesworth to be the liaison to counsel for the university, but he told Molesworth to keep plaintiff informed. Plaintiff never complained to defendant Markee that she was not being informed.
In the fall of 1997 plaintiff learned that an investigation led to a determination that a food service manager had falsified time sheets for his son. Although the food services manager was an employee in plaintiff's division, she was not informed of the investigation or included in the subsequent decision to negotiate a retirement agreement with the manager. When plaintiff expressed her concerns to defendant Markee about being excluded from the decision making process, he expressed no surprise or concern. Plaintiff also asked Markee whether he was aware that the manager already had a reprimand in his personnel file relating to similar behavior.
G. Events after Plaintiff's Departure
Defendant Markee replaced plaintiff with Mick Viney, a white male. The university now has a position in the department of admissions and enrollment with the title of "Recruiting Manager." The duties of this position include visiting schools.
DISPUTED FACTS
The parties genuinely dispute the following facts: (a) whether defendant Markee laid out his expectations for plaintiff in a meeting during August 1996; (b) when, how often and with what level of specificity Markee told plaintiff he wanted her to be involved in recruiting; (c) whether Markee told plaintiff about complaints against her *849 during a November 1996 meeting; (d) whether plaintiff's replacement has been involved in visiting schools for recruiting purposes; (e) whether independent evaluators had to be brought in to evaluate one of plaintiff's employees, Sandra Stacy, because plaintiff had failed to do so adequately; (f) whether it was plaintiff or defendant Markee who had misgivings about hiring Elise Rogers; and (g) whether Mark Molesworth told Kevin Emerick, the assistant women's basketball coach, to exclude plaintiff from developments in the situation involving Shelly Till because plaintiff was a "black female."
OPINION
A. Race and Sex Discrimination
1. General principles
Plaintiff brings her sex discrimination claim under the equal protection clause of the Fourteenth Amendment (via 42 U.S.C. § 1983) and Title VII of the Civil Rights of 1964. She brings her race discrimination claim under these laws as well as 42 U.S.C. § 1981. The Fourteenth Amendment prohibits states from denying any person the equal protection of the laws. Title VII prohibits employers from discriminating against employees or applicants on the basis of race, sex, religion or national origin. Section 1981 prohibits discrimination on the basis of race in the making and enforcing of contracts, including employment contracts. Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 95 S. Ct. 1716, 44 L. Ed. 2d 295 (1975). Each of these laws applies to discrimination by state employers. Alexander v. Wisconsin Department of Health and Family Services, 263 F.3d 673, 681-82 (7th Cir.2001).
Title VII is based on agency principles; § 1983 and § 1981 are predicated upon fault. Compare Burlington Industries, Inc. v. Ellerth, 524 U.S. 742, 754, 118 S. Ct. 2257, 141 L. Ed. 2d 633 (1998) with Hildebrandt v. Illinois Department of Natural Resources, 347 F.3d 1014, 1039 (7th Cir.2003). As plaintiff's former employer, the board of regents rather than defendant Markee is the proper defendant for plaintiff's Title VII claim. 42 U.S.C. § 2000e(b); Mateu-Anderegg v. School District of Whitefish Bay, 304 F.3d 618, 623 (7th Cir.2002). Because Congress has validly abrogated state sovereign immunity with respect to Title VII, plaintiff may recover damages against defendant Board of Regents on this claim. Nanda v. Board of Trustees of the University of Illinois, 303 F.3d 817, 830-31 (7th Cir.2002). However, plaintiffs may not sue state entities for damages under § 1981 or § 1983. Williams v. Wisconsin, 336 F.3d 576, 580 (7th Cir.2003) ("a state is not a `person' subject to a damages action under § 1983"); Rucker v. Higher Educational Aids Board, 669 F.2d 1179, 1184 (7th Cir.1982) (holding that states are entitled to sovereign immunity for § 1981 claims). With respect to those two claims, plaintiff may seek damages from defendant Markee in his personal capacity if she can show that he was personally involved in the illegal decision. Kelly v. Municipal Courts of Marion County, Indiana, 97 F.3d 902, 908-09 (7th Cir.1996). In addition, she may obtain injunctive relief against Markee in his official capacity. Power v. Summers, 226 F.3d 815, 819 (7th Cir.2000) ("official capacity suits against state officials that seek only injunctive relief are permitted by 42 U.S.C. § 1983 and not forbidden by Eleventh Amendment") (citations omitted).
The standard for imposing liability on a defendant is essentially the same with respect to § 1981, § 1983 and Title VII. Under Title VII, a plaintiff establishes an unlawful employment practice when she demonstrates that her race or sex was a "motivating factor" in the employer's decision. 42 U.S.C. § 2000e-2(m); see also Venters v. City of Delphi, 123 F.3d 956, *850 973 n. 7 (7th Cir.1997). In other words, the plaintiff must prove that her race or sex was one of the reasons that the employer took adverse action against her. Price Waterhouse v. Hopkins, 490 U.S. 228, 250, 109 S. Ct. 1775, 104 L. Ed. 2d 268 (1989). The plaintiff may use direct or circumstantial evidence to meet this burden. Desert Palace v. Costa, 539 U.S. 90, 123 S. Ct. 2148, 156 L. Ed. 2d 84 (2003). Similarly, the Supreme Court has held that a defendant may be held liable under § 1983 for violating the Fourteenth Amendment if discriminatory animus was a "motivating factor" in the decision. Hunter v. Underwood, 471 U.S. 222, 225, 105 S. Ct. 1916, 85 L. Ed. 2d 222 (1985); Village of Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 270, 97 S. Ct. 555, 50 L. Ed. 2d 450 (1977); see also Williams v. Seniff, 342 F.3d 774 (7th Cir.2003) ("Our cases make clear that the same standards for proving intentional discrimination apply to Title VII and § 1983 equal protection.") The Court of Appeals for the Seventh Circuit has held that discrimination claims brought under § 1981 should be analyzed under the same framework as claims under § 1983 and Title VII. Patton v. Indianapolis Public School Board, 276 F.3d 334, 338 (7th Cir.2002) ("Discrimination claims under both Title VII and § 1981 are analyzed in the same manner."); Malacara v. City of Madison, 224 F.3d 727, 729 (7th Cir.2000) (using same framework to analyze claims under § 1981, § 1983 and Title VII).
As the court of appeals has recognized, there is more than one way to prove a discrimination claim. A plaintiff may rely on decision makers' remarks or behavior that either acknowledge discriminatory intent or more ambiguously support an inference of discrimination. Troupe v. May Department Stores Co., 20 F.3d 734, 736 (7th Cir.1994). In addition, a plaintiff may show that similarly situated employees were given more favorable treatment. Id. Finally, a plaintiff may show that she was qualified for the job but replaced by someone outside her group and that the employer's stated reasons are unworthy of belief. Id. In cases decided after Troupe, the court of appeals has stated that the third method of proof is essentially the same as the burden shifting method first articulated by the Supreme Court in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973). See, e.g., Volovsek v. Wisconsin Dept. of Agriculture, Trade and Consumer Protection, 344 F.3d 680, 690 (7th Cir.2003); Huff v. UARCO, Inc., 122 F.3d 374, 380 (7th Cir.1997); see also Reeves v. Sanderson Plumbing Products, 530 U.S. 133, 142, 120 S. Ct. 2097, 147 L. Ed. 2d 105 (2000) (plaintiff may defeat motion for summary judgment if he shows that (a) he is member of protected class; (b) he was "otherwise qualified" for position; (c) he was terminated; (d) he was replaced by someone outside protected class; and (e) defendant's articulated reasons for firing him are not its true reasons).
2. Adverse employment action
Under any method of proof, a plaintiff must show that she suffered from what courts have referred to as an "adverse employment action." See, e.g., Haywood v. Lucent Technologies, Inc., 323 F.3d 524, 531-32 (7th Cir.2003); Schobert v. Illinois Dept. of Transportation, 304 F.3d 725, 732 (7th Cir.2002); Herrnreiter v. Chicago Housing Authority, 315 F.3d 742, 744 (7th Cir.2002). Although this phrase is not found in § 1981, § 1983 or Title VII, each statute requires the plaintiff to prove an injury of some kind. Title VII requires a plaintiff to show that he was discriminated against "with respect to his compensation, terms, conditions, or privileges of employment" or that his employer treated him in a way that "would deprive or tend to deprive *851 any individual of employment opportunities or otherwise adversely affect his status as an employee." 42 U.S.C. § 2000a. Section 1981 requires a plaintiff to show that her rights were impaired with respect to "the making, performance, modification, and termination of contracts, and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship." 42 U.S.C. § 1981(b). Although the Fourteenth Amendment could be interpreted as extending to all differential treatment, the court of appeals has applied the "adverse employment action" limitation to claims under the equal protection clause as well. E.g., McPhaul v. Board of Commissioners of Madison County, 226 F.3d 558, 566 (7th Cir.2000); see also Doe v. Welborn, 110 F.3d 520, 523 (7th Cir.1997) ("Section 1983 is a tort statute, which means that the defendant must breach a duty owed to the plaintiff, who must suffer cognizable legal harm.")
Although there has been little discussion of the issue in the case law, it appears that the court of appeals assumes that the injury requirement is the same for each of the discrimination laws. Hunt v. City of Markham, 219 F.3d 649, 653-54 (7th Cir.2000) (assuming that "adverse employment action" has same meaning in Title VII, ADEA and § 1981); Dahm v. Flynn, 60 F.3d 253 (7th Cir.1994) (relying on cases decided under Title VII in concluding that change in responsibility might constitute adverse employment action under § 1983); cf. Halloway v. Milwaukee County, 180 F.3d 820, 825-27 (7th Cir.1999) (applying same standard for "adverse employment action" under both § 1983 and ADEA).
In this case, the adverse action complained of by plaintiff is defendant Markee's decision to nonrenew her contract with the university. Defendants do not dispute that, generally, termination constitutes an adverse employment action. See, e.g., Crady v. Liberty National Bank & Trust Co., 993 F.2d 132, 135 (7th Cir.1993). Indeed, there are few employment actions that could be more "adverse" to an employee than being discharged. Nevertheless, defendants argue that nonrenewal of a contract is not the same thing as termination and should not be considered an adverse employment action. For support, they cite Markel v. Board of Regents of the University of Wisconsin System, 276 F.3d 906 (7th Cir.2002).
In Markel, the plaintiff was employed by the university on a fixed-term nine month contract. The defendant dismissed the plaintiff one month before her contract expired, but paid her in full up through the end of her contract, which was nonrenewable. The plaintiff contended that the university had discriminated against her because of her sex in violation of Title VII. In considering whether the plaintiff suffered from an adverse employment action, the court of appeals stated: "This is an interesting legal question because Markel was not technically dismissed from her job; she was paid in full until the end of her contract, and her contract was nonrenewable." Id. at 911. However, the court of appeals declined to decide the issue because it concluded that the plaintiff could not show that she was meeting her employer's legitimate expectations.
Markel is not helpful for defendants for at least two reasons. First, the court raised but did not resolve the question whether the plaintiff in that case suffered from an adverse employment action. Second, even if Markel could be read as implying that there was no adverse employment action in that case, Markel is readily distinguishable. In that case, the plaintiff's contract was nonrenewable. In this case, it is undisputed that defendants could have renewed plaintiff's contract if they had chosen to; defendant Markee's predecessor had done so three times. It is true that *852 defendants were under no contractual obligation to continue plaintiff's employment, but this is not a case involving an alleged breach of contract or a deprivation of a property interest. The question in this case is whether an employer may discriminate on the basis of race or sex in deciding whether to renew an employee's contract. In other words, if an employer would have renewed the contract of an African-American or female if she had been a white or male employee, does its failure to renew the African-American female's contract violate federal discrimination laws? Under defendants' view, employers would have impunity to discriminate on the basis of race or sex so long as they bided their time until the employee's contract expired. Nothing in Markel or the language of § 1981, § 1983 or Title VII requires such an absurd result.
Plaintiff's situation is little different from the countless other at-will employees who bring discrimination suits after they are terminated. Like plaintiff, at-will employees may be dismissed at any time and for almost any or no reason, so long as the reason is not a constitutionally or statutorily impermissible one. It is beyond dispute that at-will employees are entitled to the protections of Title VII and the equal protection clause. See Kohls v. Beverly Enterprises Wisconsin, Inc., 259 F.3d 799, 805 (7th Cir.2001). The court of appeals has held recently that at-will employees may bring claims under § 1981 as well. Walker v. Abbott Laboratories, 340 F.3d 471 (7th Cir.2003). At the very least, plaintiff's situation is akin to an applicant who contends that she was not hired (or re-hired) because of her race or sex. The civil rights laws at issue in this case apply equally to both termination decisions and the refusal to re-hire. See Cerutti v. BASF Corp., 349 F.3d 1055 (7th Cir.2003); Johnson v. University of Wisconsin-Eau Claire, 70 F.3d 469 (7th Cir.1995); Von Zuckerstein v. Argonne National Laboratory, 984 F.2d 1467 (7th Cir.1993). To the extent that defendants suggest that there is no adverse employment action when the employer's decision is a discretionary one, the court of appeals has squarely rejected this argument. Power v. Summers, 226 F.3d 815, 821 (7th Cir.2000) (denial of discretionary raise is adverse employment action).
Courts in other jurisdictions agree that the refusal to renew a contract is an adverse employment action. Carter v. University of Toledo, 349 F.3d 269 (6th Cir.2003) (§ 1981 and Title VII); Minshall v. McGraw Hill Broadcasting, Inc., 323 F.3d 1273, 1280 (10th Cir.2003) (ADEA); Day v. South Park Independent School District, 768 F.2d 696 (5th Cir.1985) (§ 1983); Fekade v. Lincoln University, 167 F. Supp. 2d 731, 739 (E.D.Pa.2001) (Title VII); Guinan v. Roman Catholic Archdiocese of Indianapolis, 50 F. Supp. 2d 845, 851 (S.D.Ind.1999) (ADEA); Lindblom v. Challenger Day Program, Ltd., 37 F. Supp. 2d 1109, 1116 (N.D.Ill.1999) (Title VII); see also Delaware State College v. Ricks, 449 U.S. 250, 101 S. Ct. 498, 66 L. Ed. 2d 431 (1980) (assuming that termination after one-year contract is actionable under § 1981 and Title VII); Trejo v. Shoben, 319 F.3d 878 (7th Cir.2003) (assuming that refusal to renew contract was adverse employment action for purpose of First Amendment retaliation claim); Griffin v. Board of Regents of Regency Universities, 795 F.2d 1281 (7th Cir.1986) (assuming that refusal to renew contract was adverse employment action under Title VII).
Defendants declined to renew plaintiff's employment contract after six years. Whether this action is considered a termination or a refusal to re-hire, I conclude that it is a cognizable injury for the purpose of § 1981, § 1983 and Title VII. Being denied a renewed contract is not a "minor or trivial" action. Silk v. City of *853 Chicago, 194 F.3d 788, 800 (7th Cir.1999). If the reason defendants did not renew plaintiff's contract was her race or sex, they violated the law.
3. Evidence of discrimination
With respect to the first category of evidence identified in Troupe (behavior and conduct of the decision maker that would support an inference of discriminatory intent), plaintiff points to disputed testimony from Kevin Emerick, the former assistant women's basketball coach, that Mark Molesworth, the athletic director, told him that plaintiff should not be informed of developments in Shelly Till's complaint against the university because plaintiff was a "black female" and might be sympathetic to Till. Plt.'s PFOF, dkt. # 35, at 30-32, ¶¶ 188-97. An initial challenge for plaintiff is to show a link between Molesworth's alleged comments and the decision not to renew her contract. Plaintiff does not argue that Molesworth was involved in the decision. Therefore, before the remarks could be even arguably probative of discrimination, plaintiff would have to show that Molesworth's views somehow tainted defendant Markee's judgment. Russell v. Board of Trustees of the University of Illinois, 243 F.3d 336, 342 (7th Cir.2001); see also Simmons v. Chicago Board of Education, 289 F.3d 488, 492 (7th Cir.2002) ("statements by nondecisionmakers cannot satisfy a plaintiff's burden of proving discrimination").
Plaintiff relies on the following evidence to in an attempt to show that Molesworth's comments may be imputed to defendant Markee: (a) although plaintiff was Molesworth's immediate supervisor, Molesworth also reported to Markee; (b) according to Emerick, he and Molesworth were reporting directly to Markee on the Till situation, bypassing plaintiff; (c) Markee never disclaimed Molesworth's alleged statements, even after he learned of Emerick's accusation; (d) when plaintiff asked Markee if she could discuss the Till situation with the university's legal counsel, Markee told her she could not.
As discussed below in the context of plaintiff's retaliation claim, this evidence could support an inference that defendant Markee did not want plaintiff to be involved in the Till situation. However, it does not support an inference that Markee discriminated against plaintiff because of her race or sex. Plaintiff points to nothing in the record demonstrating that defendant Markee directed Molesworth to make the alleged comments or that he shared the view expressed in these comments. In addition, plaintiff fails to explain why discriminatory intent is suggested by silence about someone else's statements. A plaintiff in a discrimination case cannot create a triable issue through speculation alone. McCoy v. Harrison, 341 F.3d 600, 604 (7th Cir.2003). Therefore, I cannot conclude that Molesworth's alleged comments support plaintiff's case.
With respect to the third category of evidence identified in Troupe, plaintiff has shown that she was replaced by a white male and that she was "qualified" for the position, at least to the extent that she had the necessary skills and experience to be an assistant chancellor. In addition, defendants agree that plaintiff achieved a number of significant accomplishments during her tenure as assistant chancellor. To the extent that being "qualified" within the meaning of Troupe means meeting the employer's legitimate expectations, this issue merges with the question of pretext and the two may be analyzed together. Jones v. Union Pacific Railroad Co., 302 F.3d 735, 742 (7th Cir.2002). Thus, the question is whether plaintiff has adduced evidence that defendants' stated reason for dismissing her are unworthy of belief. (Plaintiff has also adduced the second kind of evidence identified in Troupe, namely, *854 evidence that similarly situated administrators received more favorable treatment. Because this evidence is relevant to the question of pretext, I will reserve discussion of it for the pretext analysis to avoid duplication.)
In their brief, defendants advance two reasons for the decision not to renew plaintiff's contract: (1) she refused defendant Markee's directives regarding reorganization and recruiting; and (2) her management style was having an adverse effect on staff morale to the point that staff members were resigning. Dfts.' Br., dkt. # 17, at 12. Defendants also propose findings of fact related to other alleged deficiencies in plaintiff's performance, although they are not necessarily the same problems cited during the March 1998 meeting. I have not considered these facts because defendants do not argue that defendant Markee relied on any of these alleged deficiencies in making his decision. See Balderston v. Fairbanks Morse Engine Division of Coltec Industries, 328 F.3d 309, 323 (7th Cir.2003) (refusing to consider alleged deficiencies of plaintiff when there was no evidence that those deficiencies influenced decision maker).
Plaintiff also notes in her brief that the reasons cited in defendants' brief are not the only reasons that defendant Markee provided during the personnel commission hearing or when he first informed her that he was not renewing her contract. She observes that among Markee's initial reasons was plaintiff's "failure to assess and promptly address serious functioning of the placement office, which was under her supervision." Plaintiff devotes a significant portion of her brief (15 pages) to explaining why there is no basis in fact for defendant Markee's asserted belief that she was having difficulty managing the placement office. Her emphasis is somewhat puzzling considering that defendants are not relying on this reason for the purpose of summary judgment.
It may be that plaintiff means to argue that defendants' decision not to emphasize some of their initial reasons shows that all of their reasons are pretextual. It is true that an employer's shifting explanations may support a finding of pretext. Zaccagnini v. Chas. Levy Circulating Co., 338 F.3d 672, 678 (7th Cir.2003). Generally, however, this is true only when the employer is attempting to advance new reasons during litigation that were not offered before. See, e.g., O'Neal v. City of New Albany, 293 F.3d 998, 1005-06 (7th Cir.2002); Stalter v. Wal-Mart Stores, Inc., 195 F.3d 285, 291 (7th Cir.1999); Emmel v. Coca-Cola Bottling Co., 95 F.3d 627, 634 (7th Cir.1996). Also, a jury may infer pretext from a an employer's disavowal of a reason it gave previously. Appelbaum v. Milwaukee Metropolitan Sewerage District, 340 F.3d 573, 579 (7th Cir.2003). In this case, however, defendants have not advanced new reasons or even rejected their earlier ones, at least not expressly. It is not necessarily inconsistent to focus in litigation on a subset of the reasons originally given. Schuster v. Lucent Technologies, 327 F.3d 569, 577 (7th Cir.2003) ("[T]he explanations must actually be shifting and inconsistent to permit an inference of mendacity.")
Therefore, assuming that plaintiff has demonstrated that it is pretextual for defendants to assert that she had difficulty managing the placement office, it would not necessarily help plaintiff because the court of appeals has held that a plaintiff must show independently that all of the defendant's articulated reasons are pretextual. Olsen v. Marshall & Ilsley Corp., 267 F.3d 597, 601 (7th Cir.2001); Crim v. Board of Education of Cairo School District, 147 F.3d 535, 541 (7th Cir.1998). There is a limited exception to this rule *855 when all of the reasons are intertwined or the pretextual character of one reason is so "fishy and suspicious" that it calls into doubt each of the reasons. Russell v. Acme-Evans Co., 51 F.3d 64, 70 (7th Cir.1995). I need not consider whether this exception might apply in this case because I conclude that plaintiff has adduced sufficient evidence to allow a jury to find that the non-discriminatory reasons asserted in defendants' brief are pretextual.
Perhaps the reason relied on most heavily by defendants is plaintiff's resistance to defendant Markee's directive to engage in recruiting efforts. Plaintiff attempts to cast doubt on this reason in many ways, arguing that recruiting was not part of her job description, that Markee was not clear regarding what he wanted her to do and that she did not in fact defy defendant Markee's orders.
The first argument is a nonstarter. Nothing in Title VII, § 1981 or the Fourteenth Amendment prohibits employers from changing job descriptions or reassigning tasks. As noted above, defendant Markee was entitled to act unreasonably or unfairly. Plaintiff's second and third argument have some support in the record. It is undisputed that defendant Markee told plaintiff on at least one occasion that he was "not sure" what he wanted her to do with recruitment. In addition, it appears that plaintiff never refused outright to become involved in recruiting activities. Again, however, an employer does not violate discrimination laws if it gives vague directives or terminates only difficult or resistant employees rather than ones who are blatantly defiant. Plaintiff points to no evidence showing that she even attempted to comply with Markee's instructions. Although the parties disagree about the number of times that defendant Markee told plaintiff he wanted her to engage in recruiting activities, it is undisputed that plaintiff told Markee during their December 1997 meeting that she was not interested in being a recruiter, whatever that might entail. Plaintiff cannot show that there was no basis in fact for Markee's perception of insubordination. Hall v. Gary Community School Corporation, 298 F.3d 672 (7th Cir.2002) (evidence that defendant had "exaggerated" plaintiff's deficiencies did support inference of pretext); Simmons v. Chicago Board of Education, 289 F.3d 488 (7th Cir.2002) (when one of defendant's articulated reasons for termination was plaintiff's insubordination, plaintiff could not show pretext with evidence that he "never explicitly stated that he would not comply with [his supervisor's] directive").
However, even if defendant Markee had a legitimate reason for being frustrated with plaintiff, she may establish an issue of fact regarding pretext if he treated similarly situated administrators more favorably. Appelbaum, 340 F.3d at 580 ("Disparate discipline of an employee who is similarly situated to the plaintiff but is outside the protected class may support an inference of ... discrimination."); Curry v. Menard, Inc., 270 F.3d 473, 479 (7th Cir.2001). Plaintiff suggests that to the extent she was resistant to defendant Markee's directive, it was because she believed that he was targeting her because of her race to become a minority recruiter. Plaintiff does not specify why she suspected this, although presumably it was because of Markee's emphasis on "nontraditional" students. Further, she argues that Markee confirmed her suspicion when he did not respond to her question, "Is this directive based on my ethnicity?" Defendant Markee denies that he failed to respond to her question, but of course, on a motion for summary judgment, I must view the evidence in the light most favorable to plaintiff. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, *856 91 L. Ed. 2d 202 (1986). This dispute alone would not necessarily carry the day for plaintiff by itself, but she has also adduced evidence that white and male senior administrators declined to engage in recruiting and did so without consequence.
If these other administrators were not similarly situated to plaintiff, their differential treatment would not be probative, O'Regan v. Arbitration Forums, Inc., 246 F.3d 975, 985 (7th Cir.2001), but defendants have not identified any relevant differences. Curry, 270 F.3d at 479 (on motion for summary judgment, employer has initial burden to present evidence that employees are not similarly situated). Like the other senior administrators, plaintiff's primary responsibilities were not related to recruiting. Although defendant Markee was free to assign duties to plaintiff that were outside her job description, if his expectations of her were different from his expectations for other senior administrations, this would support an inference of pretext. Cf. Hedrich v. Board of Regents of University of Wisconsin System, 274 F.3d 1174, 1183 (7th Cir.2001) (no inference of discrimination when defendant applied criteria outside handbook to plaintiff because there was no evidence that others' assessments were limited to criteria in handbook).
Defendant Markee did tell plaintiff that he believed she was "perfectly positioned to address off-campus issues," but he never explained why he held this belief. Further, to the extent that there was something unique about the office of student affairs, plaintiff has adduced evidence that her replacement as assistant chancellor of student affairs has engaged in almost no recruiting since he was hired. In fact, since plaintiff's departure, the university has hired a "recruiting manager," who is responsible for visiting schools. This evidence is sufficient to create a genuine dispute whether plaintiff's lack of recruiting efforts actually motivated defendant Markee's decision to nonrenew her contract. Freeman v. Madison Metropolitan School District, 231 F.3d 374, 379 (7th Cir.2000) (evidence that perceived deficiency did not actually motivate decision is evidence of pretext).
A second reason articulated by defendants was plaintiff's resistance to defendant Markee's reorganization efforts. The problem with this reason is that there is no evidence that plaintiff was resistant to defendant Markee's divisional reorganization. The only incident defendants point to is that plaintiff raised some concerns about Markee's plan before it was implemented. Neither side proposes any facts about what those concerns were, but it is undisputed that Markee accepted and implemented her suggestions. Although defendants propose as a fact that defendant Markee "believed" that too many people were reporting to plaintiff, the facts show that under Markee's plan, the number of employees reporting to plaintiff increased. Although Markee may have expected plaintiff to reduce the number of persons reporting to her after the reorganization, defendants point to no evidence that Markee ever communicated this expectation to plaintiff. Further, Markee did not question plaintiff during her 1997 evaluation when she listed "divisional reorganization" as one of her most significant accomplishments. Because there is no evidence that plaintiff resisted Markee's reorganization efforts or that Markee found fault with plaintiff's concerns at the time, defendants have failed to meet their burden of production with respect to this reason. Texas Department of Community Affairs v. Burdine, 450 U.S. 248, 254, 101 S. Ct. 1089, 67 L. Ed. 2d 207 (1981) (defendant must "produc[e] evidence that the plaintiff was rejected, or someone else was preferred, for *857 a legitimate, nondiscriminatory reason") (emphasis added).
Third, defendants assert that plaintiff's management style created morale problems within the student affairs office. Defendants cite several employees who they say left the university in part because of plaintiff. First, they point to Tony Sherwin, who was a minority recruiter for the university until 1996 or 1997. Although defendant Markee avers that he believes Sherwin was upset with plaintiff when he left, he is unable to articulate why he believes this. Markee concedes that he never met with Sherwin and he does not remember the circumstances surrounding his departure. As reasons for leaving the university, Sherwin cited "racial harassment" and "the good ol' boys club" in his exit questionnaire. He did not mention plaintiff. There is only one example in the record of an instance when defendant Markee knew that Sherwin was displeased with plaintiff: when plaintiff reprimanded Sherwin for entering into an agreement for which he had no authority. However, it is undisputed that defendant Markee supported plaintiff's decision when she told him what happened.
The circumstances surrounding Elise Rogers's departure are similar. Although the facts show that Rogers was upset with plaintiff when she left after less than two months of employment, the facts show also that defendant Markee did not blame plaintiff for Rogers's dissatisfaction at the time. Rather, when plaintiff went to Markee about the situation with Rogers, he responded that Rogers was "manipulative" and had "gotten away with this kind of behavior for a long time." This is sufficient to show that Rogers's complaints about plaintiff may not have been the real reason for plaintiff's termination. Grayson, 308 F.3d at 820.
The closest call may be with respect to Alfred Thompson, who was the director of multicultural student services until June 1997. Defendants propose many findings of fact regarding problems that Thompson had with plaintiff. Plaintiff disputes the reasonableness of Thompson's complaints, but her belief alone would not be sufficient to show pretext. Chiaramonte v. Fashion Bed Group, 129 F.3d 391, 401 (7th Cir.1997). In addition, plaintiff alleges in her brief that Thompson had complained about another senior administrator who was never disciplined. Plt.'s Br., dkt. # 34, at 7. Plaintiff did not include this allegation in her proposed findings of fact and she provides no citation to the record in her brief. Therefore, even assuming these complaints are comparable to plaintiff's, I cannot consider them. Briefs are not evidence. Fed.R.Civ.P. 56(c); Procedure to Be Followed on Motions for Summary Judgment, I.B.4 ("The court will not consider facts contained only in a brief.")
The problem with relying on Thompson's complaints, however, is that there is no evidence that Thompson ever presented them to defendant Markee. Rather, in Thompson's letter to Markee announcing his decision to leave, he wrote that he wanted to "thank Dr. Walker for her support over the past three years ... I will miss the many positive interactions that we shared." The facts do show that the personnel director told Markee that Thompson had complained about plaintiff in his exit questionnaire. However, a reasonable jury could find that Thompson's complaint did not motivate the decision to terminate plaintiff because Markee took no action against plaintiff at the time that Thompson completed the questionnaire. Rather, Markee waited six months to mention Thompson's complaint to plaintiff. Ajayi v. Aramark Business Services, Inc., 336 F.3d 520 (7th Cir.2003) (defendant's failure to take action on complaints supports finding of pretext). (In addition to these specific complaints, defendants also *858 propose as a fact that the university president told defendant Markee about complaints against plaintiff. Because defendants concede that Markee did not see any merit to these complaints, Dfts.' Reply to Plt.'s Resp. to Dfts.' PFOF, dkt. # 44, at 14, ¶ 12, I have not considered this fact.).
With respect to plaintiff's performance in general, I agree with defendants that there is limited probative value to plaintiff's evidence that defendant Markee's predecessor was extremely satisfied with her work. Such evidence might be marginally relevant to show that Markee's expectations were non-legitimate and discriminatory. Fortier v. Ameritech Mobile Communications, 161 F.3d 1106, 1113 (7th Cir.1998). However, as defendants point out, the court of appeals has stated many times that it is not the employee's past performance that matters but her performance at the time of the adverse decision. Staples v. Pepsi-Cola General Bottlers, Inc., 312 F.3d 294, 300 (7th Cir.2002); Peele v. Country Mutual Insurance, 288 F.3d 319, 329 (7th Cir.2002). Similarly, it helps plaintiff's case little to show that the North Central Accrediting Association gave her office a positive review. Defendant Markee was free to disagree with another's assessment of plaintiff's performance. Even if a third party's positive assessment could be relevant to showing pretext, plaintiff has adduced no evidence that the association considered the factors that were important to Markee.
Nevertheless, plaintiff has undermined defendants' assertion that her overall performance was the reason for the nonrenewal of her contract by adducing evidence that defendant Markee did not indicate any displeasure with plaintiff's performance until just before he made his decision. It is undisputed that Markee told plaintiff during their 1997 evaluation conference that the year had gone well and that he did not suggest any areas where she needed improvement. It is also undisputed that, later in 1997, Markee gave plaintiff a merit-based raise that was comparable to the raises received by other assistant chancellors and that until at least March 1998, Markee believed that plaintiff was becoming a more effective manager and contributing to his initiatives for campus. Further, there is a genuine dispute with respect to whether defendant Markee expressed concerns about plaintiff's performance before December 1997.
Finally, in one paragraph in their brief-in-chief, defendants argue that courts must give "enhanced deference" to employers in the university context and that this deference "militates against a finding of pretext." In support of this argument, defendants cite Hishon v. King & Spalding, 467 U.S. 69, 80 n. 4, 104 S. Ct. 2229, 81 L. Ed. 2d 59 (1984) (Powell, J., concurring), in which Justice Powell observed: "[T]he Courts of Appeals generally have acknowledged that respect for academic freedom requires some deference to the judgment of schools and universities as to the qualifications of professors, particularly those considered for tenured positions."
It is not clear how defendants believe Justice Powell's footnote in Hishon should apply to this case. Certainly, defendants cannot intend to argue that academic freedom gives universities carte blanche to discriminate against African-Americans or women. The Supreme Court has never embraced this view. At most, the Court has suggested that academic freedom could be a relevant consideration in evaluating affirmative action plans. Grutter v. Bollinger, 539 U.S. 306, ___, 123 S. Ct. 2325, 2336, 156 L. Ed. 2d 304 (2003). Defendants do not suggest that they terminated plaintiff as part of a plan to increase diversity on campus. To the extent that defendants mean to argue that courts must give greater weight to defendant Markee's *859 testimony because he represents a university, this would greatly exceed a court's authority in deciding summary judgment motions. Appelbaum, 340 F.3d at 579 (on motion for summary judgment, courts must "resis[t] temptation to weigh the evidence or to make our own credibility determinations").
The Court's observation in Hishon is little more than a truism that could be said about any employer, not just universities. In evaluating any discrimination case, a court must give deference to the employer's judgment. The court of appeals has stated countless times that courts may not act as a "super personnel" department. E.g., Dyrek v. Garvey, 334 F.3d 590, 598 (7th Cir.2003); Balderston, 328 F.3d at 324; Grayson, 308 F.3d at 820. This is why a plaintiff must do more than show the unreasonableness of an employer's decision; she must show that its reasons are dishonest. However, nothing in Hishon puts a heavier burden on employees of universities in meeting this burden. Defendants cite no other authority that would require this result and I decline to impose one in this case.
4. Summary
Plaintiff's case of discrimination is far from overwhelming. There is little, if any, indication in the record that defendant Markee harbored any animus against African-Americans or women. Further, much of the evidence relied upon by plaintiff is unhelpful either because it challenges the reasonableness of Markee's decision, relates to the intent of individuals who played no part in the decision or relates to other administrators' deficiencies that were not comparable to the problems that Markee perceived in plaintiff's performance. (For instance, it does not help plaintiff's case to show that Markee failed to discipline administrators who were insubordinate to her. A chancellor will likely be much more concerned with insuring that his own directives are followed than with enforcing policies of other administrators. Haywood v. Lucent Technologies, 323 F.3d 524 (7th Cir.2003) (evidence of differential treatment not probative when offenses of employees were not the same).)
Despite these deficiencies, plaintiff has done the minimum necessary to bring her case before a jury. Plaintiff was replaced by a white male and she has adduced evidence that she was meeting defendant Markee's legitimate expectations, that she was treated differently from similarly situated white and male administrators and that defendants' articulated reasons for refusing to renew her contract are not honest. Generally, this is sufficient to show a genuine issue of material fact whether the defendant discriminated against an employee in violation of Title VII, § 1981 or § 1983. Zaccagnini, 338 F.3d at 676 ("`Because a fact-finder may infer intentional discrimination from an employer's untruthfulness, evidence that calls truthfulness into question precludes summary judgment.'") (quoting Perdomo v. Browner, 67 F.3d 140, 145 (7th Cir.1995); Sheehan v. Donlen Corp., 173 F.3d 1039, 1046 (7th Cir.1999)). Defendants' motion for summary judgment will be denied with respect to plaintiff's claims that she was discriminated against because of her race and sex.
B. Retaliation
1. Public concern
The First Amendment provides public employees with limited protection when their employer retaliates against them for engaging in expressive conduct. The threshold question for a retaliation claim under the First Amendment is whether the employee engaged in protected speech. Patton v. Indianapolis Public School Board, 276 F.3d 334, 340 (7th Cir.2002). In the public employment context, this inquiry *860 requires a determination whether the employee engaged in speech that is a matter of public concern. Trejo, 319 F.3d at 884. In other words, the employee must show that she addressed "a matter of political, social, or other concern to the community, rather than merely a personal grievance of interest only to the employee." Gustafson v. Jones, 290 F.3d 895, 907 (7th Cir.2002); see also Dishnow v. School District of Rib Lake, 77 F.3d 194, 197 (7th Cir.1996)(matter of public concern is one "in which the public might be interested, as distinct from wholly personal grievances").
Although one could argue that a jury (members of the "public") would be the body most capable of determining whether a statement is a matter of public concern, the court of appeals has held that the question whether speech is constitutionally protected is a question of law to be decided by the court, see Taylor v. Carmouche, 214 F.3d 788, 792 (7th Cir.2000); Kokkinis v. Ivkovich, 185 F.3d 840, 843 (7th Cir.1999), using the Connick-Pickering test. See Connick, 461 U.S. 138, 103 S. Ct. 1684; Pickering v. Board of Education, 391 U.S. 563, 88 S. Ct. 1731, 20 L. Ed. 2d 811 (1968). In making this determination, a court must consider the content, form and context of the speech, Gustafson, 290 F.3d at 906-07. Content is the most important factor, Kuchenreuther v. City of Milwaukee, 221 F.3d 967, 974 (7th Cir.2000), "though `[t]he speaker's motivation and choice of forum are [also] important because, absent those factors, every employment dispute involving a public agency could be considered a matter of public concern.'" Wright v. Illinois Department of Children and Family Services, 40 F.3d 1492, 1501 (7th Cir.1994).
Five statements made by plaintiff are at issue: (1) her complaint during a meeting about cartoon caricatures that she found to be racially offensive; (2) her discussions with Molesworth and defendant Markee regarding pregnancy accommodations for Shelly Till and a potential sex discrimination complaint by Till; (3) her expressed opinion regarding relationships between students and faculty and the university's policy on this issue; (4) her questioning of Markee about the investigation of the food services manager who had falsified time sheets; and (5) the concerns she raised with Markee about his reorganization plan.
With respect to plaintiff's first two statements, it is beyond dispute that race and sex discrimination are matters of public concern. Connick, 461 U.S. at 148, 103 S. Ct. 1684 (race discrimination); Kokkinis v. Ivkovich, 185 F.3d 840, 844 (7th Cir.1999) (sex discrimination). Plaintiff's statements about the cartoon caricatures could be viewed as more of a concern about insensitivity than discrimination, but I do not find this an important difference. Plaintiff was objecting to the depiction of racial minorities in a newsletter that had been sent to the students at the university. This is sufficient to show that she was speaking on a matter of public concern. Jeffries v. Harleston, 21 F.3d 1238, 1245 (2d Cir.1994) (speech objecting to representations of African-Americans in curriculum "unquestionably involved public issues"), vacated on other grounds by Harleston v. Jeffries, 513 U.S. 996, 115 S. Ct. 502, 130 L. Ed. 2d 411 (1994); see also Gumbhir v. Curators of the University of Missouri, 157 F.3d 1141, 1144 (8th Cir.1998) (complaints about ethnic slurs and "unfavorable comments concerning immigrants" were matters of public concern).
I reach the same conclusion regarding plaintiff's comments on the Till incident. Although plaintiff was not complaining about gender inequity as Till was, the facts show that plaintiff's statements were made in the context of trying to insure that the university's actions were in compliance with laws against sex discrimination. *861 They were not complaints about her own grievances or "casual chit-chat." Swank v. Smart, 898 F.2d 1247, 1251 (7th Cir.1990). Speech about compliance with the law is a matter of public concern. E.g., Southside Public Schools v. Hill, 827 F.2d 270 (8th Cir.1987) (compliance with federally-mandated programs for the disabled); see also Hensley v. Horne, 297 F.3d 344, 347 (4th Cir.2002) (inquiries into sexual harassment complaint of another employee).
The comments about dating relationships are a closer call. Some of plaintiff's comments appear to be no more than a statement of her own standard of conduct, which would not be protected by the First Amendment. However, "[s]peech [may have] multiple objectives. One statement can address issues of both public and private concern." Wales v. Board of Education of Community Unit School District 300, 120 F.3d 82, 84-85 (7th Cir.1997). The facts suggest that plaintiff's primary concern was insuring compliance with the university's policy, which would be a matter of public concern. E.g., Johnson v. University of Cincinnati, 215 F.3d 561 (6th Cir.2000) (compliance with affirmative action program). Accordingly, I conclude that these statements are protected by the First Amendment.
Defendants do not argue that their interest in "promoting effective and efficient public service" outweighed plaintiff's right to comment on the above three issues. Gustafson, 290 F.3d at 909. Therefore, I need not engage in weighing the various factors set forth by the Supreme Court in Pickering.
With respect to the final two issues, I cannot conclude that plaintiff's comments about defendant Markee's reorganization plan are protected speech because plaintiff has adduced no evidence about those comments. In her brief, plaintiff argues that she had concerns that the reorganization plan could result "in a setback for diversity in the Division of Student Affairs, because [the] plan initially had no direct reports to Dr. Walker by women or minority directors." Plt.'s Br., dkt. # 34, at 39. Plaintiff's brief contains no citation to the record and she proposes no findings of fact that support the allegation in her brief. Rather, in her proposed findings of fact, she states only that she made "recommendations" to defendant Markee about the reorganization plan and that he accepted them. Plt.'s PFOF, dkt. # 35, at 9, ¶ 63. Because plaintiff has pointed to no evidence showing that she communicated her concern to defendant Markee, I cannot conclude that her statements support a claim for retaliation under the First Amendment. Michael v. St. Joseph County, 259 F.3d 842, 846 (7th Cir.2001) (rejecting retaliation claim because "there is no evidence in the record definitively establishing" what plaintiff said to defendant); Hartman v. Board of Trustees of Community College District No. 508, Cook County, Illinois, 4 F.3d 465, 471 (7th Cir.1993).
Finally, plaintiff has failed to show that the First Amendment would protect her conversation with defendant Markee about the investigation of the food service manager. Plaintiff is correct that complaints of "general wrongdoing" may be a matter of public concern, Marshall v. Porter County Plan Commission, 32 F.3d 1215 (7th Cir.1994), but the available evidence shows that plaintiff was objecting to her exclusion from the investigation process, not to the manager's wrongdoing or to Markee's alleged lax acceptance of it. Because plaintiff's grievance was primarily personal in nature, plaintiff's retaliation claim cannot survive with respect to this statement. Wallscetti v. Fox, 258 F.3d 662, 667 (7th Cir.2001) ("speech relating to only the effect an employer's action has on *862 the speaker is not shielded by the First Amendment"); Colburn v. Trustees of Indiana University, 973 F.2d 581, 587 (no First Amendment protection when "overriding reason for speech" was personal in nature); see also Jackson v. Leighton, 168 F.3d 903 (6th Cir.1999) (criticism of preferential treatment to one employee not matter of public concern). Accordingly, I will grant defendants' motion for summary judgment with respect to these two statements.
2. Causation
As with claims under the Fourteenth Amendment, a plaintiff may prove retaliation under the First Amendment if she shows that her protected speech was a "substantial or motivating" factor in the defendants' action against her. Morfin, 349 F.3d at 1005. In support of this element, plaintiff points to the undisputed facts that defendant Markee was aware of each of plaintiff's protected statements (he was one to which each was directed) and that Markee began to consider not renewing plaintiff's contract within weeks of their discussion about Till. In addition, plaintiff relies again on (a) Emerick's testimony that he and Molesworth were bypassing her and reporting directly to Markee on developments in Till's case and that Molesworth told Emerick that plaintiff should be excluded because she was a "black female" and (b) Markee's refusal to allow plaintiff to speak with legal counsel about Till's potential discrimination complaint.
Closeness in time between protected speech and an adverse decision can be evidence that the speech played a role in the decision. Sitar v. Indiana Department of Transportation, 344 F.3d 720, 728 (7th Cir.2003); McGuire v. City of Springfield, Illinois, 280 F.3d 794, 796 (7th Cir.2002). However, the court of appeals has not made it entirely clear whether temporal proximity may be sufficient on its own to show that a plaintiff's protected conduct motivated an employer's decision. For instance, in Stone v. City of Indianapolis Public Utilities, 281 F.3d 640, 644 (7th Cir.2002), the court stated that temporal proximity "will rarely be sufficient in and of itself to create a triable issue." But in Lalvani v. Cook County, Illinois, 269 F.3d 785, 790 (7th Cir.2001), the court stated, "When an adverse employment action follows close on the heels of protected expression, and the plaintiff can show that the person who decided to impose the adverse action knew of the protected conduct, the causation element of the prima facie case is typically satisfied."
Perhaps Stone and Lalvani are not as inconsistent as they might seem at first blush. The lesson of both cases may be that timing should not be viewed in isolation; it can be more or less probative depending on the facts of each case. For example, in this case, the probative value of the timing is enhanced if I credit plaintiff's testimony (which I must do) that defendant Markee had given her no indication before she raised these concerns that he and she "weren't getting along" or that she was otherwise not meeting his expectations. Even assuming that Markee had spoken with plaintiff before December 1997 about problems, defendants point to no incidents occurring around this time that would have led him to think about not renewing plaintiff's contract. See Pugh v. City of Attica, Indiana, 259 F.3d 619, 630 (7th Cir.2001) (temporal proximity insufficient when record "establish[ed] that the City discharged Mr. Pugh for misappropriation of funds"); Thomsen v. Romeis, 198 F.3d 1022, 1028 (7th Cir.2000) (closeness in time not suspicious when other evidence established legitimate reason for termination). Combined with defendant Markee's reluctance to allow plaintiff to be involved in the investigation even though *863 plaintiff was the supervisor for the athletic department, this evidence would permit a jury to reasonably infer that plaintiff's protected speech motivated Markee's decision not to renew plaintiff's contract.
All of the above evidence relates only to plaintiff's speech about Till; her speech on the dating policy and the cartoon caricatures occurred more than six months before the target date. Generally, a period this long would not be sufficient to support an inference of retaliation. Wallscetti v. Fox, 258 F.3d 662, 669 (7th Cir.2001) (by itself, time lapse of four months too long to support inference of retaliation).
Citing a case from the Third Circuit, plaintiff argues that her earlier statements can piggyback on those related to the Till incident because a reasonable jury could infer that defendant Markee had been irked by each of her protected comments but that the latest one was the last straw. San Filippo v. Bongiovanni, 30 F.3d 424, 444 (3d Cir.1994) ("[W]here, as here, a plaintiff engages in subsequent protected activity and the plaintiff is dismissed shortly after the final episode of protected activity, a fact finder may reasonably infer that it was the aggregate of the protected activities that led to retaliatory dismissal.") The rationale of San Filippo would be strongest when all of the plaintiff's protected speech related to the same subject matter. In this case, however, plaintiff's statements were unrelated; their only unifying point is that each is on a matter of public concern. Accepting plaintiff's argument in full would mean that employees could create a triable issue with respect to any protected statement, no matter how old or tenuous the connection between the speech and the adverse decision. Particularly because there is little evidence that defendant Markee exhibited any hostility to plaintiff's other statements, I cannot conclude that it would be reasonable for a jury to find that Markee relied on the statements in making his decision. Accordingly, I will grant defendants' motion for summary judgment on plaintiff's retaliation claims, with the exception of plaintiff's claim that defendant Markee refused not to renew her contract because of her speech related to the Till incident.
I note that in the context of retaliation cases brought under Title VII, the court of appeals has held that a plaintiff does not need to prove a causal connection in order to survive a motion for summary judgment. Stone, 281 F.3d at 644; see also Sitar, 344 F.3d at 728; Rogers v. City of Chicago, 320 F.3d 748, 755 (7th Cir.2003). Rather, the finder of fact may infer causation if the plaintiff can establish a prima facie case similar to the one in McDonnell Douglas. The court of appeals has not yet applied this framework in the context of First Amendment retaliation claims and plaintiff has not argued that she could satisfy it if the framework did apply. Therefore, she has waived any argument that she could prove her retaliation claims under an indirect approach.
3. Adverse employment action
I note briefly that the injury requirement in a First Amendment retaliation case is different from the requirement in a retaliation or discrimination case under Title VII. The Court of Appeals for the Seventh Circuit has held that a plaintiff need not point to an "adverse employment action" in a retaliation case under the First Amendment; it is sufficient if she shows that the defendant's action "is likely to deter the exercise of free speech, whether by an employee or anyone else." Power, 226 F.3d at 820. An actionable injury includes "even something as trivial as making fun of an employee for bringing a birthday cake to the office to celebrate another employee's birthday." Id. I have *864 no difficulty in concluding that this test is satisfied by a refusal to renew a contract that an employee hoped and expected would be renewed.
4. Affirmative defense
An employer may avoid liability for retaliation under the First Amendment if it can prove by a preponderance of the evidence that it would have taken the same action even if the plaintiff had not engaged in protected speech. Mt. Healthy City School District Board of Education v. Doyle, 429 U.S. 274, 97 S. Ct. 568, 50 L. Ed. 2d 471 (1977). However, because I have concluded that plaintiff has adduced sufficient evidence to allow a reasonable jury to find that defendant Markee's reasons for not renewing plaintiff's contract are pretextual, defendants cannot succeed on this defense as a matter of law.
C. Qualified Immunity
Defendants argue that even if plaintiff has demonstrated that there is a genuine issue of material fact on her claims under §§ 1981 and 1983, defendant Markee is nonetheless entitled to qualified immunity, which bars money damages against a public official when his conduct did not violate "clearly established" constitutional rights. See Hope v. Pelzer, 536 U.S. 730, 122 S. Ct. 2508, 153 L. Ed. 2d 666 (2002).
At the outset, I note that defendants' argument on this issue is not entirely clear. In their brief in chief, defendants write: "Chancellor Markee would be entitled to qualified immunity because it was not clearly unconstitutional for a reasonable official to not renew the limited term contract of an `at will' employee who was overtly resisting the changes he was lawfully imposing on upper management, and thereby sabotaging his ability to comply with his mandate from the Board of Regents to increase enrollment." Dfts.' Br., dkt. # 17, at 28.
Two possible arguments may be gleaned from this sentence. The first is that defendant Markee is entitled to qualified immunity because he terminated plaintiff for legitimate reasons, an act that is not clearly unconstitutional. The obvious deficiency in this argument is that it confuses the question of what is unconstitutional with the question of what is clearly established. Of course, defendant Markee would not violate the Constitution if he chose not to renew plaintiff's contract because of insubordination and not because of her race or sex. However, I have concluded that there is a genuine issue of material fact about defendant Markee's reasons for terminating plaintiff. If the real reason was her race or sex or the exercise of her First Amendment rights, Markee could not deny that such a decision would violate the Constitution and that its unlawfulness would be clearly established. Gustafson v. Jones, 290 F.3d 895 (7th Cir.2002) ("[T]he key elements of this case have been clear for years: a public employer may not retaliate against an employee who exercises his First Amendment speech rights."); Markham v. White, 172 F.3d 486, 491 (7th Cir.1999) ("The fact that arbitrary gender-based discrimination, including discrimination in an educational setting, violates the equal protection clause has been plain in this circuit for almost a decade and a half.")
A second possible argument is that it was not clearly established that refusing to renew a contract was an adverse employment action. However, defendants concede in their briefs that they are aware of no case in which a court has held that universities may discriminate or retaliate against employees in the context of renewing contracts. As noted above, the one case that defendants rely on is readily distinguishable, even assuming that it supports a conclusion that nonrenewable *865 contracts may not form the basis for a discrimination case under Title VII. The Court of Appeals for the Seventh Circuit has assumed in multiple cases brought under § 1983 that the refusal to renew a contract is an injury sufficient to trigger the protection of the Constitution, see, e.g., Trejo, 319 F.3d 878; Griffin, 795 F.2d 1281, as has the Supreme Court, Ricks, 449 U.S. 250, 101 S. Ct. 498. The courts' assumption supports a conclusion that it is clearly established that the Constitution applies to contract renewals, as do the legion of cases from other circuits that have held or assumed that this is the case. Carter, 349 F.3d 269; Minshall, 323 F.3d 1273; Day, 768 F.2d 696; Fekade, 167 F. Supp. 2d 731; see also Alexander v. DeAngelo, 329 F.3d 912 (7th Cir.2003) ("[T]he absence of a previous decision establishing liability on the same facts is not critical; `the easiest cases [for liability] don't even arise.'") (quoting United States v. Lanier, 520 U.S. 259, 271, 117 S. Ct. 1219, 137 L. Ed. 2d 432 (1997)).
There is nothing new or novel about plaintiff's claims. If plaintiff can prove at trial that defendant Markee discriminated against her because of her race or sex or because she exercised her First Amendment rights, she will have proven that Markee violated clearly established law.
ORDER
IT IS ORDERED that
1. Plaintiff Sharon Walker's motion to strike the affidavits of Ann Lydecker and George Brooks is DENIED as unnecessary.
2. The motion filed by defendants Board of Regents of the University of Wisconsin System and David Markee to take judicial notice of the transcripts of the hearing before the State of Wisconsin Personnel Commission is GRANTED.
3. Defendants' motion for summary judgment is GRANTED with respect to plaintiff's claim that defendant Markee retaliated against her for raising concerns about his reorganization plan, objecting to her exclusion from the investigation of an employee, objecting to the depiction of racial minorities in a newsletter and expressing her opinion on the university's policy about relationships between faculty and students. In all other respects, defendants' motion for summary judgment is DENIED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1315066/ | 158 Ga. App. 411 (1981)
280 S.E.2d 628
TUGGLE
v.
WILSON.
61441.
Court of Appeals of Georgia.
Decided April 30, 1981.
Harold A. Horne, Jr., for appellant.
Richard C. Freeman III, for appellee.
BIRDSONG, Judge.
Breach of contract. H. C. Tuggle desired to purchase certain property in Gwinnett County. Tuggle is a registered real estate agent and has owned and operated his own agency. Prior to this litigation, Tuggle's father had died and Tuggle had qualified as administrator for his father's estate. Another real estate agent, Britt (a distant cousin of Tuggle), located land for sale in Gwinnett County and informed Tuggle of the availability of the land. Tuggle found the tract of land to be one that ran south from a Stephenson Road. The *412 appellee Carol Wilson owned the approximately three acres of land fronting on Stephenson Road that Tuggle desired to purchase. There was a frame house on the property. The family residing there had executed a lease with option to purchase with the owner, Wilson. The family had become delinquent in rental payments, and Mrs. Wilson was in the process of cancelling the lease and option and had demanded possession. Immediately to the west of the Wilson property, there was a large tract of land that belonged to the estate of Britt's grandfather. To the east adjoining Wilson's property along Stephenson Road lay other tracts of land belonging to third parties. Tuggle believed there was only one such tract (presumably the Gatlin land) when in actuality there were two tracts that fronted on Stephenson Road. The tract furthest to the east and extending to the south was a 19.4 acre tract belonging to Gatlin. In between the Gatlin and Wilson property and lying to the east and south of the Wilson acreage was a small tract of land owned by Carter. The Carter property actually adjoined the Wilson property and separated Wilson's acreage from that owned by Gatlin.
Tuggle and Wilson entered into a purchase-sell contract. The contract was subject to Mrs. Wilson's being able to evict her tenants and to cancel their option to buy. Tuggle's purchase was subject to Tuggle being able to obtain the property lying to the east and south of Mrs. Wilson's property. These conditions precedent were addendums to the contract and approved by both parties. The most *413 pertinent addendum stated: "15. This contract is contingent upon the final acceptance of a contract issued by H. C. Tuggle to purchase a tract of land containing approximately 19.4 acres and adjoining the Wilson property on the south and east sides. Should the Purchaser be unable to obtain the acceptance of his offer to purchase the adjoining tract, this contract between Mr. Tuggle and Ms. Wilson will become null and void and all earnest money will be refunded to the Purchaser."
Mrs. Wilson had her tenants evicted on April 4. Appellant Tuggle was present at the eviction and entered the frame house to help move the belongings out of the house. About four days later the house was burned, apparently as a result of arson. The contract authorized Tuggle to pursue the sale in the event of such a fire and be entitled to any insurance. Tuggle believed the insurance on the house would be approximately $37,000, which in ultimate effect would require him to expend only about $7,000, for the property. However, Mrs. Wilson declared the contract null and void and declined to close on the sale. It was her contention that Tuggle actually purchased the 19.4 acre Gatlin site as administrator of his deceased father's estate and not in his own right and further that the Gatlin land was not "adjoining" her property because the Carter property separated the Gatlin and Wilson land. Tuggle admitted that he had indeed purchased the Gatlin property in his capacity as administrator for the estate and that he had never made a bona fide offer for the adjoining Carter property because the price was too high.
When Tuggle learned by letter that Mrs. Wilson had declared the sale contract null and void, Tuggle telephoned Mrs. Wilson to pursue the matter. When Mrs. Wilson was evasive in her answers and lead Tuggle to believe that the matter was not negotiable, Tuggle threatened to sue Mrs. Wilson, using certain four-letter words that traditionally have been considered obscene. Tuggle admitted using the language substantially as alleged by Mrs. Wilson. Tuggle did subsequently bring suit against Mrs. Wilson seeking either specific performance of the contract or alternatively compensatory damages for breach of contract. Mrs. Wilson answered denying that the contract was enforceable because of vagueness and lacking in mutuality and filed a cross complaint that her peace, dignity and tranquility had been violated by the use of the threatening and obscene language over the telephone. Mrs. Wilson moved for summary judgment as to Tuggle's complaint and as to liability in those counts of her cross complaint alleging violation of her peace and tranquility through the use of the abusive and obscene language. The trial court granted Mrs. Wilson summary judgment and against Tuggle and dismissing Tuggle's complaint on the ground that the *414 contract was vague and unenforceable. The court granted summary judgment to Mrs. Wilson as to liability in those counts of the cross complaint alleging the use of the threatening and obscene language. Tuggle brings this appeal enumerating as error the grants of summary judgment to Mrs. Wilson. Held:
1. Tuggle argues that as soon as the tenants had been evicted, he commenced efforts with a bank to finance the purchase price of the Wilson property. Thus he argues that he had fulfilled all the requirements of the contract. He had purchased the 19.4 acres and notified Mrs. Wilson that he was ready to close. He contends that he was not interested in the Carter property and sought only the Wilson property because he wished to remodel and live in the frame house.
On the other hand it would appear that if Tuggle had not desired to close on the property he could have made the same arguments advanced by Mrs. Wilson. He had not in fact purchased the adjoining property to the south and east of the Wilson property and the sale under the contract was made expressly subject to such a condition. Further, the contract is subject to an interpretation that Tuggle was required to buy the property himself. While the contract required the purchase of a 19.4 acre tract, it also required the purchase of the "adjoining" land to the south and east of the Wilson property. This could mean that adjacent property actually touching the Wilson property or the property lying generally to the south and east of the Wilson property. Depending upon the interpretation put upon the contract by either Mrs. Wilson or Tuggle, it could be argued that the condition precedent had not been fulfilled.
It is well settled that contracts conditioned upon discretionary contingencies lack mutuality. "If, in a contract for the sale of real estate, payment of the purchase price is made contingent upon an event which may or may not happen at the pleasure of the buyer, the contract lacks mutuality, and until that contingency has occurred, there is no obligation on the part of the purchaser to purchase or the seller to sell. F. & C. Investment Co. v. Jones, 210 Ga. 635 (81 SE2d 828); Wehunt v. Pritchett, 208 Ga. 441 (67 SE2d 233)." Teague v. Adair Realty &c. Co., 92 Ga. App. 463, 467 (88 SE2d 795). See Stone Mtn. Prop. v. Helmer, 139 Ga. App. 865, 867 (229 SE2d 779). Moreover, part performance or conduct indicating acceptance of the contract by one of the parties does not cure the uncertainties. As we read the contract in question, performance of part is no cure or remedy for the vital requirement of certainty. Green v. Zaring, 222 Ga. 195, 198-199 (149 SE2d 115); Grizzle v. Gaddis, 75 Ga. 350; Thomas v. Harris, 127 Ga. App. 361, 363 (193 SE2d 260). Any contract, including one for the sale of land, must contain a specific and definite statement of the terms of the contract. Its terms must be *415 such that neither party can reasonably misunderstand them. Stated otherwise, the rule as to certainty is that the agreement must be so certain and complete that each party may have an action on it. Jones v. Graham, 39 Ga. App. 822, 824 (148 S.E. 604). This court would be remiss in carrying out the contract in its present state of uncertainty for we could do so based only upon our guess or conjecture as to the true intent of the parties. We might well be guilty or erroneously decreeing that which the parties never intended or contemplated. Williams v. Manchester Bldg. Supply Co., 213 Ga. 99, 101 (97 SE2d 129). Lastly, the interpretation and construction of contracts is for the trial court. Henderson Mill Ltd. v. McConnell, 237 Ga. 807, 809 (229 SE2d 660); Taylor Freezer Sales Co. v. Hydrick, 138 Ga. App. 738, 739 (227 SE2d 494). The trial court did not err in granting summary judgment to Mrs. Wilson on Tuggle's complaint seeking to enforce such an ambiguous contract or to refuse specific performance of the same.
2. Tuggle also complains as to the grant of partial summary judgment as to liability on Mrs. Wilson's counterclaim pertaining to the use of obscene language over the telephone, contending that he was entitled to a jury trial as to his intent. We disagree.
Tuggle frankly admitted his anger and use of the words alleged by Mrs. Wilson. Those words, not necessary here to repeat, are words commonly accepted as obscene in meaning and are not words used in usual business transactions. There is no question that the words used in a conversation involving a real estate sale fall within the ambit of Ga. L. 1968, p. 9 (Code Ann. § 104-9901 (a)) which proscribe any telephone communication wherein the caller makes a comment which is obscene, lewd, filthy or indecent. Tuggle not only does not create an issue of fact as to the utterance of the objectionable language but frankly admitted using the language. The purpose of the Summary Judgment Act is to eliminate the necessity for trial by a jury where, giving the opposing party the benefit of all reasonable doubts and all favorable inferences that may be drawn from the evidence, there is no genuine issue as to any material fact, and the moving party is entitled to a judgment as a matter of law Holland v. Sanfax Corp., 106 Ga. App. 1 (126 SE2d 442).
The only issue sought to be raised by Tuggle is the matter of his intent. However, the matter of intent relates to a criminal matter and is of no moment in a civil trial for damages. Nash v. Hess Oil &c. Corp., 121 Ga. App. 546, 548 (174 SE2d 373) (reversed on other grounds in Hess Oil &c. Corp. v. Nash, 226 Ga. 706 (177 SE2d 70)). We conclude as to these three counts of Mrs. Wilson's counterclaim that the trial court did not err in granting summary judgment to Mrs. Wilson.
*416 Judgment affirmed. Shulman, P. J., and Sognier, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1369660/ | 530 F. Supp. 2d 274 (2008)
CITIZENS UNITED, Plaintiff,
v.
FEDERAL ELECTION COMMISSION, Defendant.
Civil Action No. 07-2240 (ARR, RCL, RWR).
United States District Court, District of Columbia.
January 15, 2008.
As Amended January 16, 2008.
*275 James Bopp, Jr., Clayton J. Callen, Jeffrey P. Gallant, Richard E. Coleson, Bopp, Coleson & Bostrom, Terre Haute, IN, for Plaintiff.
Adav Noti, Kevin Deeley, Steve Nicholas Hajjar, Federal Election Commission, Washington, DC, for Defendant.
MEMORANDUM OPINION
PER CURIAM.
For the reasons that follow we deny Citizens United's ("Citizens") motions for a preliminary injunction to enjoin the Federal Election Commission ("FEC") from enforcing provisions of the Bipartisan Campaign Reform Act of 2002 ("BCRA"),[1] with respect to Citizens' advertisements for a movie Hillary: The Movie and its distribution of The Movie through cable TV video on-demand.
I.
Citizens United is a nonprofit membership corporation, tax-exempt under Internal Revenue Code § 501(c)(4). (Am. Compl. ¶ 5.) Citizens produced a movie titled Hillary: The Movie. (Id. Ex. 2; Notice [30] Regarding Joint Stip.) The Movie focuses on Senator Hillary Rodham Clinton's "Senate record, her White House record during President Bill Clinton's presidency, . . . her presidential bid," and includes "express opinions on whether she would make a good president." (Am. Compl. ¶ 14.) Citizens plans to distribute The Movie in January or February 2008 through theaters, video on-demand (NOD") broadcasts, and DVD sales. (Id.) Citizens notified the court on January 7, 2008, that it had released The Movie for "public sale and exhibition." (Notice [30] Regarding Joint Stip.); see http://www. hillarythemovie.com (last visited Jan. 11, 2008) (offering The Movie on DVD for $23.95 and promoting screenings of the film in seven movie theaters across the country). The Movie's release date coincides with the dates when many states will hold primary elections or party caucuses. Senator Clinton is a presidential candidate in those states. (Am. Compl. ¶ 17.) Citizens intends to fund at *276 least three television advertisements two 10-second advertisements, "Wait"[2] and "Pants,"[3] and one 30-second advertisement, "Questions"[4] to coincide with the release of its movie. (Id. Ex. 1.) The advertisements promote The Movie and direct viewers to The Movie's website for more information about the film and how to see or purchase it. (Id. ¶ 19.) If Senator Clinton becomes the Democratic presidential nominee, Citizens plans to broadcast the three advertisements and possibly other advertisements within 30 days before the Democratic National Committee Convention and within 60 days before the November general election both periods are within BCRA's definition of an electioneering communication. (Id. ¶ 20); 2 U.S.C. § 434(f)(3)(A)(i)(II)(bb). Citizens has elected not to broadcast its advertisements pending resolution of this litigation. (Am.Compl. ¶ 26.) It has entered into negotiations to broadcast The Movie through the "Political Movies" component of a new nationwide VOD channel, "Elections '08," but has decided to forego the opportunity pending resolution of the current litigation because, according to Citizens, the broad cast would be banned under. BCRA and, even if this were not so, the broadcast would require Citizens to disclose certain information and make certain statements as described below. (Id. ¶ 28-30.)
BCRA amended the Federal Election Campaign Act of 1971 ("FECA").[5] BCRA, Pub.L. No. 107-155, 116 Stat. 81 (2002) (codified at 2 U.S.C. § 431 et seq.). Passed in 2002, it represented "the most recent federal enactment designed to purge national politics' of what was conceived to be the pernicious influence of `big money' campaign contributions." McConnell v. FEC, 540 U.S. 93, 115, 124 S. Ct. 619, 157 L. Ed. 2d 491 (2003) (internal citation omitted). BCRA introduced a new system for regulating what it termed "electioneering communications." Under BCRA § 201, an "electioneering communication" is:
any broadcast, cable, or satellite communication which
(I) refers to a clearly identified candidate for Federal office;
(II) is made within
*277 (aa) 60 days before a general, special, or runoff election for the office sought by the candidate; or
(bb) 30 days before a primary or preference election, or a convention or caucus of a political party that has authority to nominate a candidate, for the office sought by the candidate . . .
2 U.S.C. § 434(f)(3)(A). For presidential candidates, the communication must also be capable of being received by 50,000 or more persons. See 11 C.F.R. § 100.29(b)(3)(ii). Citizens recognizes that under this statutory definition, both its advertisements and a VOD[6] broadcast of The Movie would be electioneering communications. (Am.Compl. ¶¶ 17, 29.) Electioneering communications are subject to a host of restrictions imposed by BCRA. Three are relevant here: § 203, § 201, and § 311. Section 203 prevents corporations and labor unions from funding electioneering communications out of their general treasury funds, unless the communication is made to its stockholders or members, to get out the vote, or to solicit donations for a segregated corporate fund for political purposes. 2 U.S.C. § 441b(b)(2). This provision does not bar electioneering communications paid for out of a segregated fund that receives donations only from stockholders, executives and their families. 2 U.S.C. §§ 441b(b)(2)(C), (b)(4)(A).[7] Any electioneering communication that is not prohibited is subject to the disclosure requirements of § 201 and the disclaimer requirements of § 311, which are set out in part II.B.
Citizens' complaint, filed on December 13, 2007,[8] contains two major claims: (1) that § 203's prohibition of corporate disbursements for electioneering communications violates the First Amendment on its face and as applied to The Movie and to the 30-second advertisement "Questions"[9]; and (2) that BCRA § 201 requiring disclosure and § 311 requiring disclaimers are unconstitutional as applied to Citizens' three advertisements (and to The Movie, if Citizens broadcasts it in a manner that does not violate § 203).
II.
The court will not issue a preliminary injunction unless the movant shows that it has "1) a substantial likelihood of success on the Merits, 2) that it would suffer irreparable injury if the injunction is not granted, 3) that an injunction would *278 not substantially injure other interested parties, and 4) that the public interest would be furthered by the injunction." Omar v. Harvey, 479 F.3d 1, 18 (D.C.Cir. 2007) (citing CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d 738, 746 (D.C.Cir.1995)). Granting injunctive relief is an "extraordinary and drastic remedy," and it is the movant's obligation to justify, "by a clear showing," the court's use of such a measure. Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S. Ct. 1865, 138 L. Ed. 2d 162 (1997).
A.
We will analyze first Citizens' likelihood of prevailing on the merits of its claims regarding The Movie. In McConnell, the Supreme Court upheld § 203 on its face, rejecting claims that the financing of "electioneering communications" constituting express advocacy or its functional equivalent were within the protection of the First Amendment. 540 U.S. at 203-09, 124 S. Ct. 619. McConnell did not, however, "purport to resolve future as-applied challenges." FEC v. Wis. Right to Life, Inc., ___ U.S. ___, ___, 127 S. Ct. 2652, 2661, 168 L. Ed. 2d 329 (2007) (citation omitted) ("WRTL"). The Chief Justice's opinion in WRTL stated that an advertisement could not be considered the functional equivalent of express advocacy unless it "is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate."[10]Id. at 2667. To promote the objectivity of this analysis, courts are to disregard contextual evidence of the corporation's intent in running an advertisement.[11]See id. at 2668.
Citizens wants us to enjoin the operation of BCRA § 203 as a facially unconstitutional burden on the First Amendment right to freedom of speech. The theory is that with respect to § 203, WRTL narrowed McConnell to such an extent that it "left the door open to facial invalidation based on the sort of circumstances that have now arisen." (2d Mot. for Prelim. Inj. Mem. at 2). For Citizens to prevail on this claim, we would have to overrule McConnell, which is to say that Citizens has no chance of prevailing. Only the Supreme Court may overrule its decisions. The lower courts are bound to follow them. See Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477, 484, 109 S. Ct. 1917, 104 L. Ed. 2d 526 (1989); Thurston Motor Lines, Inc. v. Jordan K Rand, Ltd., 460 U.S. 533, 535, 103 S. Ct. 1343, 75 L. Ed. 2d 260 (1983); Hutto v. Davis, 454 U.S. 370, 375, 102 S. Ct. 703, 70 L. Ed. 2d 556 (1982) (per curiam).
With respect to Citizens's as-applied claims regarding The Movie, the first question under Chief Justice Roberts' WRTL opinion and as it turns out, the last question is whether the film is express advocacy or its functional equivalent. If it is, McConnell makes it likely that *279 Citizens would not win on the merits of its claim that the First Amendment permits it to broadcast the movie within the electioneering communications period as currently funded. Citizens contends that The Movie is issue speech and, as it stated in oral argument, that issue speech is any speech that does not expressly say how a viewer should vote. The trouble is that the controlling opinion in WRTL stands for no such thing. Instead, if the speech cannot be interpreted as anything other than an appeal to vote for or against a candidate, it will not be considered genuine issue speech even if it does not expressly advocate the candidate's election or defeat. WRTL, 127 S.Ct. at 2667.
The Movie does not focus on legislative issues. See id.; 11 C.F.R. § 114.15(b). The Movie references the election and Senator Clinton's candidacy, and it takes a position on her character, qualifications, and fitness for office. See id.; 11 C.F.R. § 114.15(b). Dick Morris, one political commentator featured in The Movie, has described the film as really "giv[ing] people the flavor and an understanding of why she should not be President." Dick Morris, Hillary's Threat, Address (Mar.2007) (available at www.citizensunited.org/blog/? entryid=4563815). After viewing The Movie and examining the 73-page script at length, the court finds Mr. Morris's description to be accurate. The Movie is susceptible of no other interpretation than to inform the electorate that Senator Clinton is unfit for office, that the United States would be a dangerous place in a President Hillary Clinton world, and that viewers should vote against her.[12]The *280 Movie is thus the functional equivalent of express advocacy. See WRTL, 127 S.Ct. at 2667 (setting out the "functional equivalent" standard). As such, it falls within the holding of McConnell sustaining, as against the First Amendment, § 203 insofar as it bars corporations from funding electioneering communications that constitute the functional equivalent of express advocacy. There is no substantial likelihood that Citizens will prevail on its asapplied challenge with respect to The Movie.
B.
Citizens' proposed advertisements present a different picture. The FEC agrees that Citizens may broadcast the advertisements because they fall within the safe harbor of the FEC's prohibition regulations implementing WRTL. They did not advocate Senator Clinton's election or defeat; instead, they proposed a commercial transaction buy the DVD of The Movie. See WRTL, 127 S.Ct. at 2667; 11 C.F.R. § 114.15(b). Although Citizens may therefore run the advertisements, it complains that requirements of § 201 and § 311 of BCRA, 2 U.S.C. §§ 434(f)(2), 441 d, impose on it burdens that violate the First Amendment.
Section 201 is a disclosure provision requiring that any corporation spending more than $10,000 in a calendar year to produce or air electioneering communications must file a report with the FEC that includes among other things the names and addresses of anyone who contributed $1,000 or more in aggregate to the corporation for the purpose of furthering electioneering communications. §§ 434(f)(1), (2)(F); 11 C.F.R. § 104.20(c)(9). Section 311 is a disclaimer provision. 2 U.S.C. § 441d. For advertisements not authorized by a candidate or her political committee, the statement "___ is responsible for the content of this advertising" must be spoken during the advertisement and must appear in text on-screen for at least four seconds during the advertisement. § 441 d(d)(2). In addition, such advertisements are required to include the name, address, and phone number or web address of the organization behind the advertisement. § 441 d(a)(3).
Citizens thinks that § 201 and § 311 are unconstitutional because its advertisements do not constitute express advocacy or the functional equivalent of express advocacy. The argument is that the Supreme Court's WRTL decision narrowed the constitutionally permissible scope of what could be considered an electioneering communication. Under Citizens' reading of WRTL, anything that is not express advocacy or not "susceptible of [a] reasonable interpretation other than as an appeal to vote for or against a specific candidate" cannot be constitutionally regulated by Congress under BCRA. See 127 S.Ct. at 2667.
*281 We do not believe WRTL went so far. The only issue in the case was whether speech that did not constitute the functional equivalent of express advocacy could be banned during the relevant pre-election period. Although McConnell upheld the § 203 prohibition on its face, the Court left open the issue that was presented in WRTL, reserving it for decision on an asapplied basis. In contrast, when the McConnell Court sustained the disclosure provision of § 201 and the disclaimer provision of § 311, it did so for the "entire range of electioneering communications" set forth in the statute. McConnell, 540 U.S. at 196, 124 S. Ct. 619; see also id. at 230-31, 124 S. Ct. 619 (discussing § 311). Citizens's advertisements obviously are within that range.
Although Citizens styles its argument as an as-applied challenge, it offers only one distinction between its advertisements and the mine-run of speech that constitutes electioneering communication under BCRA. The distinction, so goes the argument, is that Citizens' speech is constitutionally protected, as WRTL holds. We know that the Supreme Court has not adopted that, line as a ground for holding the disclosure and disclaimer provisions unconstitutional, and it is not for us to do so today. And we know as well that in the past the Supreme Court has written approvingly of disclosure provisions triggered by political speech even though the speech itself was constitutionally protected under the First Amendment.[13]See FEC v. Mass. Citizens for Life, 479 U.S. 238, 259-62, 107 S. Ct. 616, 93 L. Ed. 2d 539 (1986) (striking down a prohibition, and noting that the disclosure provisions will apply to the newly permitted speech); Citizens Against Rent Control/Coal. for Fair Housing v. City of Berkeley, 454 U.S. 290, 297-98, 102 S. Ct. 434, 70 L. Ed. 2d 492 (1981) (same); First Nat'l Bank of Boston v. Bellotti, 435 U.S. 765, 791-92 & n. 32, 98 S. Ct. 1407, 55 L. Ed. 2d 707 (1978) (discussing how disclosure provisions can help offset the coercive aspects of corporate speech).
The McConnell Court did suggest one circumstance in which the requirement to disclose donors might be unconstitutional as-applied if disclosure would lead to reprisals and thus "impose an unconstitutional burden on the freedom to associate in support of a particular cause." 540 U.S. at 198, 124 S. Ct. 619. To this, the Court added that the plaintiff must show a "reasonable probability that the compelled disclosure of . . . contributors' names will subject them to threats, harassment, or reprisals." Id. (quoting Brown v. Socialist Workers '74 Campaign Comm., 459 U.S. 87, 100, 103 S. Ct. 416, 74 L. Ed. 2d 250 (1982)). Citizens' memorandum in support of its motion states that there may be reprisals, but it has presented no evidence to back up this bald assertion. In that respect, Citizens is thus in a similar position as the parties in McConnell who made the same assertion but presented no specific evidentiary support. See 540 U.S. at 199, 124 S. Ct. 619.
We therefore hold that Citizens has not established the requisite probability of prevailing on the merits of its arguments against the disclosure and disclaimer provisions § 201 and § 311, respectively.
C.
Citizens tells us that without a preliminary injunction it will not be able to broadcast The Movie, that it will have to disclose the identity of its contributors to the FEC if it runs the advertisements, and that some portion of the time it purchased for the advertisements would be consumed by *282 the disclaimers BCRA requires. If Citizens had made more of a showing that it had a chance of prevailing in this court on the merits, these kinds of harms might have warranted preliminary relief. But in the face of McConnell's ruling that the disclosure and disclaimer provisions are constitutional and that the restriction on corporate speech advocating the defeat of a candidate does not violate the First Amendment, Citizens is unable to raise "questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberate investigation." Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d Cir.1953); see also FTC v. H.J. Heinz Co., 246 F.3d 708, 714-15 (D.C.Cir.2001), Population Inst. v. McPherson, 797 F.2d 1062, 1078 (D.C.Cir. 1986), Washington Metro. Area Transit Comm. v. Holiday Tours, Inc., 559 F.2d 841, 844 (D.C.Cir.1977).
As to the remaining factors governing preliminary relief, we cannot say that enjoining enforcement of the BCRA provisions at issue would serve the public interest in view of the Supreme Court's determination that the provisions assist the public in making informed decisions, limit the coercive effect of corporate speech, and assist the FEC in enforcing contribution limits. See McConnell, 540 U.S. at 196, 205, 231.
* * *
Citizens' motion for preliminary injunction with respect to the § 203 Prohibition as applied to "Questions" shall be DENIED as moot as set forth in footnote 9 and shall be DENIED with respect to all other claims. A separate order shall issue this date.
NOTES
[1] Pub.L. No. 107-155, 116 Stat. 81 (2002), codified at 2 U.S.C. § 431 et seq.
[2] The script for the television advertisement, "Wait" reads as follows:
[Image(s) of Senator Clinton on screen]
"If you thought you knew everything about Hillary Clinton . . . wait 'til you see the movie."
[Film Title Card]
[Visual Only] Hillary: The Movie.
[Visual Only] www.hillarythemovie.com
[3] The script for the television advertisement, "Pants" reads as follows:
[Image(s) of Senator Clinton on screen]
"First, a kind word about Hillary Clinton: [Ann Coulter Speaking & Visual] She looks good in a pant suit."
"Now, a movie about the everything else."
[Film Title Card]
[Visual Only] Hillary: The Movie.
[Visual Only] www.hillarythemovie.com
[4] The script for the television advertisement, "Questions" reads as follows: [Image(s) of Senator Clinton on screen]
"Who is Hillary Clinton?"
[Jeff Gerth Speaking & Visual] "[S]he's continually trying to redefine herself and figure out who she is . . .
[Ann Coulter Speaking & Visual] "[A]t least with Bill Clinton he was just good time Charlie. Hillary's got an agenda . . ."
[Dick Morris Speaking & Visual] "Hillary is the closest thing we have in America to a European socialist . . ."
"If you thought you knew everything about Hillary Clinton . . . wait 'til you see the movie.
[Film Title Card]
[Visual Only] Hillary: The Movie. In theaters [on DVD] January 2007. [Visual Only] www.hillarythemovie.com
[5] Pub.L. No. 92-225, 86 Stat. 3 (1972) (codified at 2 USC § 431 et seq.).
[6] The parties did not raise the issue of whether VOD was within the definition of "electioneering communication." However, a broadly worded FEC regulation defining "electioneering communications" indicates that VOD would be a "broadcast, cable, or satellite communication" because it is "disseminated through the facilities of a . . . cable television system." See 11 C.F.R. §§ 100.29(b)(1), (b)(3)(i) (indicating that "broadcast, cable, or satellite communications" include communications "aired, broadcast cablecast or otherwise disseminated through the facilities of a television station, radio station, cable television system, or satellite system").
[7] Corporations and labor unions may also contribute to Political Action Committees, which are permitted to make electioneering communications. See McConnell, 540 U.S. at 204, 124 S. Ct. 619 (citing FEC v. Beaumont, 539 U.S. 146, 162-63, 123 S. Ct. 2200, 156 L. Ed. 2d 179 (2003)).
[8] On December 14, 2007, Citizens' motion for a three-judge district court was granted [14] pursuant to BCRA § 403 and 28 U.S.C. § 2284. On January 10, 2008, the threejudge court held an expedited hearing on the motions for preliminary injunctions.
[9] Plaintiff's challenge regarding the prohibition of "Questions" will be denied as moot. The FEC, in its filings and at oral argument, conceded that the advertisement is exempt from the Prohibition. (Opp' n to 2d Mot. for Prelim. Inj. at 17.)
[10] The parties agree, as do we, that the Chief Justice's formulation is now the governing test for the functional equivalent of express advocacy. Although the Court's opinion in WRTL was fragmented, the Chief Justice's opinion approved the judgment of the district court on the narrowest grounds. "When a fragmented Court decides a case and no single rationale explaining the result enjoys the assent of five Justices, the holding of the court may be viewed as that position taken by those Members who concurred in the judgments on the narrowest grounds." Marks v. United States, 430 U.S. 188, 193, 97 S. Ct. 990, 51 L. Ed. 2d 260 (1977) (internal quotation marks omitted).
[11] WRTL discounted evidence that included the corporation's other candidate-related advocacy, the timing of the advertisements, and the advertisement's reference to an Internet address that directed viewers to a website containing express advocacy against the election of candidates for federal office. 127 S.Ct. at 2668-69 (Opinion of Roberts, C.J.).
[12] A selection of excerpts from the movie are indicative of the film's message as a whole and serve to demonstrate the difficulty that this court had in its ultimately unsuccessful attempt to find a reasonable interpretation of The Movie that would take it out of the WRTL "functional equivalent to express advocacy" classification.
Excerpts include statements by the film's narrator, one of several political commentators or another interviewee stating:
"She's driven by the power, She's driven to get the power. That is the driving force in her life." (Am. Compl. Ex. 2 at 1.)
"She is the expert at not saying what she believes she will run on attacking Republicans, and being the first woman president oh isn't that amazing, she's a woman she can walk and talk." (Id.)
"She is steeped in controversy, steeped in sleaze, that's why they don't want us to look at her record." (Id. at 1-2.)
"Over the past 16 years Hillary Clinton has undoubtedly become one of the most divisive figures in America. How this makes her suited to unite the country as the next president is troubling to many." (Id. at 6.)
"I mean think of what it says about Hillary Clinton that she was willing to put up with his open philandering, with anything in a skirt who wanders before his eyesight all for the power at least with Bill Clinton he was just good time Charlie. Hillary's got an agenda and she's willing to put up with that to be [P]resident of the [U]nited [S]tates, she's got a to do list when she gets to the White House." (Id. at 21-22.)
"I think the American people have a right to as much of a public record as possible about Hillary Clinton. Those records should be released before the 2008 elections so that we can learn a lot more about exactly how much influence she had in the White House, what her positions were in the White House, and how she acted in the White House." (Id. at 60.)
"Finally, before America decides on our next president, voters should need no reminders of [] what's at stake the well being and prosperity of our nation." (Id. at 68-69.)
"It[']s been said and I agree with it that this is the most personal political choice that Americans make. They want, they their personality traits, their will they consider a person that they could trust, that they would like, that they were comfortable with, and that's [where] I think Hillary Clinton as a candidate has great defects." (Id. at 69.)
"If she reverts to form, Hillary Clinton will likely be in the future what she has been in the past, which is a person, a woman, a politician of the left, and I don't think that's going to [be] good for the security of the United States." (Id. at 70.)
"I think we are at a very critical time in this country. I can tell you beyond a shadow of a doubt that uh, the Hillary Clinton that I know is not equipped, not qualified to be our commander in chief." (Id. at 71.)
"[T]his vote comes down to one thing: liberty. Do you believe in liberty or don't you? Economic liberty, free speech, protecting our borders, protecting our country from terrorism the issue is liberty." (Id.)
"[W]e must not ever underestimate this woman. We must not ever understate her chances of winning. We mustn't be lolled into a state of security and complacency by the new found moderation that she likes to talk about. And we must never forget the fundamental danger that this woman [poses] to every value that we hold dear." (Id. at 72).
In sum, plaintiff's counsel's representation at oral argument that the movie did not exhort viewers to vote against Senator Clinton, is simply untrue.
[13] But see Majors v. Abell, 361 F.3d 349, 356-57 (7th Cir.2004) (Easterbrook, J., dubitante). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3159587/ | IN THE SUPREME COURT OF PENNSYLVANIA
WESTERN DISTRICT
COMMONWEALTH OF PENNSYLVANIA, : No. 153 WAL 2015
:
Respondent :
: Petition for Allowance of Appeal from
: the Order of the Superior Court
v. :
:
:
DAVID GREECE, :
:
Petitioner :
ORDER
PER CURIAM
AND NOW, this 2nd day of December, 2015, the Petition for Allowance of Appeal
is DENIED. | 01-03-2023 | 12-02-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/2901079/ | Criminal Case Template
COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
EL PASO INDEPENDENT SCHOOL
DISTRICT,
Appellant,
v.
LILLIAN W. CROUCH,
Appellee.
§
§
§
§
§
No. 08-04-00131-CV
Appeal from the
327th District Court
of El Paso County, Texas
(TC#2002-5419)
MEMORANDUM OPINION
The parties to this appeal have filed a Joint Motion for Entry of Judgment, stating
that all matters in controversy between them have been compromised and settled and
requesting that we render a judgment effectuating their agreement. The motion is
granted. See Tex. R. App. P. 42.1(a)(2)(A). In accordance with the parties’ agreement,
judgment is rendered that all of the claims of both parties, including all claims made in
the trial court, are dismissed with prejudice. Each party shall bear her or its own costs.
SUSAN LARSEN, Justice
November 10, 2004
Before Panel No. 4
Barajas, C.J., Larsen, and McClure, JJ. | 01-03-2023 | 09-09-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1428498/ | 832 F. Supp. 56 (1993)
UNITED STATES of America, Petitioner,
v.
Roy MOSELEY, Custodian of Records and Moseley Construction, Inc., Respondent.
No. 93-MC-19L.
United States District Court, W.D. New York.
July 15, 1993.
*57 Brian M. McCarthy, Asst. U.S. Atty., Steven E. Cole, U.S. Dept. of Justice, Tax Div., Washington, DC, for U.S.
Arnold R. Petralia, Petralia, Webb & O'Connell, P.C., Rochester, NY, for respondents.
*58 AMENDED DECISION AND ORDER
LARIMER, District Judge.
This is a proceeding brought pursuant to Internal Revenue Code §§ 7402(b) and 7604(a) to enforce an Internal Revenue Service ("the IRS") summons. The summons was issued on October 7, 1992 as part of a joint investigation by both the Examination Division and Criminal Investigation Division of the IRS. The purpose of this investigation was to determine the correctness of respondent, Roy Moseley's ("Moseley") individual income tax returns for the years 1987-1989.
The summons directed Moseley, as custodian of records ("custodian") for Moseley Construction, Inc. ("MCI"), to appear and produce for examination the books, records and other papers of MCI at the IRS offices in Rochester, New York. Moseley refused to comply with the summons and this petition followed.
For the reasons that follow, the petition for enforcement of the summons is granted. It will be enforced, however, only as to those original documents copies of which are not currently in the possession of the IRS in a complete and legible state.
DISCUSSION
Moseley has refused to comply with the IRS summons for three reasons: 1) as the sole owner, officer, director and employee of MCI, he argues that compliance with the summons would violate his individual Fifth Amendment right against self-incrimination; 2) he maintains that the IRS already has in its possession the information sought; and 3) he contends that the summons is vague and overbroad.
A) Act of Production and Fifth Amendment Privilege
Moseley maintains that he is entitled to resist the IRS summons on the grounds that his act of production will be personally incriminating. He contends that the corporate documents sought by the IRS, to the extent that they exist, might provide evidence of a tax violation against him personally. According to Moseley, such forced disclosure violates his Fifth Amendment privilege.
Moseley's claim that he has a Fifth Amendment privilege which excuses MCI from producing the requested corporate documents is without merit. It is well established that corporations do not have a Fifth Amendment privilege. Hale v. Henkel, 201 U.S. 43, 74-75, 26 S. Ct. 370, 378-79, 50 L. Ed. 652 (1906); Bellis v. United States, 417 U.S. 85, 88, 94 S. Ct. 2179, 2183, 40 L. Ed. 2d 678 (1974); Braswell v. United States, 487 U.S. 99, 107, 108 S. Ct. 2284, 2289-90, 101 L. Ed. 2d 98 (1988).
Since a corporation can only act through its agents, it follows that a corporate agent, when acting in that capacity, cannot refuse to comply with an IRS summons based on his own perceived Fifth Amendment privilege. "Any claim of Fifth Amendment privilege asserted by the agent would be tantamount to a claim of privilege by the corporation which possesses no such privilege." Braswell, 487 U.S. at 110, 108 S.Ct. at 2291. The agent's act of production is, therefore, deemed to be an act of the corporation and not a personal act of the individual.
Moseley concedes these general principles but claims that as the sole owner, director, officer and employee of MCI, his claim is unique and fits within what he believes to be an "exception" to these general rules. Moseley claims that footnote 11 of the Braswell decision creates this "exception." In Braswell, the Supreme Court explicitly left open the question "whether the agency rationale supports compelling a custodian to produce corporate records when the custodian is able to establish, by showing ... that he is the sole employee and officer of the corporation, that the jury would inevitably conclude that he produced the records." Braswell, 487 U.S. at 118, n. 11, 108 S.Ct. at 2295, n. 11.
For several reasons, I believe Moseley's contentions are without merit. First of all, Moseley reads the Supreme Court's decision in Braswell too broadly. The Supreme Court did not create the exception relied upon here by Moseley. In fact, the Supreme Court explicitly held that the Fifth Amendment *59 is never implicated when the custodian is compelled to produce corporate records "regardless of how small the corporation may be." Id. at 108, 108 S.Ct. at 2290.
In my view, the issue suggested by Braswell in footnote 11 was rejected by the Second Circuit in the case of In re Grand Jury Subpoenas Dated October 22, 1991 and November 1, 1991, 959 F.2d 1158 (2d Cir.1992). In that case, the Second Circuit considered facts almost identical to the facts here, that is, the recipient of the subpoena duces tecum for corporate records (Doe) was the president and sole stockholder of the target corporation. In part, Doe declined to comply with the subpoena of corporate records because he claimed that the act of production would incriminate him as president and sole stockholder. Relying on the Supreme Court's decisions in Braswell and Bellis, the Second Circuit rejected the argument. The Second Circuit cited Braswell for the proposition that the custodian has no privilege even if he is the corporation's sole stockholder and cited Bellis for the proposition that the custodian cannot claim the privilege regardless of how small a corporation may be.
The Second Circuit did not discuss directly footnote 11 in Braswell, but it seems clear that the court rejected the argument that Moseley makes here based on that footnote.
The Second Circuit stated that the custodian has no privilege because he is not acting in a personal capacity but a representative one. Because of this, his act of production cannot be used against him directly. In re Grand Jury Subpoenas, 959 F.2d at 1164 (citing Braswell, 487 U.S. at 118, 108 S.Ct. at 2295). But, the Second Circuit noted that the jury could draw permissible inferences of knowledge based on "[an individual's] position in the corporation." However, the jury could not draw any adverse inferences "from his role as custodian or his act of production." Id.
In my view, this decision by the Second Circuit closes any possible window of privilege left open by footnote 11 in Braswell.
The Fourth Circuit recently has also rejected the argument made here by Moseley. In United States v. Stone, 976 F.2d 909 (1992), cert. denied, ___ U.S. ___, 113 S. Ct. 1843, 123 L. Ed. 2d 467 (1993) the court was faced with the precise issue raised by Moseley here and the court did explicitly discuss Braswell's footnote 11.
In Stone, the taxpayer was the sole shareholder, director, officer and employee of a corporation which was issued a subpoena duces tecum by the Department of Energy. The taxpayer declined to comply with the subpoena on the ground that the corporation's documents were personally incriminating and therefore privileged under the Fifth Amendment. He argued that his status as sole shareholder, officer, director and employee excused him, because of his privilege, from producing the subpoenaed corporate documents.
The Fourth Circuit acknowledged that Braswell left open the question of whether there existed an exception from the general rule of production for custodians who were the sole employee and officer of a corporation. The court held that no such exception existed and that the district court properly rejected the claimed Fifth Amendment privilege. The taxpayer's decision to operate as a corporation rather than as a sole proprietor was crucial to the Fourth Circuit. "[Respondent] chose the corporate form and gained its attendant benefits ... he cannot now disregard the corporate form to shield his business records from production." Stone, 976 F.2d at 912.
I agree with the Fourth Circuit's reasoning in Stone. Allowing Moseley to successfully resist the IRS summons based solely on his status as sole owner, director, officer and employee of MCI would be tantamount to allowing Moseley to conduct business in the corporate form only when it was advantageous to do so. As custodian of MCI, Moseley is being summoned to perform a corporate act. If he is allowed to assert a privilege, "authorities would be stymied not only in their enforcement efforts against [him] but also in their prosecutions of organizations." In re Grand Jury Subpoenas, 959 F.2d at 1164.
Since Moseley cannot avail himself of the Fifth Amendment privilege, because he is the custodian of MCI and MCI is being summoned *60 to produce corporate records, there is no need to go into a discussion of the possible incriminating nature of the documents sought. Moseley must comply with the IRS summons and produce the corporate records of MCI in a manner consistent with this decision.
B) Information Sought Already in IRS Possession
Moseley next argues that the IRS already has in its possession the information sought in the October 7, 1992 summons. According to Moseley, at some point in 1989, the IRS commenced the tax investigation of Moseley and MCI. During those years, the IRS made document information requests of Moseley and MCI for documents pertaining to the period January 31, 1986 through January 31, 1991.
Pursuant to those requests, Moseley delivered corporate documents to an agent of the IRS, with the last delivery being on or about December 2, 1991. In addition, the IRS served a summons on the accountant for both Moseley and MCI requesting documents for the period January 1, 1986 through January 31, 1991.
According to Moseley, the IRS retained the documents turned over by Moseley, MCI and the accountant until a request for their return was made by Moseley's attorney on September 25, 1992. On October 2, 1992 and October 7, 1992, Moseley's attorney traveled to the IRS offices in Rochester, New York where the original documents were turned over to him. At that time, Moseley's attorney was advised that copies of these documents were kept by the IRS.
To enforce an IRS summons, the IRS must make a prima facie showing of "good faith," which includes a showing "that the investigation will be conducted pursuant to a legitimate purpose, that the inquiry may be relevant to the purpose, that the information sought is not already within the [IRS's] ... possession, and that the administrative steps required by the Code have been followed..." United States v. Powell, 379 U.S. 48, 57-58, 85 S. Ct. 248, 255, 13 L. Ed. 2d 112 (1964).
Once the IRS's prima facie showing has been Diet, the burden of showing why enforcement of the summons should not proceed rests with the party summoned. United States v. White, 853 F.2d 107, 111 (2d Cir.1988), cert. granted, 489 U.S. 1051, 109 S. Ct. 1309, 103 L. Ed. 2d 578 cert. dismissed, 493 U.S. 5, 110 S. Ct. 273, 107 L. Ed. 2d 6 (1989). The IRS's burden is minimal and its prima facie case for enforcement can be established by the declarations of an IRS agent submitted in support of the Government's position. United States v. Saunders, 951 F.2d 1065, 1067 (9th Cir.1991); St. German of Alaska Eastern Orthodox Catholic Church v. United States, 840 F.2d 1087, 1092 (2d Cir.1988).
A declaration of Agent Thomas J. Michalski, the special agent in charge of the investigation, was submitted with the IRS's petition to enforce the summons. In his declaration, Agent Michalski does not state that documents had been produced by Moseley prior to the issuance of the October 7, 1992 summons and specifically states that "[t]he books, papers, records, or other data sought by the summons are not already in the possession of the [IRS]." (Michalski Declaration ¶ 11).
A Supplemental Declaration of Agent Michalski was submitted in support of the Government's position at a hearing held before the Court on April 15, 1993. In this declaration, Agent Michalski conceded that certain documents were produced by Moseley prior to the issuance of the October 7, 1992 summons and that the original documents have been returned to Moseley's attorney. (Supplemental Declaration ¶ 2). Agent Michalski also states that; he attempted to microfilm or photocopy all of these documents, but that many of the reproductions are incomplete or illegible and, therefore, it is necessary to obtain again the originals of all the documents previously produced. (Supplemental Declaration ¶ 2). Agent Michalski does not state which documents need to be re-copied or why those documents which were successfully copied and still in the possession of the IRS, are insufficient to allow the IRS to continue its investigation.
*61 Moseley contends that the IRS has failed to make a prima facie showing of good faith because the documents being sought in the October 7, 1992 summons are the same documents which he turned over and which were copied by the IRS. Moseley claims that the IRS already has in its possession the information it is seeking.
The IRS position now is that, although some documents were voluntarily produced, it does not believe that all of MCI's records were turned over. The IRS also contends that it is entitled to receive all of the original documents again, even if it once had some of them incident to Moseley's voluntary production prior to the October 7, 1992 summons.
"[T]he `already possessed' principle enunciated by Powell ... [is] a gloss on § 7605(b)'s prohibition of `unnecessary' summonses, rather than an absolute prohibition against the enforcement of any summons to the extent that it requests the production of information already in the possession of the IRS." United States v. Davis, 636 F.2d 1028, 1037 (5th Cir.), cert. denied, 454 U.S. 862, 102 S. Ct. 320, 70 L. Ed. 2d 162 (1981). It is to be narrowly construed. For example, documents which are in the physical possession of the IRS but "incapable of practical retrieval" are deemed to not be "already possessed" for purposes of the Powell test. United States v. Linsteadt, 724 F.2d 480, 483-84 (5th Cir.1984).
In United States v. First Nat'l Bank of N.J., 616 F.2d 668, 673-74 (3d Cir.), cert. denied sub nom., Levey v. United States, 447 U.S. 905, 100 S. Ct. 2987, 64 L. Ed. 2d 854 (1980), the taxpayer refused to comply with an IRS request to produce retained copies of forms 1099 and 1087.[1] The taxpayer argued that copies of these forms had been sent to the IRS Centers by the individuals preparing the form. The Third Circuit held, that since these forms were stored by the IRS without an indexing system or method of retrieval, as a practical matter, they were neither accessible nor available to the IRS. Id. at 673-74. But see United States v. Theodore, 479 F.2d 749, 755 (4th Cir.1973) (the Fourth Circuit refused to enforce an IRS summons because nothing in the record supported the conclusion that the IRS could not readily retrieve the information from its files).
It is well established that the IRS is entitled to receive original documents in response to a summons. United States v. Davey, 543 F.2d 996, 1001 (2d Cir.1976). Davey does not, however, address the issue whether the IRS has the right to obtain original documents a second time, after it returned the originals to the taxpayer.
In this action, the IRS received original documents from Moseley, thereby satisfying the requirement of Davey. It then chose to copy their original documents and return them to the taxpayer.[2] Since the IRS made the copies of the documents themselves, there can be no question that the copies were true duplicates of the original documents received from Moseley.
The IRS has not cited one case where the IRS received original documents from a taxpayer, chose to copy those documents, returned the originals, and then asked for the same original documents again from the same taxpayer.
Cases cited by the IRS for the proposition that a summons can be enforced as long as the bulk of the materials is not demonstrably in the possession of the IRS deal with document requests made to third parties and the taxpayer's refusal to produce documents which the IRS received from other sources. See United States v. Davis, 636 F.2d 1028, 1037 (5th Cir.), cert. denied, 454 U.S. 862, 102 S. Ct. 320, 70 L. Ed. 2d 162 (1981) (IRS denied that it already possessed the information and taxpayer maintained that IRS received the information from a local bank). This is clearly not the case here. The IRS concedes that it possesses some of the documents, see Supplemental Declaration ¶ 2, and that these *62 documents were obtained from the taxpayer through voluntary production. I can see no purpose in requiring Moseley to produce documents which the IRS already has in its possession.
It is quite a different matter, however, if the IRS is maintaining that they have copies of documents which are illegible due to a copying problem. Such a mishap is not unusual and if that is the case, those documents would not be readily accessible to the IRS and should not prohibit the IRS from reexamining the documents in question.
In this case, the IRS does not maintain that the documents which it has in its possession, in a complete and legible manner, are inaccessible. Agent Michalski's reason for requesting all of the original documents produced is that some copies are incomplete and illegible. While this provides a reason for the production of certain documents, it does not provide a reason for the production of all of the documents.
Therefore, because the IRS admits that it retained copies of documents previously produced, and because it is unclear which documents the IRS possesses, it is necessary to limit enforcement of this petition. The IRS must provide Moseley with a list of those documents that it possesses in a complete and legible state and which it obtained from him through prior voluntary production. Moseley must then fully comply with the summons, except that it need not produce those documents which appear on the IRS's list.[3]
C) Summons Vague and Overbroad
Finally, Moseley maintains that the IRS summons is vague and overbroad in that it requests "general correspondence and administrative files." According to Moseley, it is impossible to determine which items of general correspondence and items in the administrative files are relevant to the IRS examination.
26 U.S.C. § 7602(a)(1) authorizes the Secretary of the Treasury to summon and "examine any books, papers, records, or other data which may be relevant or material" to a particular tax inquiry. "The language `may be' reflects Congress' express intention to allow the IRS to obtain items of even potential relevance to an ongoing investigation, without reference to its admissibility." United States v. Arthur Young & Co., 465 U.S. 805, 814, 104 S. Ct. 1495, 1501, 79 L. Ed. 2d 826 (1984) (emphasis in original).
An IRS summons is overbroad if "it does not advise the summoned party what is required of him with sufficient specificity to permit him to respond adequately to the summons." United States v. Medlin, 986 F.2d 463, 467 (11th Cir.1993) (quoting United States v. Wyatt, 637 F.2d 293, 392 n. 16 (5th Cir.1981)). Generally, in order to avoid being overbroad the summons must identify: (1) the object of the investigation; (2) the records sought; and (3) the time period from which the documents are to be drawn. See id.; Linsteadt, 724 F.2d at 483.
The IRS summons states:
You are hereby summoned and required to appear before Special Agent Thomas Michalski, an officer of the [IRS], to give testimony and to bring with you and to produce for examination the following books, records, papers, and other data relating to the tax liability or the collection of the tax liability or for the purpose of inquiring into any offense connected with the administration or enforcement of the internal revenue laws concerning the person identified above [Roy C. Moseley] for the periods shown.
Attached to the summons is a separate document which lists nine separate categories of documents and requires the production of:
Any and all books, records, documents, and other items as set forth below for [MCI] for the period January 1, 1980 through and including January 31, 1991 ...
*63 Only if the summons forces Moseley to determine whether the documents are relevant to the investigation and does not describe the documents summoned with reasonable certainty, can it be deemed to be overbroad and unenforceable. See United States v. Lewis, 604 F. Supp. 1169, 1172 (E.D.La. 1985) (holding summons overbroad which asked for "all information which would be necessary to enable a representative of the [IRS] ... to properly determine total income earned ..."). The mere fact that the IRS summons requests general correspondence and administrative files does not make it vague and overbroad as long as the request is limited to documents relating to the tax liability of Moseley. Linsteadt, 724 F.2d at 483.
The IRS request identifies Roy C. Moseley as the object of the investigation, the specific records sought, and it is properly limited to data relating to the tax liability of Moseley for a specified time period. Moseley is not being asked to determine the relevancy of the documents to be produced, as in Lewis, supra. Instead, Moseley as custodian of MCI, is being asked to produce documents relating to him over a specified time.
Since the summons is properly limited and describes the documents to be produced with reasonable certainty, the summons is not vague and overbroad.
CONCLUSION
The petition to enforce the IRS summons is granted. Its scope is limited, however, to those documents which were obtained from the respondent and which are not presently in the possession of the IRS in a complete and legible state.
Respondent shall produce all such documents no later than July 22, 1993, at the offices of the Internal Revenue Service, 100 State Street, Room 2240, Rochester, New York.
IT IS SO ORDERED.
NOTES
[1] Forms 1099 and 1087 are required to be prepared by those from whom taxpayers receive nonwage income. First Nat'l State Bank of N.J., 616 F.2d at 673.
[2] Whether or not the IRS had an obligation to return these documents and retain a copy for its use in its investigation, is an issue that is not before this Court. Having chosen to take this path, however, the IRS must abide by its consequences.
[3] Agent Michalski, in his Supplemental Declaration, states that certain documents relating to the time period January 1, 1980 through January 31, 1986 were not produced pursuant to the initial document requests. If these documents exist, are not on IRS's list and are in the possession of MCI, they must be produced in order to be in full compliance with the summons. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2212720/ | 233 Cal. App. 2d 104 (1965)
R. H. MYERS, Plaintiff and Respondent,
v.
LEE STEPHENS et al., Defendants and Appellants.
Civ. No. 21910.
California Court of Appeals. First Dist., Div. One.
Mar. 22, 1965.
Ring, Turner & Ring and H. E. Barker, Jr., for Defendants and Appellants.
Pelletreau, Gowen, Moses & Porlier and J. Vance Porlier for Plaintiff and Respondent.
MOLINARI, J.
Defendants Lee Stephens and Ferrol Development Company appeal from a judgment, after a court trial, awarding plaintiff damages in the sum of $3,040. The case was tried, and judgment was entered, upon a conversion theory based on the sale by defendants of personal property which they had allegedly previously sold to plaintiff.
Questions Presented
1. Did plaintiff and defendants enter into a valid and enforceable contract of sale on November 14, 1962, so as to give plaintiff a cause of action in conversion against defendants *108 who "resold" the same property to a third person on November 15, 1962?
2. Was plaintiff entitled in his conversion action to recover damages based on his loss of profits from his anticipated resale of the house?
The Record
On November 14, 1962, Ferrol Development Company had for sale a single- unit residence located at 2879 Melillo Drive in Walnut Creek. Several months previous to this date, defendant Lee Stephens, president of the Ferrol Development Company, had contacted defendant Vernon Erickson, [fn. 1] a real estate broker, and informed him to "go ahead and sell it." About two weeks prior to November 14, 1962, Erickson telephoned plaintiff and told him "we had a house ... that we wanted to get moved off."
On November 14, 1962, plaintiff called on Erickson and made an offer to purchase the house for $250, stating that he would need some time to move it off--somewhere in the neighborhood of from 30 to 60 days. Erickson responded that he would have to call the owner " 'and find out if he'd take that. ...' " Erickson then, in plaintiff's presence, telephoned Stephens and informed him of plaintiff's offer. According to Erickson's testimony Stephens responded that "he couldn't wait that long. He wanted to get it off right now. ... He more or less turned that down unless I could get something better." And Stephens himself testified as to his conversation with Erickson as follows: "I told Vern that the price, the $250 was immaterial to me, but I needed the house moved off faster than that, that that was not acceptable ... that if he could sell the house and improve on the time, fine. What I was primarily interested in was getting the house off as soon as possible." Stephens further testified that in his mind when the telephone call ended the house was not sold.
After the telephone conversation with Stephens had ended, plaintiff and Erickson continued their conversation. Erickson inquired as to how long it would take to move the building. Plaintiff responded that he "felt the building could be moved out of there within thirty days" and that within 10 days he "could give him the actual moving date." Erickson stated "that that was acceptable" and wrote out a receipt, which he signed, stating that the sum of $250 was received from *109 R. H. Myers "For house at 2879 Melillo Dr., Walnut Creek. To be moved off property--Buyer will give a definite move off date in 10 days." Plaintiff then gave Erickson the check for $250. [fn. 2]
Immediately following November 14, 1962, plaintiff, who apparently believed that the deal had been closed, commenced preliminary work on the house for the purpose of preparing it for removal. Meanwhile, on November 15, 1962, Stephens, who had not yet been informed by Erickson that he had accepted the $250 from plaintiff and had given him a receipt therefor, sold the house directly to one Tost for $1.00, the deposit receipt stating that the house was to be moved within 15 days.
At the trial, plaintiff introduced evidence relating to the profit which he had anticipated from the resale of this house. He testified that it would have cost him approximately $8,000 to move the house and get it in a condition for resale, that the lot which he anticipated using as the site for the house would cost $4,000, and that the value of the house when relocated would be about $17,000, thus netting him a profit in the amount of approximately $5,000 to $6,000. Plaintiff also introduced the testimony of an appraiser who stated that the value of the relocated house would be $16,950 to $17,250. Defendants' counsel entered a timely objection to the introduction of this whole line of testimony as being immaterial and irrelevant. Defendants took the position that the appropriate measure of damages was the fair and reasonable value of the house, which was admitted by the pleadings to be $250.
Was a Sale of the House Consummated on November 14, 1962?
Since the gist of plaintiff's complaint was an action in conversion, it was incumbent upon him to prove ownership of the house in himself on November 15, 1962. [fn. 3] (See Schweitzer v. Bank of America, 42 Cal. App. 2d 536, 544 [109 P.2d 441]; Metropolitan Life Ins. Co. v. San Francisco Bank, 58 Cal. App. 2d 528, 534 [136 P.2d 853].) Based upon the evidence adduced at the trial, the court below found that the property was sold to plaintiff on November 14, 1962, and that defendants *110 converted the same to their own use when they sold it to a third party on November 15, 1962. On this appeal defendants contend that a sale of the house was not made on November 14, 1962 on two grounds: (1) that a contract was not entered into because plaintiff's tender was nothing more than an offer which was not accepted by defendants; and (2) that in any event, Erickson, as defendants' agent, exceeded his authority.
In both the original and amended complaints plaintiff alleged that the agreement of sale between the parties consisted of the subject receipt. This also appears to be the theory upon which plaintiff proceeded initially at the trial. In the course of the trial evidence was adduced by both sides as to the circumstances and conversations leading up to and surrounding the execution of the receipt. Objections were not interposed or urged that there was any violation of the parol evidence rule. In its findings the trial court did not make a specific finding as to whether the agreement of sale consisted of the subject receipt or whether it consisted of an oral agreement, but merely found that defendants "sold" the subject house to plaintiff. In his brief on appeal plaintiff does not urge or contend that the subject receipt constituted the agreement of sale but merely asserts that "whether there was a completed sale or not is a question of fact." [fn. 4] In the light of the record and the posture in which each side presented its case, it is apparent that the trial court and the litigants proceeded on the theory that the issue to be determined was whether an oral contract of sale was entered into between the parties. Insofar as the subject receipt is concerned, it appears to have been treated as a mere receipt and not as a binding agreement constituting an exclusive memorial.
[1a] Adverting to the record we find plaintiff testified that after Stephens rejected his offer to remove the house within the period of 30 to 60 days, plaintiff proposed to Erickson that he could move the house within 30 days and that within 10 days he would advise Erickson of the actual moving date. Plaintiff testified further that Erickson accepted this offer and that the latter thereupon drew up the receipt. [fn. 5] Although this evidence was in conflict with Erickson's *111 testimony that the tender of $250 was merely a deposit and that plaintiff's proposal was subject to Stephens' approval, the trial court was justified, under well- established principles, in accepting plaintiff's version of the conversation and rejecting Erickson's. The trial court was also justified, as the trier of the facts, to weigh and reject the testimony of Erickson's coemployee, Thomas Jensen, who overheard the tail end of the conversation between plaintiff and Erickson, and who testified that he heard Erickson say, " 'We think we've got a deal. ... If Lee [Stephens] takes ... If Lee O.K's this time limit bit we're on our way to a sale' ...."
Reconciling plaintiff's testimony with that of Stephens, who testified that the time limit for moving the house of from 30 to 60 days originally proposed by plaintiff was not acceptable to him, that he "needed the house moved off faster than that," and that he told Erickson in the telephone conversation "that if he could sell the house and improve on the time, fine," and considering Erickson's testimony that Stephens turned plaintiff's original offer down "unless I could get something better," the trial court was entitled to infer that Erickson was authorized to accept an offer which cut the moving-off time to within 30 days. The trial court was also entitled to consider the receipt in arriving at the intention of the parties. [2] A mere receipt is in the nature of an admission that money or property has been received. (Haidinger-Hayes, Inc. v. Marvin Hime & Co., 206 Cal. App. 2d 46, 51-52 [23 Cal. Rptr. 455].) As such it is not a written instrument the terms of which cannot be contradicted by parol, *112 and parol evidence is also admissible to show the terms of a receipt and even to vary the express terms of that receipt. (Haidinger-Hayes, Inc. v. Marvin Hime & Co., supra, pp. 51-52; 18 Cal.Jur.2d, Evidence, 261, p. 746.) [1b] Thus the deposit receipt, when reconciled with the oral testimony, was subject to the interpretation that Erickson received $250 for the described house which was to be moved off the property at a date to be specified within 10 days from the date of the receipt.
The trial judge was justified, therefore, in concluding that there was mutual assent as between plaintiff and Erickson as to all the essential terms of the agreement. These terms were found by the trial court to be as follows: that plaintiff agreed to buy and defendants agreed to sell the house in question for the sum of $250, provided it was moved within 30 days from November 14, 1962, weather permitting, the exact date of removal to be furnished defendants by plaintiff within 10 days from said date.
We now turn to the claim that Erickson was merely a "special agent" and that he had no authority to execute a contract of sale on behalf of defendants. The general rule as to the scope of an agent's authority is stated in Civil Code section 2319 [fn. 6] as follows: "An agent has authority: 1. To do everything necessary or proper and usual, in the ordinary course of business, for effecting the purpose of his agency: ..." In the instant case it is conceded by both parties that we are dealing with the sale of personal property. Accordingly, the present case is not governed by the rule applicable to real property that, in the absence of evidence indicating otherwise, when the owner of realty lists it for sale with a broker or agent, the agent's authority extends only to finding a purchaser and not to entering into a contract of sale on behalf of the owner. (Holway v. Malloy, 70 Cal. App. 2d 317, 319-320 [160 P.2d 893]; Sackett v. Starr, 95 Cal. App. 2d 128, 133- 134 [212 P.2d 535]; Thompson v. Scholl, 32 Cal. App. 4, 5 [161 P. 1006]; Rest., Agency 2d, 53, comment b., pp. 157, 158.)
[3] With respect to personal property, it is the general rule that an agent may bind his principal if he does not exceed the power with which he is actually or ostensibly vested. (Tynan Lbr. Co. v. W. A. Hammond Co., 124 Cal. App. 159, 163 [12 P.2d 45]; Barrios & Co., Inc. v. J. R. Garrett Co., *113 72 Cal. App. 786, 795 [238 P. 155]; Ventura Mfg. etc. Co. v. Warfield, 37 Cal. App. 147, 161 [174 P. 382]; Wright v. Solomon, 19 Cal. 64, 72 [79 Am.Dec. 196]; 3 Am.Jur.2d, Agency, 99, p. 498.) Accordingly, in the light of this rule, whether a sale made by an agent is binding upon his principal must be determined with a view to the character and purpose of the agency. (3 Am.Jur.2d, supra, p. 499.) Therefore, consonant with section 2319, and the general rule, a selling agent is authorized to do whatever is necessary and usual to carry out the purpose of the agency, that is, the sale. (See 2319 and 3 Am.Jur.2d, supra, 101, p. 501.)
To assist in the determination of the extent of the agent's authority to sell, the Restatement sets forth certain rules as to the interpretation of such authority. (Rest.2d Agency, 53-66, pp. 157-180.) Thus, an express authorization "to sell" property of the principal may be interpreted as meaning that the agent shall find a purchaser to whom the principal may sell, or make a contract of sale, or make a conveyance for the principal ( 53). Authority "to find ... a purchaser," unless otherwise agreed, means that the agent is restricted to the finding of such purchaser ( 54). Such authority includes the authority to state the terms upon which the principal is willing to sell, to solicit offers in accordance therewith, and to describe the subject matter ( 54). Where, however, the authority given is to "contract for a ... sale" it includes the authority to enter into negotiations for and to complete the sale, including therein the usual or other appropriate terms, and, if a writing is required or is usual, to execute such writing ( 55).
[4] The record in the instant case discloses that when Stephens first contacted Erickson concerning the sale of the house he stated " 'Go ahead and sell it.' " When queried on cross-examination as to whether he had said to Erickson, during the telephone conversation hereinbefore alluded to, " 'You get a deal if you can improve on the time,' " Stephens replied "I may have. I'm not sure." In testifying with respect to this conversation Stephens stated: "[I]t ran along this line, that if he could sell the house and improve on the time, fine. What I was primarily interested in was getting the house off as soon as possible. And it ended at that point." In this respect it should be noted that Erickson testified he had stated to plaintiff, after learning of the Tost transaction, that he "thought we had a deal." Although the record also discloses that Erickson and Stephens both testified that any *114 offer concerning the sale of the house was subject to the latter's approval, this testimony merely created a conflict in the evidence. [fn. 7] Accordingly, in the light of the foregoing principles, and in view of the elementary principle that the evaluation and reconciling of any conflicts or inconsistencies is for the trial court and that the power of the appellate court begins and ends with a determination as to whether there is any substantial evidence to support the findings, we are satisfied that there was substantial evidence in the record upon which the trial court could find that Erickson was authorized to sell the house in question and that this authorization included the authority to make a contract of sale.
Under the state of record the evidence was such as to establish Erickson's authority both on the basis of actual and ostensible authority. "Actual authority is such as a principal intentionally confers upon the agent, or intentionally, or by want of ordinary care, allows the agent to believe himself to possess." ( 2316.) In the instant case the evidence was such as to warrant the finding that, during their telephone conversation, Stephens authorized Erickson to negotiate and conclude the sale of the house to a purchaser who would agree to remove the house within a time less than that contained in plaintiff's original offer. The record is equally susceptible of the inference that Erickson himself believed he had such authority.
The record also warrants the inference that by his conduct Stephens led plaintiff to believe he had conferred authority upon Erickson to sell the house. Based on the fact that Erickson accepted plaintiff's counterproposal to remove the house within 30 days and gave him the receipt in question following the telephone conversation between Erickson and Stephens which was carried on in plaintiff's presence, it is reasonable to infer plaintiff assumed that as a result of the telephone conversation Erickson was authorized to sell the house upon the terms and conditions agreed upon between himself and Erickson. "Ostensible authority is such as a principal, intentionally or by want of ordinary care, causes or allows a third person to believe the agent to possess." ( 2317.) [5] Within the ambit of this definition it has been held that if a principal by his acts has led others to believe that he *115 has conferred authority upon an agent, he cannot be heard to assert, as against third persons who have relied thereon in good faith, that he did not intend to confer such power. (Safeway Stores, Inc. v. King Lumber Co., 45 Cal. App. 2d 17, 22 [113 P.2d 483]; Gaine v. Austin, 58 Cal. App. 2d 250, 260 [136 P.2d 584].)
It is defendants' contention that it was incumbent upon plaintiff to inquire into the extent of Erickson's authority. [6] Where the agent acts within the scope of his actual authority, it is immaterial whether or not an inquiry into the extent of the authority has been made by a person dealing with the agent. (Wood v. Crocker First Nat. Bank, 107 Cal. App. 685, 686 [291 P. 221]; Palo Alto Mutual etc. Assn. v. First Nat. Bank, 33 Cal. App. 214, 223 [164 P. 1124]; Rankin v. Brown, 131 Cal. App. 137, 143 [20 P.2d 954].) [7] With regard to ostensible authority, the rule is that, if the principal clothes his agent with such authority, a person dealing with the agent, in the absence of any conduct on the part of either principal or agent warranting inquiry, is entitled to rely upon that apparent authority and is not bound by undisclosed limitations. (2 Cal.Jur.2d, Agency, 44, p. 689; 2318.) The rule asserted by defendants that a person who does not determine the extent of the agent's power acts at his own peril (Keele v. Clouser, 92 Cal. App. 526, 532 [268 P. 682]; Hill v. Citizens Nat. Trust & Sav. Bank, 9 Cal. 2d 172, 177 [69 P.2d 853]), does not apply where, by reason of the conduct of the principal, there is no ground for inquiry. (Fairbanks v. Crump Irr. etc. Co., Inc., 108 Cal. App. 197, 209 [291 P. 629]; Robinson v. American Fish etc. Co., 17 Cal. App. 212, 219-220 [119 P. 388].) The rule contended for by defendants applies to an assumed agency. Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it. (Hill v. Citizens Nat. Trust & Sav. Bank, supra, p. 177; Ernst v. Searle, 218 Cal. 233, 240 [22 P.2d 715].) In the present case there was no controversy with respect to the existence of the agency, the controverted issue being the nature and extent of the authority. Assuming arguendo that the instant case is not one in which plaintiff was entitled to rely upon Erickson's apparent authority by reason of Stephens' conduct, the burden was upon plaintiff to establish the nature and extent of Erickson's authority. As hereinbefore indicated the *116 evidence adduced by plaintiff was sufficient to meet this burden.
Damages
Defendants assert that the judgment awarded special damages which were not properly pleaded, and that the award was based upon loss of profits which were speculative and uncertain. [fn. 8] Before proceeding to a discussion of these assignments of claimed error, we should point out that the applicable measure of damages for the conversion of personal property is section 3336 which reads as follows: "The detriment caused by the wrongful conversion of personal property is presumed to be: First--The value of the property at the time of the conversion, with the interest from that time, or, an amount sufficient to indemnify the party injured for the loss which is the natural, reasonable and proximate result of the wrongful act complained of and which a proper degree of prudence on his part would not have averted; and Second--A fair compensation for the time and money properly expended in pursuit of the property."
[8] Although the first part of section 3336 appears to provide for alternative measures of recovery, the first of the two measures, namely the value of the property converted at the time and place of conversion with interest from that time, is generally considered to be the appropriate measure of damages in a conversion action. (48 Cal.Jur.2d, Trover and Conversion, 44, p. 589; 2 Witkin, Summary of Cal. Law (1960) 430, p. 1627; Lonergan v. Monroe, 77 Cal. App. 2d 223, 225 [175 P.2d 42]; Fletcher Aviation Corp. v. Landis Mfg. Co., 95 Cal. App. 2d 905, 909- 910 [214 P.2d 400]; Murphy v. Wilson, 153 Cal. App. 2d 132, 136 [314 P.2d 507].) [9] The determination of damages under the alternative provision is resorted to only where the determination on the basis of value at the time of conversion would be manifestly unjust. (48 Cal.Jur.2d, Trover and Conversion, supra, pp. 589-590; Betzer v. Olney, 14 Cal. App. 2d 53, 61 [57 P.2d 1376]; see Ruiz v. Bank of America, 135 Cal. App. Supp. 2d 860, 864 [287 P.2d 409]; Wade v. Markwell & Co., 118 Cal. App. 2d 410, 432 [258 P.2d 497].)
[10a] In the instant case the evidence and the admissions made by the parties [fn. 9] clearly establish the value of the house *117 to be $250. Accordingly, under the first alternative of section 3336 the trial court would have been obliged to award damages in the sum of $250, plus interest from the time of the conversion. However, since the trial court awarded damages in the sum of $3,040, it is apparent that it did so upon the basis of the second alternative of section 3336, namely, "an amount sufficient to indemnify the party injured for the loss which is the natural, reasonable and proximate result of the wrongful act complained of ...." Our immediate inquiry, therefore, is whether, under the circumstances of the instant case, damages were properly assessable under the second alternative, and, if so, whether such measure of damages was properly applied.
We are satisfied that there were special circumstances in the present case which required a different measure of damages to be applied than that provided under the first alternative. The record discloses that plaintiff was engaged in the business of buying houses for the purpose of moving them to other lots, rehabilitating them, and then selling them. The record further discloses that, based upon cost factors derived from previous experience, the cost of moving the subject house to a certain available lot, and then renovating it, would amount to approximately $8,000. Plaintiff testified that he had "several choices of sites" upon which to move the house, that he "had a verbal agreement" to purchase the lot, upon which he proposed to move the house, from one Camerlo, who owned two lots at the site, for $4,000. Plaintiff also testified that, based upon such experience and other sales made by him in the general area where the house was to be relocated, the probable selling price of the house and lot would be the sum of $17,000. Based upon this selling price, plaintiff stated that his anticipated profit would be the difference between such price and the aggregate total cost of $12,000 incurred for the house moving and renovating and for the lot acquisition.
A real estate broker-salesman named Woods, called as a witness by plaintiff, testified that he was familiar with this house and its proposed removal, and that "Based on the projected renovation process" he was of the opinion that it would sell from between $16,950 to $17,250. Woods also stated that he had sold other houses for plaintiff, and that he intended to sell this house in which case his commission would *118 be 6 per cent. He also testified that houses were selling in the area in question in a price range of from $15,950 or $16,000 to $18,500.
[11] The "amount of compensation ... must be left to the sound discretion of the trial court, to be ascertained and adjudged after consideration of all the facts and circumstances established by the evidence in the case." (LeBrun v. Richards, 210 Cal. 308, 320 [291 P. 825]; Wade v. Markwell & Co., supra, p. 432.) [10b] In the case at bench, although the trial court did not indicate in its findings or memorandum of decision how it arrived at damages in the sum of $3,040, the award is not unreasonable, provided the trial court was properly justified in awarding damages for loss of anticipated profits, since damages in such amount find support in the record. Anticipated profits in the sum of $3,040 may be established within the range of the selling prices and aggregate costs testified to. Thus a resale value of $16,000, less the sum of a commission of 6 per cent (amounting to $960), a lot cost of $4,000, and moving and renovation costs preparatory to resale in the amount of $8,000, leaves a net profit of $3,040.
[12] It is well established in this state that recovery may be had in a tort action for loss of profits resulting from the tort if such profits can be shown with a reasonable degree of certainty; but recovery is denied where the profits are uncertain, speculative or remote. (Johnson v. Central Aviation Corp., 103 Cal. App. 2d 102, 105-106 [229 P.2d 114]; Natural Soda Products Co. v. City of Los Angeles, 23 Cal. 2d 193, 199 [143 P.2d 12]; Razzano v. Kent, 78 Cal. App. 2d 254, 261-262 [177 P.2d 612]; Fibreboard Paper Products Corp. v. East Bay Union of Machinists, 227 Cal. App. 2d 675, 702- 703 [39 Cal. Rptr. 64].) [13] Although evidence to establish profits must not be uncertain or speculative, "This rule does not apply to uncertainty as to the amount of the profits which would have been derived, but to uncertainty or speculation as to whether the loss of profits was the result of the wrong and whether any such profits would have been derived at all." (Continental Car-Na-Var Corp. v. Moseley, 24 Cal. 2d 104, 113 [148 P.2d 9].)
[14] It is clear from the cases dealing with prospective profits that the principle inherent in the recovery of such profits is that the evidence must make reasonably certain their nature, occurrence, and extent. (See Grupe v. Glick, 26 Cal. 2d 680, 692-693 [160 P.2d 832].) Moreover, where such profits are allowable, a defendant cannot complain if the *119 probable profits are, of necessity, estimated, since it was the defendant himself who prevented the plaintiff from realizing the profits. (Fibreboard Paper Products Corp. v. East Bay Union of Machinists, supra, p. 703; see Natural Soda Products Co. v. City of Los Angeles, supra, p. 200.)
Turning to the present case in the light of these principles, we are satisfied that plaintiff has established a satisfactory basis for estimating what his anticipated profits would have been had there been no tort. There was evidence of operating experience sufficient to permit a reasonable estimate of the probable expense required to place the house in a condition where it would be ready for resale so as to furnish a basis for estimating what the probable profits would have been when sold at the market values prevailing in the area. We find no merit, moreover, in defendants' contention that the anticipated profits were conjectural on the basis that plaintiff had not purchased the lot in question, and that therefore it was speculative as to whether he could have acquired it. The record discloses that plaintiff stated he had a verbal agreement to purchase the lot for $4,000. We are not called upon to determine the validity of the agreement between plaintiff and the lot owner, but it suffices for the purpose of our review to state that such evidence was susceptible of the inference that plaintiff was in a position to acquire ownership of the lot so as to move the house onto it. The performance of work and the expenditure of money upon the house in question by plaintiff, immediately upon signing the receipt, so as to make it ready for removal is some evidence that plaintiff possessed a lot upon which to place it. Moreover, there was evidence in the record that other lots in the area were available to plaintiff for approximately the same cost as the one in question.
[15] Defendants contend that the anticipated loss of profits is not "the natural, reasonable and proximate result of the wrongful act complained of," within the meaning of section 3336. Although no California case which has applied the alternative measure of damages in a conversion case has specifically defined this language, we are satisfied that its meaning is synonymous with the term "proximate cause" or "legal cause." These terms mean, in essence, "that there be some reasonable connection between the act or omission of the defendant and the damage which the plaintiff has suffered." (Prosser, Torts (3d ed. 1964) p. 240.) In determining whether this connection exists, the question is whether it was reasonably *120 foreseeable to a prudent person, having regard for the accompanying circumstances, that injury or damage would likely result from his wrongful act. (Osborn v. City of Whittier, 103 Cal. App. 2d 609, 615-616 [230 P.2d 132]; Mosley v. Arden Farms Co., 26 Cal. 2d 213, 216 [157 P.2d 372]; Werkman v. Howard Zink Corp., 97 Cal. App. 2d 418, 425 [218 P.2d 43].) This question being one of fact to be determined generally by the trier of fact (Osborn v. City of Whittier, supra, p. 616; Barker v. City of Los Angeles, 57 Cal. App. 2d 742, 748 [135 P.2d 573]; Bauman v. City & County of San Francisco, 42 Cal. App. 2d 144, 154 [108 P.2d 989]), we are satisfied that the trial court's implied finding in the instant case that plaintiff's loss of profits from the contemplated sale of the house was proximately caused by defendants' wrongful conversion is adequately supported by the evidence. We reach this conclusion based on the facts, as established by the record, that plaintiff was engaged in the business of buying houses for the purpose of moving them to other lots and reselling them, and that defendants desired to have the subject house moved off their property. Therefore, the conclusion is inescapable that it would be foreseeable to reasonably prudent persons in defendants' position that if they wrongfully prevented plaintiff from carrying out his plans with regard to the house, plaintiff's damages would include a loss of profits from the contemplated sale.
[16a] Defendants assert, further, that since loss of profits constitutes special damages, and since plaintiff pleaded damages generally, he is not entitled to recover such loss of profits. [17] It is the rule that special damage must be set forth in the complaint or the plaintiff will not be permitted to give evidence of it at the trial. (Colvig v. RKO General, Inc., 232 Cal. App. 2d 56, 69 [42 Cal. Rptr. 473]; Shook v. Pearson, 99 Cal. App. 2d 348, 351-352 [221 P.2d 757].) [18] "General damages," however, need not be specially pleaded. (Armstrong v. Adams, 102 Cal. App. 677, 682 [283 P. 871]; Castino v. Ritzman, 156 Cal. 587, 588 [105 P. 739]; Mitchell v. City of Santa Barbara, 48 Cal. App. 2d 568, 573 [120 P.2d 131].) [19] General damages are "those which necessarily result from the act complained of," (Morris v. Allen, 17 Cal. App. 684, 688 [121 P. 690]) and are implied by law to have thereby accrued to plaintiff. (Stevenson v. Smith, 28 Cal. 102, 104 [87 Am. Dec. 107]; Mitchell v. Clarke, 71 Cal. 163, 167 [11 P. 882, 60 Am. Rep. 529]; Armstrong v. Adams, supra, p. 682.) Special damages, on the other hand, are defined as damages *121 which do not arise from the wrongful act itself, but depend on the circumstances peculiar to the infliction of each respective injury. (Berry v. Bank of Bakersfield, 177 Cal. 206, 210 [170 P. 415]; Drinkhouse v. Van Ness, 202 Cal. 359, 377 [200 P. 809].)
[20] With respect to loss of profits, the appellate courts have made a distinction between actions ex contractu and ex delicto insofar as the pleading of such loss is concerned. In cases involving breach of contract it has been held that loss of profits need not be specially pleaded. (Morello v. Growers Grape Products Assn., 82 Cal. App. 2d 365, 375 [186 P.2d 463]; Brunvold v. Johnson, 36 Cal. App. 2d 226, 230 [97 P.2d 489]; Tahoe Ice Co. v. Union Ice Co., 109 Cal. 242, 249 [41 P. 1020]; Grupe v. Glick, supra, 26 Cal. 2d 680, 688.) The rationale of the cases holding that lost profits are recoverable without special allegations is that they are usually the direct and natural result of a breach of contract and are such as may fairly be supposed to have entered into the contemplation of the parties when they made the contract. (See Tahoe Ice Co. v. Union Ice Co., supra, p. 249; and Grupe v. Glick, supra, p. 688.) In tort cases, however, it has been held that damages from loss of profits are special in their nature and that therefore the facts must be particularly alleged in order to admit evidence thereof and justify recovery. (Shaw v. Southern Pacific R.R. Co., 157 Cal. 240, 242 [107 P. 108]; Lombardi v. California St. Ry. Co., 124 Cal. 311, 319- 320 [57 P. 66]; McCarthy Co. v. Boothe, 2 Cal. App. 170, 173 [83 P. 175]; Maus v. Scavenger Protective Assn., 2 Cal. App. 2d 624, 631 [39 P.2d 209].) The distinction in the application of the rule in tort cases appears to lie in the rationale that loss of profits is not generally the direct and natural result of the tort. (See Lombardi v. California St. Ry. Co., supra, pp. 319-320.)
[16b] In the present case the original complaint was one for specific performance in which no damages were pleaded in the complaint. [fn. 10] The only reference to damages was contained in the prayer which, in addition to seeking a conveyance of the house, also prayed for damages in the sum of $6,000 "for withholding conveyance of said house; ..." No demurrer was interposed and the cause proceeded to trial on *122 the issues tendered by the answer. [fn. 11] At the trial, during the examination of plaintiff, his counsel sought to introduce evidence of loss of profits, to which offer defendants objected on the ground of irrelevancy. Plaintiff's counsel thereupon moved to amend his complaint to incorporate in the body of the complaint the allegations in the prayer with respect to damages. [fn. 12] This motion was granted. Counsel for defendants thereupon indicated that defendants were not prepared to meet this claim of "specific damages," and the trial court indicated that if a continuance was necessary the same would be granted. Plaintiff then adduced evidence with respect to his claim of loss of profits. Although defendants interposed objections on the ground that a proper foundation had not been laid, and on the basis of relevancy and hearsay, no objection was thereafter interposed that such damages for loss of profits were not within the purview of the allegations of the complaint. Moreover, plaintiff was cross-examined with respect to his testimony as to loss of profits. At the conclusion of the first day of trial, on March 21, 1963, the trial having proceeded into defendants' case, the trial was adjourned until August 1, 1963. When the trial resumed, defendants presented evidence on the issue of loss of profits. Before doing so, counsel for defendants noted that he was presenting such evidence because the court had deemed such evidence admissible, and stated "we object to the admissibility of it," to which the court replied: "I understand." At the conclusion of defendants' case and rebuttal by plaintiff, the cause was ordered submitted on briefs.
On September 24, 1963, the trial judge filed his memorandum of decision indicating he found that defendants wrongfully converted the house in question to plaintiff's damage in the sum of $3,040. Thereafter, and on November 18, 1963, plaintiff filed an "Amended Complaint to Conform to Proof" alleging in essence that defendants had, on November 14, 1962, sold to plaintiff the house in question and had thereafter converted it to their own use "to plaintiff's damage in the sum of Three thousand, Forty Dollars ($3,040.00)." On the same *123 day, the trial court made and signed its "Findings of Fact and Conclusions of Law" and judgment.
It clearly appears that the original complaint sounded in contract. In the light of the authorities heretofore cited, plaintiff would have been entitled to prove loss of profits under the general allegation of damages. Although the reporter's transcript seems to indicate that plaintiff moved to amend the complaint for the purpose of alleging the general damages which were omitted from the body of his complaint, and that this motion was granted, the minutes of the court, as contained in the clerk's transcript, disclose that the motion which plaintiff made, and which was granted by the court, was a motion to amend the complaint "to conform to proof." The record is barren as to the basis upon which the amendment to conform to proof was granted. However, in view of the fact that the trial court in its memorandum of decision and in its findings indicated that its decision was based on the theory of conversion, and since no error is claimed in this respect by defendants, we must assume that the amendment to conform to proof was for the purpose of amending the original complaint for specific performance to one in tort for conversion. It should also be pointed out here that both parties, in their briefs on appeal, have treated the present case as one in conversion, and, therefore, under well- established principles the appellate court must consider that the case was tried on this theory.
We thus have a situation where, during the course of the trial, plaintiff changed his theory of recovery from specific performance to conversion, that is, from an ex contractu action to one ex delicto. No claim is made by defendants that the trial court erred or abused its discretion in allowing the amendment to conform to proof or the change in plaintiff's theory of recovery. The only claim of error is that the amended complaint did not plead the loss of profits specially.
As a result of the amendment to conform to proof the action became one in tort and therefore any allegations of damages purporting to seek loss of anticipated profits should have been pleaded specially. The amended complaint, however, merely contained a general allegation of damages. Our inquiry, therefore, is whether under the state of the record it can be said that defendants were prejudiced. Initially it should be noted that no objection was interposed to the amended complaint. Moreover, the purpose of the rule requiring that special damages be specifically pleaded is to inform the defendant of the *124 case he must meet and thus to prevent surprise. (Mills v. San Diego Conservatory of Music, 47 Cal. App. 300, 306 [191 P. 546].) In the case at bench, while defendants may have been taken by surprise when plaintiff originally offered evidence relating to loss of profits, they were given ample opportunity to meet this evidence and to prepare for this issue when they were granted a continuance in excess of four months. Defendants did offer evidence on this issue. Therefore, they were not misled by the amended complaint nor were they prejudiced by the general allegation of damages in this complaint since defendants tried their case with reference to the issue of loss of profits.
In First Nat. Bank v. De Moulin, 56 Cal. App. 313 [205 P. 92], the plaintiff was given permission at the conclusion of the trial to amend its complaint by interlineation to conform to proof as to the number of shares owned by the defendant, but failed to do so. The reviewing court, in refusing to reverse the judgment because of such failure, stated: "But, leave having been given to amend and the court having found the fact in accordance with the evidence and in conformity with the amendment that would have been made had plaintiff availed itself of the permission granted, we think that we should consider the case as though the amendment had in fact been made." (Pp. 323-324.) (To the same affect see: Armstrong v. Lassen Lumber & Box Co., 204 Cal. 529, 531-532 [209 P. 453]; Stark v. Wellman, 96 Cal. 400, 402-403 [31 P. 259].) In Stark, we find this statement with respect to an amendment made after verdict and the entry of judgment: "But if its effect had been to help the complaint, the defendant still was not injured, for he tried his case with reference to it, and was not prejudiced by the fact that it was not reduced to writing until afterwards." (P. 403.)
The judgment is affirmed.
Sullivan, P. J., and Sims, J., concurred.
On cross-examination he stated: "I said, 'Well, I can pinpoint the time element if you will agree for--let me set a move date within ten days.' ... And I said, 'I can pinpoint this move in a matter of ten days.' He said, 'This is agreeable.' He wrote the receipt and I wrote the check. ... I assured him that, barring weather, that the building would be gone in thirty days. ... I don't know why it wasn't put in the receipt. This conversation took place, and the man agreed. ... Our agreement was between Erickson and I, after the telephone conversation he said that this would be acceptable--this would be agreeable, to give him a move date within ten days upon my assurance that this building would be moved within thirty days, barring weather, and that was agreed upon. No one could do it if the weather was bad. ... He said something is going to have to be done about the time element on this, and I, at that time I told him. 'All right. I'll give you a definite move date within ten days, and I, --barring weather, the house will be gone in thirty days.' At that time he wrote the receipt and said that that was acceptable."
NOTES
[fn. 1] 1. The trial court found that Erickson was not a party to the conversion. The record does not disclose whether judgment was entered in his favor. In any event he is not a party to this appeal.
[fn. 2] 2. Erickson testified that the check was tendered and received as a deposit on the house.
[fn. 3] 3. Under the Uniform Sales Act, which was the law in California in 1962 when the transactions herein involved took place, the remedy of conversion was available to the buyer "Where the property in the goods has passed to the buyer" (former Civ. Code, 1786); and pursuant to Civ. Code, 1738 and 1739 (rule 1), as they then provided, the property in the house passed when the contract was made.
[fn. 4] 4. This statement is followed with the assertion that "The trial Court made its finding in favor of respondent and such finding will not be disturbed on appeal if supported by any substantial evidence."
[fn. 5] 5. His statements in this respect appear in several portions of his testimony both on direct and cross-examination. On direct examination he testified as follows: "... I told him that I felt the building could be moved out of there within thirty days, but certainly within ten days' time I could give him a definite move date. ... And I told him that within ten days I could give him the actual moving date."
[fn. 6] 6. All statutory references hereinafter made are to the Civil Code unless otherwise indicated.
[fn. 7] 7. Erickson testified that when "its stated that an agent is authorized to sell a house" such expression means, in the trade, that "he's authorized to take an offer and a deposit." Stephens also testified that he would not have accepted the terms contained in the receipt given by Erickson to plaintiff.
[fn. 8] 8. Defendants contend that if they are liable the proper measure of damages is the sum of $250, the value of the house.
[fn. 9] 9. In his complaint plaintiff alleged that the sum of $250 which he paid for the house "was the fair and reasonable value of said property." This allegation was not denied by defendants in their answer, and hence must be deemed to have been admitted. Moreover, defendants concede in their brief that the value of the house on the day of the alleged conversion was the sum of $250.
[fn. 10] 10. The gist of the complaint was that a contract had been completed, a fair consideration mutually tendered and accepted, and a present sale consummated by defendant Erickson, as agent of Ferrol Development Company. Plaintiff prayed that defendants execute a good and sufficient conveyance of the property.
[fn. 11] 11. The answer alleged, in essence, that no binding contract had been entered into between plaintiff and defendants.
[fn. 12] 12. Plaintiff's counsel stated as follows: "If Your Honor please, I'd like to bring this in, or I'd like to ask to amend the complaint to show damages, loss of anticipated profits. You will note the prayer does show a--an item of $6,000 damages. Counsel is right. There is no item in the body of the complaint. I was going to put this on--I intended to ask to amend to conform to proof. I'd like to at this time to ask to amend the complaint to put it in as it is in the prayer and not in the body of the complaint." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1202648/ | 509 F.3d 1020 (2007)
ACTION APARTMENT ASSOCIATION, INC., a California corporation; Mathew Millen, Plaintiffs-Appellants,
v.
SANTA MONICA RENT CONTROL BOARD, a municipal entity; Mary Ann Yurkonis, Defendants-Appellees.
No. 05-56533.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted June 18, 2007.
Filed December 3, 2007.
*1021 *1022 Robert J. Franklin (argued) and Rosario Perry, Santa Monica, CA, attorneys for Plaintiffs-Appellants Action Apartment Association, Inc., and Mathew Millen.
David Pettit and Michael Roth (argued), Los Angeles, CA; and David Daniels and Michaelyn Jones, Santa Monica, CA, attorneys for Defendants-Appellees, Santa Monica Rent Control Board and Mary Ann Yurkonis.
Before: SIDNEY R. THOMAS, RAYMOND C. FISHER, and RONALD M. GOULD, Circuit Judges.
THOMAS, Circuit Judge:
In this appeal, we are presented with a claim that Santa Monica's rent control ordinance is unconstitutional under both the "public use" component of the Fifth Amendment's Takings Clause and the substantive component of the Fourteenth Amendment's Due Process Clause. We conclude that the Fifth Amendment claims are not viable, that the facial Fourteenth Amendment claim is time-barred, and that the as applied Fourteenth Amendment claim is unripe. We therefore affirm the judgment of the district court, dismissing the complaint.
I
In 1979, the people of Santa Monica, California, enacted a rent control ordinance by popular referendum. In 1991, we upheld that ordinance against a due process challenge and a takings challenge. Schnuck v. City of Santa Monica, 935 F.2d 171, 172 (9th Cir.1991). We held that Santa Monica's desire to control rapidly rising rents and to cure housing shortages constituted a legitimate governmental purpose, and we held that the 1979 rent control ordinance was a rational means of accomplishing that purpose.
The ordinance has remained in effect continuously since 1979, but the Santa Monica Rent Control Board ("the Board") has amended its provisions on three occasions, twice prior to 2002 and once in 2002. Among the 2002 amendments, the Board enacted some new provisions, including, most significantly, provisions that make it harder for landlords to evict their tenants.
Action Apartment Association ("Action"), an association of landlords, and Matthew Millen ("Millen"), an individual landlord, filed suit under 42 U.S.C. § 1983 exactly two years after the effective date of the 2002 amendments. In their complaint, Action and Millen (collectively, "the Landlords") alleged that the rent control ordinance violates the Fifth Amendment's Just Compensation Clause, the Fifth Amendment's Public Use Clause, and the Fourteenth Amendment's Substantive Due Process Clause.
Acknowledging that Schnuck is binding, the Landlords do not contend that rent control is unrelated to any conceivable public purpose. Rather, they contend that the Board's 2002 decision to reenact rent control with only minor alterations was an arbitrary and irrational response to the many problems that have arisen and persisted since the ordinance went into effect in 1979. Specifically, the Landlords contend that no rational legislator could have expected the more stringent eviction requirements to remedy Santa Monica's housing difficulties. They also contend that the only rational solution to the identified housing problems would be to implement *1023 a means test, by which rent ceilings would be available only to poor tenants.
The district court dismissed the complaint, holding that all Fifth Amendment claims were premature and that all substantive due process claims were preempted by the Fifth Amendment. The Landlords appeal the public use claims and the substantive due process claims. They do not appeal the district court's dismissal of their just compensation claims.
II
Because we conclude that the Plaintiffs failed to distinguish this court's decision in Schnuck, we affirm the district court's dismissal of the plaintiffs' public use claims.
The Public Use Clause generally holds that "one person's property may not be taken for the benefit of another private person without justifying public purpose, even though compensation be paid." Thompson v. Consolidated Gas Utilities Corp., 300 U.S. 55, 80, 57 S.Ct. 364, 376, 81 L.Ed. 510 (1937). As the Supreme Court made clear in Kelo v. City of New London, Connecticut, 545 U.S. 469, 125 S.Ct. 2655, 162 L.Ed.2d 439 (2005), this requirement is not a stringent one. Indeed, Kelo specifically noted that the Fifth Amendment provides "legislatures broad latitude in determining what public needs justify the use of the takings power." Id. at 483, 125 S.Ct. 2655. Under that flexible and deferential standard, there can be little doubt that Santa Monica's desire to control rising rents and to remedy housing shortages constitutes a legitimate public purpose. In fact, we have already so held. Schnuck, 935 F.2d at 176.
Recognizing that Schnuck is binding, the Landlords do not ask us to hold that the rent control ordinance is unrelated to a public purpose. In fact, they fully concede that the ordinance and its amendments intend to serve a legitimate public need. The Landlords' only Fifth Amendment argument is that the 2002 amendments to the rent control ordinance are not rationally related to the purpose they intend to serve.
In construing this argument as a Public Use Clause claim, the Landlords rest primarily on the Supreme Court's opinion in Hawaii Housing Authority v. Midkiff, 467 U.S. 229, 104 S.Ct. 2321, 81 L.Ed.2d 186 (1984). In that case, the Court held that a regulatory taking would satisfy the public use clause if it was "rationally related to a conceivable public purpose." Id. at 241, 104 S.Ct. 2321. The Court then conducted a two-step inquiry to determine whether the regulatory taking at issue was constitutional. The first question, of course, was whether the legislature's purpose constituted a "conceivable public purpose." Then, after determining that the legislature's purpose was permissible, the Court asked as a subsequent test of constitutionality whether the legislature's specific approach was rational. See id. at 241-42, 104 S.Ct. 2321. Action and Millen focus exclusively on this second prong of the Midkiff test, arguing only that the 2002 re-enactment and amendments take an irrational approach to solving Santa Monica's housing problems.
This court has confronted such claims before. In Richardson v. City and County of Honolulu, 124 F.3d 1150 (9th Cir. 1997), the plaintiffs challenged a Honolulu condominium conversion law, similar to the state law upheld by the Supreme Court in Midkiff. The plaintiffs argued that although the state law may have been rationally related to a public purpose when passed, subsequent increases in the price of housing subject to the law (at a rate greater than increases in unregulated housing) demonstrated that a conversion law could no longer be considered a rational solution to Hawaii's housing problems. Id. at 1159. The court rejected the argument, *1024 holding that deference to a legislature's public use determination is required "unless the use involves an `impossibility' or is `palpably without reasonable foundation.'" Id. at 1156 (quoting Midkiff, 467 U.S. at 240-41, 104 S.Ct. 2321). Under Midkiff, "whether the statute actually succeeds is irrelevant." Id. at 1159 (emphasis added). The court concluded that despite how poorly the state law may have performed, the city could have rationally believed that prices would have been even worse had the law not been in effect. Id. at 1159-60.
The Landlords' "public use" claims are similar to the claims this court rejected in Richardson. Even assuming that the Landlords' allegations concerning the effects of the Santa Monica rent control scheme are true, that would not demonstrate that the city's re-enactment of the rent control statute was irrational. This court has already determined that "[c]ontrolling rents to a reasonable level and limiting evictions substantially alleviate hardships to Santa Monica tenants." Schnuck, 935 F.2d at 175. "That rent control may unduly disadvantage others, or that it may exert adverse longterm effects on the housing market, are matters for political argument and resolution; they do not affect the constitutionality of the Rent Control Law." Id. The same reasoning holds true today. As in Schnuck, we decline to second-guess Santa Monica's chosen means of implementing its indisputably legitimate goals. See Kelo, 545 U.S. at 488, 125 S.Ct. 2655 ("`[E]mpirical debates over the wisdom of takings . . . are not to be carried out in the federal courts'") (quoting Midkiff, 467 U.S. at 242, 104 S.Ct. 2321).
The 2002 amendments to the Santa Monica rent control law do not change this analysis. The amendments merely tweak the rent control scheme enacted in 1979. We fail to see how these minor changes could alter this court's determination in Schnuck that the Santa Monica rent control law is rationally related to a legitimate purpose. We therefore hold that there was a valid public purpose for the amendments to the rent control law, and on that basis, affirm the district court's dismissal of claims three and five of the complaint.
III
We also affirm the district court's dismissal of the Landlords' substantive due process claims, but we again affirm on different grounds than the district court stated. Although in light of recent Circuit authority we must disagree with the district court's conclusion that the Fifth Amendment preempts the Landlords' substantive due process claims, we conclude that Action's facial claim is time-barred and that Millen's as applied claim is unripe.
A
This court previously had held that the Fifth Amendment preempts certain substantive due process challenges to land use regulations. Armendariz v. Penman, 75 F.3d 1311, 1321-24 (9th Cir.1996). But we recently recognized that the Supreme Court's decision in Lingle v. Chevron U.S.A., Inc., 544 U.S. 528, 125 S.Ct. 2074, 161 L.Ed.2d 876 (2005), signaled that substantive due process can be an appropriate vehicle to challenge the rationality of land use regulations. Crown Point Dev., Inc. v. Sun Valley, 506 F.3d 851 (9th Cir.2007). Thus, as an initial matter, we conclude that the Landlords' substantive due process claims are not preempted and that they are cognizable.
The Supreme Court has long held that certain substantive due process claims might be precluded if the same claims could be decided under an "explicit textual source of constitutional protection" rather *1025 than under the "generalized notion of `substantive due process. . . .'" Graham v. Connor, 490 U.S. 386, 395, 109 S.Ct. 1865, 104 L.Ed.2d 443 (1989). In other words, under the Graham rule, a substantive due process claim will be preempted if the asserted substantive right can be vindicated under a different and more precise constitutional rubric.
Although the Supreme Court has never cited or applied this preemption rule outside the context of criminal procedural rights, this court had explicitly held that the rule applied to the Public Use Clause. In Armendariz, we cited Graham to hold that litigants may not state their claims as substantive due process claims if the governmental action they challenge is a taking of property for private rather than public use. 75 F.3d at 1321-24.
Relying on our construction of this rule in Squaw Valley Development Co. v. Goldberg, 375 F.3d 936, 949-50 (9th Cir. 2004), the Board here argues that the public use clause provides a preemptive textual source of constitutional protection against the governmental action that the Landlords challenge. Indeed, the Board cites Squaw Valley for the broad proposition that, under Armendariz and Graham, no substantive due process claim will survive if it is based on a deprivation of real property.
To the extent that Squaw Valley can be read to support the Board's expansive understanding of Armendariz, the Supreme Court's decision in Lingle effectively overruled that portion of the Squaw Valley opinion. See Crown Point, 506 F.3d at 856 (citing Miller v. Gammie, 335 F.3d 889, 903 (9th Cir.2003) (en banc) (holding that a three-judge panel should declare a prior opinion effectively overruled if the prior opinion is clearly irreconcilable with intervening Supreme Court authority)). After Lingle, "it is no longer possible . . . to read Armendariz as imposing a blanket obstacle to all substantive due process challenges to land use regulations." Id.
In Squaw Valley, we noted that a substantive due process challenge brought "in the context of regulating use of real property" might not be "viable in this circuit." 375 F.3d at 950. The sole basis for that skepticism was the Fifth Amendment's preemptive effect. The Squaw Valley opinion traced a line of cases that started with and followed from Armendariz, and the Squaw Valley opinion indicated that those cases created a "blanket prohibition" of any substantive due process claim "based on a deprivation of real property." Id. at 949, 950 n. 7. The court then rejected the specific substantive due process claim at issue in Squaw Valley on the ground that the claim could be stated as a takings claimthat is, as a challenge to the regulation's ability "`substantially [to] advance legitimate state interests.'" Id. at 950 (quoting Macri v. King County, 126 F.3d 1125, 1129 (9th Cir.1997)).
As we recently recognized, that specific logic cannot survive the Supreme Court's decision in Lingle. Crown Point, 2007 WL 3197049, at *4. In Lingle, the Court specifically held that an arbitrary and irrational deprivation of real property, although it would no longer constitute a taking, might be "so arbitrary or irrational that it runs afoul of the Due Process Clause." 544 U.S. at 542, 125 S.Ct. 2074. Given that holding, it must be true that the Armendariz line of cases can no longer be understood to create a "blanket prohibition" of all property-related substantive due process claims. Squaw Valley, 375 F.3d at 949. After Lingle, "the Fifth Amendment does not invariably preempt a claim that land use action lacks any substantial relation to the public health, safety, or general welfare," Crown Point, at 856, regardless of anything Squaw Valley said to the contrary.
*1026 We see no difficulty in recognizing the alleged deprivation of rights in real property as a proper subject of substantive due process analysis. We have long held that a substantive due process claim "must, as a threshold matter, show a government deprivation of life, liberty, or property." Nunez v. City of Los Angeles, 147 F.3d 867, 871 (9th Cir.1998). In Squaw Valley, we specifically reaffirmed the principle that landowners have "a constitutionally protected property interest" in their "right to devote [their] land to any legitimate use." 375 F.3d at 949 (internal quotation marks omitted) (citing Harris v. County of Riverside, 904 F.2d 497, 503 (9th Cir.1990)). An arbitrary deprivation of that right, thus, may give rise to a viable substantive due process claim in any case in which the Takings Clause does not provide a preclusive cause of action.[1]
The Landlords do not assert that the government has "taken" their property within the meaning of the Fifth Amendment. They do, however, assert that the provisions of the rent control ordinance neither serve nor are "rationally related to any legitimate government purpose," and therefore unconstitutionally violate their right to use their property as they see fit. [GB 23] Specifically, they argue that the provisions are "arbitrary, unreasonable, and unrelated to the general welfare" because "there is no legitimate interest in subsidizing non-housing uses of rental properties nor in providing new rights and affirmative defenses for illegal occupants," particularly where California law does not recognize illegal occupants as tenants. [RB 12, GB 23] "[A] regulation that fails to serve any legitimate governmental objective may be so arbitrary or irrational that it runs afoul of the Due Process Clause." Lingle, 544 U.S. at 542, 125 S.Ct. 2074 (citing Lewis, 523 U.S. at 846, 118 S.Ct. 1708). The Landlords' challenges to the rent control provisions satisfy this standard and state a viable substantive due process theory.
B
Despite the legal viability of the Landlords' substantive due process theory, both of their Fourteenth Amendment claims fail on timeliness grounds. Action's claim is time-barred, and Millen's claim is unripe.
1
Because Action's claim rests on provisions of the rent control ordinance that have been in effect since 1979, its 2004 complaint was filed well beyond California's two-year statute of limitations for § 1983 claims.
It is well-established that claims brought under § 1983 borrow the forum state's statute of limitations for personal injury claims, see Wilson v. Garcia, 471 U.S. 261, 266-67, 105 S.Ct. 1938, 85 L.Ed.2d 254 (1985), and in California, that limitations period is two years. See Cal. Code Civ. P. § 335.1. "Generally, the statute of limitations begins to run when a potential plaintiff knows or has reason to *1027 know of the asserted injury." De Anza Properties X, Ltd. v. County of Santa Cruz, 936 F.2d 1084, 1086 (9th Cir.1991).
In the context of a facial challenge under the Takings Clause, we have held that the cause of action accrues on the date that the challenged statute or ordinance went into effect. See id. at 1087 (citing Hall v. City of Santa Barbara, 833 F.2d 1270, 1276 (9th Cir.1986)). We also have held that the mere re-enactment of a statutory scheme does not restart the clock, id. at 1086, and that substantive amendments to a takings statute will give rise to a new cause of action only if those amendments alter "the effect of the ordinance upon the plaintiffs." id.
Although we have not yet held that these accrual rules apply to facial substantive due process claims, see Levald, Inc. v. City of Palm Desert, 998 F.2d 680 (9th Cir.1993) (rejecting a facial takings claim as time-barred but considering a similar substantive due process claim on the merits, without discussing timeliness), we see no reason to distinguish between facial takings claims and facial substantive due process claims. First, the Wilson limitations period applies to all § 1983 claims, regardless of the civil right asserted. 471 U.S. at 272, 105 S.Ct. 1938. Second, the logic for the accrual rules in the takings context applies with equal force in the substantive due process context. Given the general rule that "the statute of limitations begins to run when a potential plaintiff knows or has reason to know of the asserted injury," it stands to reason that any facial injury to any right should be apparent upon passage and enactment of a statute. De Anza, 936 F.2d at 1086. Action, thus, should have known of its injury on the date of the ordinance's enactment.
The only question that remains is whether Action's asserted injury arises from provisions that were enacted in 1979 or from substantive amendments that were enacted in 2002 and that altered "the effect of the ordinance on" Action. If Action challenges either the substance of the 1979 provisions or the mere re-enactment of those provisions in 2002, then its claim is time-barred.
Unlike its "public use" clause claim, Action's substantive due process claim makes no mention whatsoever of the 2002 amendments. Action states only that the "application of Rent Control to Plaintiffs' property deprives Plaintiffs of their property rights without due process of law because Rent Control is not rationally related to its stated purposes." That allegation was as true in 1979 as it is today.
We therefore hold that Action's facial substantive due process claim is time-barred.
2
Millen's substantive due process challenge is time-barred in part and unripe in part.
First, Millen alleges that the enforcement of rent ceilings for the benefit of a wealthy tenant is irrational. That claim is time-barred because the rent ceiling has been in effect continuously since 1979 and was not substantively altered in 2002.
Second, Millen seems to allege that the new eviction requirements, which were enacted in 2002, give rise to a new injury on the ground that the application of those provisions for the benefit of the same tenant would be arbitrary. Millen, however, has not alleged that the government has actually enforced any of those provisions against him and for the benefit of the identified tenant.
"[A] substantive due process violation is complete as soon as the government action occurs." Macri v. King County, 126 F.3d 1125, 1129 (9th Cir.1997). However, "[t]he mere existence of a statute, *1028 which may or may not ever be applied to plaintiffs, is not sufficient to create a case or controversy within the meaning of Article III." Stoianoff v. State of Mont., 695 F.2d 1214, 1223 (9th Cir.1983).
In this case, the "government action" that Millen challenges is the enforcement of the new eviction requirements for the protection of a particular tenant in his building. That specific government action has not yet occurred. As a result, his claim is not yet ripe for review.
AFFIRMED.
NOTES
[1] In another recent opinion, we explained the distinction between substantive due process and Takings Clause claims:
"[The Takings Clause] `is designed not to limit the governmental interference with property rights per se, but rather to secure compensation in the event of otherwise proper interference. . . .' Due process violations cannot be remedied under the Takings Clause, because `if a government action is to be found impermissible for instance because it fails to meet the `public use' requirement or is so arbitrary as to violate due processthat is the end of the inquiry. No amount of compensation can authorize such action.'"
Equity Lifestyle Properties, Inc. v. County of San Luis Obispo, 505 F.3d 860, 870 n. 16 (9th Cir.2007) (citing Lingle, 544 U.S. at 537, 543, 125 S.Ct. 2074). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1481331/ | 16 F.2d 202 (1926)
UNITED STATES
v.
KIRSCHENBLATT.
No. 88.
Circuit Court of Appeals, Second Circuit.
December 6, 1926.
John M. Harlan, of New York City, for the United States.
Leo H. Klugherz, of New York City, for defendant in error.
Before HOUGH, MANTON, and HAND, Circuit Judges.
HAND, Circuit Judge (after stating the facts as above).
The officers' entry under the warrant was lawful, the warrant itself being sufficiently supported by the affidavits. The arrest was also lawful, so that the question is of the officers' powers to search either under the warrant, or as an incident to the arrest. The prosecution argues that the arrest gave the officers power to search the premises and seize, not only liquors and bottling apparatus, but any incriminatory papers which they found. That the search warrant did not go so far we understand to be agreed; at any rate, so much is plain. It is authorized only by section 25, tit. 2, of the National Prohibition Act (Comp. St. § 10138½m), which describes the property seizable as "liquor, the containers thereof," and "property designed for the manufacture of liquor."
While the last phrase may possibly not exclude all papers, it is plain, at least in a case like this, that the warrant would not justify the indiscriminate seizure of incriminatory documents. For this reason the argument runs that, since a person arrested may be searched, and all documents found upon him may be kept whatever their nature, and since the premises in which he is arrested may be searched for contraband as *203 an incident to the arrest, the search so authorized must be as broad as the search of his person.
It is true that the law has never distinguished between documents and other property found upon the person of one arrested. All may be used in the trial, so far as relevant. Baron v. U. S., 286 F. 822, 824 (C. C. A. 6); Browne v. U. S., 290 F. 870, 875 (C. C. A. 6); U. S. v. Kraus (D. C.) 270 F. 579; Dillon v. O'Brien, 16 Cox, Cr. Cas. 245; People v. Chiagles, 237 N. Y. 193, 142 N. E. 583, 32 A. L. R. 676; Getchell v. Page, 103 Me. 387, 69 A. 624, 18 L. R. A. (N. S.) 253, 125 Am. St. Rep. 307; 1 Bishop, New Crim. Proc. § 211. While the point was not involved, the language in Weeks v. U. S., 232 U. S. 383, 392, 34 S. Ct. 341, 58 L. Ed. 652, L. R. A. 1915B, 834, Ann. Cas. 1915C, 1177, was broad enough to cover it.
Furthermore, the Supreme Court has very recently held that, upon an arrest, the immediate premises may be searched for contraband (Agnello v. U. S., 269 U. S. 20, 46 S. Ct. 4, 70 L. Ed. 145), just as a vehicle may be searched (Carroll v. U. S., 267 U. S. 132, 45 S. Ct. 280, 69 L. Ed. 543, 39 A. L. R. 790), and as officers, once in under a search warrant, are not confined to the contraband specified in it (Steele v. U. S. [No. 1] 267 U. S. 498, 45 S. Ct. 414, 69 L. Ed. 757; U. S. v. Old Dominion Warehouse Co., 10 F.[2d] 736 [C. C. A. 2]). This doctrine has been extended beyond contraband to incriminatory papers in two cases in the Ninth circuit. Sayers v. U. S., 2 F.(2d) 146; Marron v. U. S., 8 F.(2d) 251.
Brady v. U. S., 300 F. 540 (C. C. A. 6), is put forward as another instance; but, so far as we can learn, the only evidence used against the defendants was contraband liquor.
While we agree that strict consistency might give to a search of the premises, incidental to arrest, the same scope as to a search of the person, it seems to us that that result would admit exactly the evils against which the Fourth Amendment is directed. Whatever the casuistry of border cases, it is broadly a totally different thing to search a man's pockets and use against him what they contain, from ransacking his house for everything which may incriminate him, once you have gained lawful entry, either by means of a search warrant or by his consent. The second is a practice which English-speaking peoples have thought intolerable for over a century and a half. It was against general warrants of search, whose origin was, or was thought to be, derived from Star Chamber, and which had been a powerful weapon for suppressing political agitation, that the decisions were directed, of which Entick v. Carrington, 19 How. St. Trials, 1029, is most often cited. These cases were decided just after the colonists had been hotly aroused by the attempt to enforce customs duties by writs of assistance, and when within 30 years they framed the Fourth Amendment it was general warrants that they especially had in mind. Boyd v. U. S., 116 U. S. 616, 6 S. Ct. 524, 29 L. Ed. 746.
After arresting a man in his house, to rummage at will among his papers in search of whatever will convict him, appears to us to be indistinguishable from what might be done under a general warrant; indeed, the warrant would give more protection, for presumably it must be issued by a magistrate. True, by hypothesis the power would not exist, if the supposed offender were not found on the premises; but it is small consolation to know that one's papers are safe only so long as one is not at home. Such constitutional limitations arise from grievances, real or fancied, which their makers have suffered, and should go pari passu with the supposed evil. They withstand the winds of logic by the depth and toughness of their roots in the past. Nor should we forget that what seems fair enough against a squalid huckster of bad liquor may take on a very different face, if used by a government determined to suppress political opposition under the guise of sedition.
It is likely that the admitted power to seize the fruits, or the tools, of crime, itself rests upon a very ancient basis. People v. Chiagles, 237 N. Y. 193, 196, 142 N. E. 583, 32 A. L. R. 676. At any rate, it is carefully circumscribed in the Search Warrant Act (Comp. St. § 10496¼a et seq.) itself. The pursuit of a thief on hue and cry was a civil as well as criminal remedy, and the captors retook the booty and in early times themselves did execution; the tool or other object which killed a man was deodand and forfeit; a burglar's kit or a counterfeiter's plate have never been property in the ordinary sense, any more than liquor since the enactment of section 25. Ruder times had ruder remedies, but the power to seize such chattels probably descends from notions which have long since lost their rational foundation, and, while the method has changed, the substance remains.
While the point has never been decided, the language of the Supreme Court accords with our belief that it is only such things that may be seized as an incident to an arrest. Thus, in Carroll v. U. S., 267 U. S. 132, 158, *204 45 S. Ct. 280, 287 (69 L. Ed. 543, 39 A. L. R. 790), the power was expressed as extending to things "which it is unlawful for him to have and which may be used to prove the offense." In Agnello v. U. S., 269 U. S. 20, 30, 46 S. Ct. 4, 5 (70 L. Ed. 145) the phrase is: "Things connected with the crime as its fruits, or as the means by which it was committed, as well as weapons and other things to effect an escape from custody." In Gouled v. U. S., 255 U. S. 298, 309, 41 S. Ct. 261, 265 (65 L. Ed. 647) the language is: "They" search warrants "may not be used as a means of gaining access to a man's house or office and papers solely for the purpose of making search to secure evidence to be used against him in a criminal or penal proceeding." It is true that the last case did not involve an arrest, but the language scarcely admits of limitation on that account.
The real difficulty in the case at bar appears to us to be in the application of the last doctrine, because it is apparent that a paper may be itself the very thing against which the law is directed. U. S. v. Welsh (D. C.) 247 F. 239, affirmed 267 F. 819 (C. C. A. 2); Search Warrant Act, § 2, subd. 3 (Comp. St. § 10496¼b). As was said in Gouled v. U. S., papers as such have no sanctity, and may be seized, like any other property, if they offend. Courts have at times extended the doctrine to papers, not actually part of the criminal act, but necessary to the conduct of the venture as a whole. Dillon v. O'Brien, 16 Cox, Cr. Cas. 245; State v. Mausert, 88 N. J. Law, 286, 95 A. 991, L. R. A. 1916C, 1014; Swan v. U. S., 54 App. D. C. 100, 295 F. 921; Marron v. U. S., 8 F.(2d) 251 (C. C. A. 9). Yet, if all records of the offender's doings, such as account books or customers' lists, are to be included, there would seem to be no escape from allowing a search at large through all his papers.
It is seldom that one finds a document containing evidence of crime which was not at one time used in its commission; the papers important in any prosecution are ordinarily either communications passing between the actors or records necessary to keep track of the details. These are all that the prosecution requires, and all that, except in rare instances, it will ever get. They cannot be reached, except by a thorough search of all that the offender has, to allow which would be to countenance exactly what the amendment was designed to prevent. Therefore, while we agree that it is no answer to a search to say that papers have been seized, we cannot agree that the power extends beyond those which are a part of the forbidden act itself. It would be hazardous to attempt any definition; we shall not.
The forged note, the fraudulent prospectus, the policy slip, the written contract, if that be forbidden, the seditious broadside perhaps all these may be contraband and subject to seizure when found on the premises. But the whole of a man's correspondence, his books of account, the record of his business, in general, the sum of his documentary property these, in our judgment, are as inviolate upon his arrest as they certainly are upon search warrant. It is enough in the case at bar to say that the record shows no papers seized which fall within the exception.
Order affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1579426/ | 516 F.Supp.2d 324 (2007)
HOWARD HESS DENTAL LABORATORIES INC. and Philip Guttierez d/b/a Dentures Plus, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
DENTSPLY INTERNATIONAL, INC., Defendant.
Jersey Dental Laboratories f/k/a Howard Hess Dental Laboratories Incorporated, and Philip Guttierez d/b/a Dentures Plus, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
Dentsply International, Inc., and named dental dealers, Defendants.
Civ. Nos. 99-255-SLR, 01-267-SLR.
United States District Court, D. Delaware.
September 26, 2007.
*325 *326 Pamela S. Tikellis, Esquire, Robert J. Kriner, Jr., Esquire, and A. Zachary Naylor, Esquire of Chimicles & Tikellis LLP, Wilmington, DE, of counsel: Thomas A. Dubbs, Esquire, Richard T. Joffe, Esquire, and Craig L. Briskin, Esquire of Labaton Sucharow & Rudoff LLP, New York City, for Plaintiffs.
W. Harding Drane, Jr., Esquire of Potter Anderson & Corroon LLP, Wilmington, DE, of Counsel for Defendant Nowak Dental Supplies, Inc.; H. Cary A. Des Roches, Esquire of the Law Offices of Cary A. Des Roches, APLC, New Orleans, LA, for Defendants Accu Bite, Inc., Dental Supplies and Equipment, Inc., Hendon Dental Supply, Inc., Henry Schein Inc., Kentucky Dental Supply Co. Inc. n/k/a KDSC Liquidation Corp., Mohawk Dental Co., and Nowak Dental Supplies, Inc.
Kathleen Jennings, Esquire and Karen V. Sullivan, Esquire of Oberly Jennings & Rhodunda, P.A., Wilmington, DE, for Defendant Arnold Dental Supply Co.
Henry E. Gallagher, Esquire and Jaclyn M. Mason, Esquire of Connolly Bove Lodge & Hutz LLP, Wilmington, DE, for Defendants Atlanta Dental Supply Co., Benco Dental Co., and Darby Dental Laboratory Supply Co., Inc.
Kurt M. Heyman, Esquire and Particia L. Enerio, Esquire of Proctor Heyman LLP, Wilmington, DE, for Defendant Burkhart Dental Supply Co.
William D. Johnston, Esquire and Christian Douglas Wright, Esquire of Young, Conaway, Stargatt & Taylor, LLP, Wilmington, DE, of counsel: Margaret M. Zwisler, Esquire, Eric J. McCarthy, Esquire, Charles R. Price, Esquire, and Amanda P. Biles, Esquire of Latham & Watkins LLP, Washington, DC, and Brian M. Addison, Esquire, of Dentsply International Inc., York, PA, for Defendant Dentsply International Inc.
Edward M. McNally, Esquire and Fotini Antonia Skouvakis, Esquire of Morris James LLP, Wilmington, DE, for Defendants Iowa Dental Supply, Co., LLC, Johnson & Lund Co., Inc. and Marcus Dental Supply Co.
William J. Wade, Esquire of Richards, Layton & Finger, Wilmington, DE, for Defendant Patterson Dental Co.
James J. Maron, Esquire, Wayne A. Marvel, Esquire, and Antionette Hubbard, Esquire of Maron Marvel Bradley & Anderson, P.A., Wilmington, DE, for Defendant Pearson Dental Supply, Inc.
Thomas P. Preston, Esquire of Blank Rome LLP, Wilmington, DE, of counsel: Charles W. Jirauch, Esquire of Quarles & Brady LLP, Pheonix, AZ, for Defendant Ryker Dental of Kentucky, Inc.
*327 MEMORANDUM OPINION
SUE L. ROBINSON, District Judge.
I. INTRODUCTION
Currently pending before the court are several motions in two related cases. Plaintiffs Howard Hess Dental Laboratories, Inc. ("Hess") and Philip Guttierez d/b/a Dentures Plus ("Dentures Plus") filed an antitrust class action against Dentsply International, Inc. ("Dentsply") on April 21, 1999. Hess Dental Laboratories, et. al v. Dentsply International Inc. ("the Hess action"), Civ. No. 99-255 (D.I.1). Hess subsequently became Jersey Dental Laboratories ("Jersey Dental") and, on April 24, 2001, the same plaintiffs filed an antitrust class action against Dentsply and twenty-six dental dealers.[1]Jersey Dental Laboratories f/k/a Howard Hess Dental Laboratories, Inc. and Philip Guttierez d/b/a Dentures Plus v. Dentsply et. al ("the Jersey Dental action"), Civ. No. 01-267 (D.I.1). An amended complaint was filed in the Jersey Dental action on October 10, 2006, wherein plaintiffs allege that defendants have conspired to maintain a purported monopoly on the manufacture of artificial teeth for sale in the United States, to restrain trade by the implementation of exclusive dealing arrangements, and to sell such teeth at anticompetitive prices. (Civ. No. 01-267, D.I. 259 at ¶ 45) Plaintiffs seek damages, equitable relief, and costs.
Currently before the court is plaintiffs' motion for summary judgment in the Hess action. (Civ. No. 99-255, D.I.256) For the reasons that follow, the court denies plaintiffs' motion. In the Jersey Dental action, several motions to dismiss have been filed: (1) motions to dismiss for lack of personal jurisdiction and improper venue pursuant to Federal Rules of Civil Procedure 12(b)(2) and (b)(3), brought by nine nonresident defendants (D.I.266)[2] and by defendant Nowak Dental Supplies, Inc. ("Nowak") (D.I.274) (collectively, the "non-Delaware defendants"); (2) certain dental dealer defendants' motion to dismiss counts II and IV of the amended complaint (D.I.264);[3] and (3) Dentsply's motion to *328 dismiss counts III and V of the amended complaint (D.I.279). For the reasons that follow, the court grants each of these motions.
II. BACKGROUND
A. The Parties
Plaintiffs Jersey Dental and Dentures Plus are dental laboratories that purchase Dentsply products, including Dentsply's "Trubyte" brand of artificial teeth, indirectly through dental dealers. They bring this action on behalf of themselves and other similarly situated dental laboratories that have purchased and regularly purchase Dentsply's Trubyte brand of artificial teeth. According to the amended complaint, the class includes "thousands of other similarly situated dental laboratories." (Civ. No. 01-267, D.I. 259 at ¶¶ 2, 3)
Defendant Dentsply is a leading manufacturer and worldwide distributor of products and equipment for the dental market. Through its Trubyte Division, Dentsply manufactures and markets products used by dental laboratories to make dentures and other removable dental prosthetics. (Id. at ¶ 4)
The remaining defendants are dental dealers that distribute Dentsply's products, including Trubyte brand teeth, through direct sales to dental laboratories. (Id. at ¶¶ 5-26) The dental dealers are the primary source of distribution of artificial teeth to dental laboratories. (Id. at ¶¶ 55, 59) Dental dealers stock a "full array" of products needed to make dentures, including artificial teeth, and generally employ skilled sales and service people to provide services to dental laboratory customers. (Id. at ¶ 60)
B. History of this Antitrust Litigation
For more than fifteen years, Dentsply operated under a policy that discouraged the dental dealers from carrying competitors' artificial teeth. U.S. v. Dentsply Int'l, 399 F.3d 181, 185 (3d Cir.2005), cert. denied, 546 U.S. 1089, 126 S.Ct. 1023, 163 L.Ed.2d 853(2006). In 1993, Dentsply adopted "Dealer Criterion 6," which provided that dental dealers. promoting Dentsply's products "may not add further tooth lines to their product offering." Id. Dentsply's relationship with the dealers is "especially terminable at will" because Dentsply operates on a purchase order basis. Id. Dealer Criterion 6 was enforced against dealers that were not "grandfathered" for sales of competing products, i.e., that had carried competing products before 1993. Id. "[I]n the recent past, none of [the dental dealers] have given up the popular Dentsply teeth to take on a competitive line." Id. Dentsply also "rebuffed attempts by [the grandfathered dealers] to expand their lines of competing products beyond the grandfathered ones." Id.
1. The government action
The first suit to be filed regarding Dealer Criterion 6 was an antitrust action filed by the United States("the government action") on January 5, 1999. (Civ. No. 99-005, D.I.1) In its suit, the government alleged that Dentsply: (1) acted unlawfully to maintain a monopoly in violation of § 2 of the Sherman Act, 15 U.S.C. § 2; (2) entered into unlawful restrictive dealing agreements that substantially lessened competition in violation of § 3 of the Clayton Act, 15 U.S.C. § 14; and (3) entered into unlawful agreements in unreasonable restraint of interstate trade and commerce in violation of § 1 of the Sherman Act, 15 U.S.C. § 1. (Id.) Following a bench trial, this court entered judgment in favor of Dentsply on August 12, 2003. (Id., D.I. 517) This court found that Dealer Criterion 6 did not preclude Dentsply's main rivals from marketing their teeth directly *329 to the dental laboratories and, therefore, Dentsply had no power to control prices or exclude competitors from the consumers. (Id., D.I. 514 at 157-59) The Third Circuit reversed, finding that Dealer Criterion 6 functionally excluded competitors from the dealers' network, "a narrow, but heavily traveled channel to the dental laboratories," and ultimately was "a solid pillar of harm to competition." U.S. v. Dentsply, 399 F.3d at 190-91.
Following the Third Circuit's mandate (Civ. No. 99-005, D.I.534), the court entered injunctive relief in favor of the government (Id., D.I. 559). The injunction was entered on April 26, 2006 and directed, inter alia, Dentsply to cease requiring its dealers to be exclusive Dentsply dealers and to remove Dealer Criterion 6 from its list of dealer requirements. (Id.) The injunction will be in effect for seven and one-half years, or until October 26, 2013. (Id.)
2. The private actions
Plaintiffs Hess and Dentures Plus filed the Hess action against Dentsply on April 21, 1999. (Civ. No. 99-255, D.I.1) Plaintiffs alleged the same antitrust violations as the government and, in addition, added causes of action for attempt to monopolize and conspiracy to monopolize, as well as damages claims, against Dentsply. (Id.) Dentsply moved for summary judgment against plaintiffs on April 3, 2000. On March 30, 2001, this court granted in part Dentsply's motion. Specifically, the court found that plaintiffs are indirect purchasers who lack standing to sue for damages under Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977). (Id., D.I. 181, 182) Therefore, the court granted Dentsply's motion "to the extent the Hess plaintiffs [sought] damages" and denied the motion to the extent they sought injunctive relief. (Id., D.I. 182 at 33, found at 2001 WL 624807 (D.Del. Mar.30, 2001))
Less than a month later, on April 24, 2001, plaintiffs filed the Jersey Dental action in this court, alleging Sherman Act violations against Dentsply and twenty-six dental dealers (the "dealer defendants") arising from the same exclusive dealing arrangement alleged in the government and Hess actions. (Civ. No. 01-267, D.I.1[4]) This time, plaintiffs alleged that they were direct purchasers. The court subsequently granted Dentsply's motion to dismiss the damages portion of the antitrust claims against it, finding that the indirect purchaser rule still applied to plaintiffs (i.e., that the "co-conspirator" exception to Illinois Brick did not apply). (Id., D.I. 166; D.I. 167, found at 180 F.Supp.2d 541 (D.Del.2001)) The court reasoned that despite plaintiffs having named, or attempted to name, all alleged co-conspirators as codefendants, the policy concerns of Illinois Brick were still implicated, namely: (1) nothing prevented the dental dealers, who were not "substantially equal" participants in the alleged conspiracy under any set of alleged facts, from filing their own lawsuits against Dentsply; (2) the difficulties of damage apportionment between direct and indirect purchasers was still present; and (3) plaintiffs did not fall within the group of private attorneys general that Congress created to redress Dentsply's assumed antitrust violation through use of the treble damage remedy. (Id., D.I. 166)
*330 Plaintiffs thereafter moved to amend their complaint in an attempt to overcome some of these deficiencies. The proposed amended complaint alleged that defendants have engaged in a retail price-fixing conspiracy, that intermediary dental dealers act only as agents for Dentsply, that plaintiffs suffered lost profits from the unrealized sale of competitive teeth, and that the dental dealers will not sue Dentsply. (Id., D.I. 170, exs. A & B) The court denied leave to amend, reasoning that plaintiff's amended claims would not withstand a motion to dismiss; the co-conspirator exception to Illinois Brick still did not apply because the dental dealers could still sue Dentsply; and Illinois Brick barred recovery of lost profits damages because plaintiffs were indirect purchasers. (Id., D.I. 208, found at Jersey Dental Laboratories v. Dentsply International, Inc., 2002 WL 2007916 (D.Del. Aug. 27, 2002))
On September 21, 2005, having heard the appeal of the Hess action, the Third Circuit affirmed this court's decision that plaintiffs, as indirect purchasers, lacked standing to sue for damages on its exclusive dealing claims. See Howard Hess Dental Labs., Inc. v. Dentsply Int'l, Inc., 424 F.3d 363 (3d Cir.2005). The Third Circuit held that a co-conspirator exception for conspiracies that are not resale price maintenance conspiracies "would only exist in circumstances where the middlemen would be barred from bringing a claim against their former co-conspirator the manufacturer because their involvement in the conspiracy was `truly complete'." Id. at 378-79. The Court found that plaintiffs did not qualify for such an exception "because the [d]istrict [c]ourt concluded, and [p]laintiffs have conceded, that the dealers' involvement in the alleged conspiracy with Dentsply was not `truly complete'." Id. at 383 (emphasis in original). Plaintiffs' admission on appeal that the dealers and Dentsply were not "substantially equal,"[5] therefore, was fatal to its claim for damages for the alleged exclusive dealing; plaintiffs were nevertheless permitted to proceed under the coconspirator exception to pursue an action for overcharge damages caused by the alleged vertical price-fixing conspiracy. Id. at 384 & n. 19.
C. The Amended Jersey Dental Complaint
Plaintiffs responded to the Third Circuit's Hess decision by filing an amended complaint in the Jersey Dental action on October 10, 2006. (Civ. No. 01-267, D.I. 259) Plaintiffs continue to assert claims against all defendants for retail price-fixing;[6] these claims are not challenged in the present motions to dismiss. (Id. at ¶¶ 131-136) The amended complaint alleges that Dentsply and the dental dealers engaged in an exclusive dealing conspiracy in violation of sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2. In counts II and III, plaintiffs allege that Dentsply and the dental dealers conspired to monopolize the artificial teeth market. (Id. at ¶¶ 137-165) In count II, plaintiffs seek both damages and injunctive relief against the dealer defendants for this alleged conspiracy. (Id. at ¶¶ 148-149) In count III, plaintiffs seek only an injunction, and not damages, against Dentsply for its role in *331 this alleged conspiracy. (Id. at ¶¶ 161, 165)
In counts IV and V, plaintiffs allege that Denstply and the dental dealers `conspired to restrain trade which, they allege, constituted a group boycott of Dentsply's competitors. (Id. at ¶¶ 166-187) Once again, plaintiffs seek both damages and injunctive relief against the dealer defendants (count IV) (id. at ¶¶ 175-176), but seek only an injunction against Dentsply (count V) (id. at ¶ 186).[7]
III. STANDARDS OF REVIEW
A. Summary Judgment
A court shall grant summary judgment only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The moving party bears the burden of proving that no genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 n. 10, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "Facts that could alter the outcome are `material,' and disputes are `genuine' if evidence exists from which a rational person could conclude that the position of the person with the burden of proof on the disputed issue is correct." Horowitz v. Fed. Kemper Life Assurance Co., 57 F.3d 300, 302 n. 1 (3d Cir.1995) (internal citations omitted). If the moving party has demonstrated an absence of material fact, the nonmoving party then "must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita, 475 U.S. at 587, 106 S.Ct. 1348 (quoting Fed.R.Civ.P. 56(e)). The court will "view the underlying facts and all reasonable inferences therefrom in the light most favorable to the party opposing the motion." Pa. Coal Ass'n v. Babbitt, 63 F.3d 231, 236 (3d Cir.1995). The mere existence of some evidence in support of the nonmoving party, however, will not be sufficient for denial of a motion for summary judgment; there must be enough evidence to enable a jury reasonably to find for the nonmoving party on that issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If the nonmoving party fails to make a sufficient showing on an essential element of its case with respect to which it has the burden of proof, the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct, 2548, 91 L.Ed.2d 265 (1986).
B. Motion to Dismiss for Lack of Personal Jurisdiction
When reviewing a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(2), a court must accept as true all allegations of jurisdictional fact made by the plaintiff and resolve all factual disputes in the plaintiff's favor. Once a jurisdictional defense has been raised, the plaintiff bears the burden of establishing with reasonable particularity that sufficient minimum contacts have occurred between the defendant and the forum state to support jurisdiction. See *332 Provident Nat'l Bank v. California Fed. Say. & Loan Ass'n, 819 F.2d 434, 437 (3d Cir.1987). To establish personal jurisdiction, a party must allege facts sufficient to satisfy two requirements, one statutory and one constitutional. See Reach & Assoc., P.C. v. Dencer, 269 F.Supp.2d 497, 502 (D.Del.2003). With respect to the statutory requirement, the court must determine whether there is a statutory basis for jurisdiction under the forum state's long arm statute. See id. As for the constitutional basis, the court must determine whether the exercise of jurisdiction comports with the defendant's right to due process. See id.; see also Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945).
C. Motion to Dismiss for Improper Venue
A court may dismiss a lawsuit for improper venue pursuant to Fed.R.Civ.P. 12(b)(3). However, the Federal Rules of Civil Procedure do not contain any specific venue provisions or requirements. A court, therefore, must determine whether venue is proper in accordance with the appropriate statutes when deciding a motion to dismiss for improper venue. See Albright v. Gord, Civ. A. No. 02-304, 2002 WL 1765340, *3 (D.Del. July 31, 2002) (citations omitted). The moving party has the burden of proving that venue is improper. See id. (citing Myers v. American Dental Ass'n, 695 F.2d 716, 724 (3d Cir. 1982)). "[I]n ruling on defendant['s] motion the plaintiff's choice of venue should not be lightly disturbed." Jumara v. State Farm Ins. Co., 55 F.3d 873, 879 (3d Cir. 1995) (citations omitted).
D. Motion to Dismiss Pursuant to Rule 12(b)(6)
In reviewing a motion filed under Fed. R.Civ.P. 12(b)(6), the court must accept all factual allegations in a complaint as true and take them in the light most favorable to plaintiff. See Erickson v. Pardus, ___ U.S. ___, ___, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007); Christopher v. Harbury, 536 U.S. 403, 406, 122 S.Ct. 2179, 153 L.Ed.2d 413 (2002). A complaint must contain "`a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to `give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, ___ U.S. ___, ___, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). A complaint does not need detailed factual allegations; however, "a plaintiffs obligation to provide the `grounds' of his `entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.'" Id. at 1964-65 (alteration in original) (citation omitted). The "[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true." Id. at 1959.
IV. DISCUSSION
A. Plaintiffs' motion for summary judgment in the Hess action
In the Hess action, the dental laboratory plaintiffs have moved for summary judgment on their claim against Dentsply for "exclusive dealing/monopoly maintenance" (count II). (Civ. No. 99-255, D.I. 256, D.I. 257 at 1, 5) Plaintiffs claim that, because the Third Circuit found that Dentsply violated section 2 in the government action, Dentsply is collaterally estopped from contesting its liability vis-a-vis the Hess complaint. Although Dentsply's violations are claimed to be the same, plaintiffs also claim that they are presently entitled to *333 greater injunctive relief than that awarded by this court in the government action.
1. Collateral estoppel
The doctrine of collateral estoppel states that, "once an issue is actually and necessarily determined by a court of competent jurisdiction, that determination is conclusive in subsequent suits based on a different cause of action involving a party to the prior litigation." Montana v. U.S., 440 U.S. 147, 153, 99 S.Ct. 970, 59 L.Ed.2d 210 (1979). Plaintiffs must establish the following four requirements for collateral estoppel to apply: "(1) the identical issue was previously adjudicated; (2) the issue was actually litigated; (3) the previous determination was necessary to the decision; and (4) the party being precluded from relitigating the issue was fully represented in the prior action." Jean Alexander Cosmetics, Inc. v. L'Oreal USA, Inc., 458 F.3d 244, 249 (3d Cir.2006) (citations omitted). Doubts about application of the doctrine of collateral estoppel should usually be resolved against its use. See Witkowski v. Welch, 173 F.3d 192, 206 (3d Cir.1999) (citing Kauffman v. Moss, 420 F.2d 1270, 1274 (3d Cir.1970)).
2. Discussion
The complaint in the Hess action contains certain causes of action pled in the government action, and some new claims. Both cases involve monopoly maintenance, restrictive dealing, and restraint of trade claims against Dentsply.[8]U.S. v. Dentsply, 399 F.3d at 184, (Civ. No. 99-255, D.I. 1 (counts I, II, and V)) The section 2 claim brought in the government action was a monopoly maintenance claim. U.S. v. Dentsply, 399 F.3d at 184. "Unlawful maintenance of a monopoly is demonstrated by proof that a defendant has engaged in anti-competitive conduct that reasonably appears to be a significant contribution to maintaining monopoly power . . . There must be proof that competition, not merely competitors, has been harmed." Id. at 187 (citations omitted). Following its review of the relevant market, Dentsply's power to exclude, and the efficacy of Dealer Criterion 6, the Third Circuit found in U.S. v. Dentsply that "the government established that Dentsply's exclusionary policies and particularly Dealer Criterion 6 violated [s]ection 2" of the Sherman Act. 399 F.3d at 196. Plaintiffs assert that, in view of this determination, Dentsply is collaterally estopped from contesting its liability for monopoly maintenance in the Hess case. (Civ. No. 99-255, D.I. 257 at 10-14) Dentsply counters that collateral estoppel does not apply because the issue of antitrust injury, specifically, the question of whether plaintiffs paid higher prices due to Dentsply's conduct, was never litigated in the government action. (Id., D.I. 262 at 8-10)
The relevant market for Dentsply's teeth, as defined by the Third Circuit, consists of two consumers combined: the dental dealers and the dental laboratories. Id. at 188. The question posed by plaintiffs' motion is, essentially, whether the Third Circuit's finding that competition in this market was harmed necessarily means that plaintiffs have suffered antitrust injury. Put another way, do plaintiffs' claims require proof' of specific injuries to plaintiffs, such as higher prices paid?
*334 In support for their argument that an acknowledgment of their injuries is implicit in the Third Circuit's decision, plaintiffs highlight the Court's finding that Dentsply's exclusive dealing had two anti-competitive effects: (1) "keep[ing] sales of competing teeth below the critical level necessary for any rival to pose a real threat to Dentsply's market share"; and (2) "impair[ing] the laborator[ies'] choice in the marketplace." (D.I. 266 at 6-7, 11) (citing U.S. v. Dentsply, 399 F.3d at 191, 194) Certainly, these findings are to be given preclusive effect. See Montana v. U.S., 440 U.S. at 153, 99 S.Ct. 970; Burlington Northern R. Co. v. Hyundai Merchant Marine Co., Ltd., 63 F.3d 1227, 1231 (3d Cir.1995).
Plaintiffs' estoppel argument, however, impermissibly combines the concepts of causation and injury. Antitrust injury "is an injury of the type the antitrust laws were intended to prevent and that flows from that which makes the defendants' acts unlawful." Angelico, M.D. v. Lehigh Valley Hospital 184 F.3d 268, 273 (3d Cir.1999) (citing Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 109, 107 S.Ct. 484, 93 L.Ed.2d 427 (1986)) (additional citations and internal quotations omitted). Plaintiffs, therefore, must have both suffered an injury, and that injury must have resulted from the occurrence of the condemned events, here, the use of Dealer Criterion 6 and other exclusionary practices to maintain Dentsply's monopoly. It is certainly plausible that plaintiffs, representing one of two consumer groups who collectively form the relevant market in this case, lost profits as the result of Dentsply's exclusionary practices. See U.S. v. Dentsply, 399 F.3d at 190-91 ("experts for both parties testified that were Dealer Criterion 6 abolished, prices would fall," presumably raising the profit margin for the laboratories). The Third Circuit, however, has issued no such finding.
The court declines to infer that a "finding of anticompetitive effects necessarily implies a finding that consumers [here, the dental laboratories] have been hurt" (D.I. 257 at 19-20),[9] in view of the lack of a determination that plaintiffs have suffered an injury in fact (which is demonstrably linked to the conduct which has been proscribed by the Third Circuit) and the nature of such injury. The court, therefore, declines to grant plaintiffs' motion for summary judgment on the ground of collateral estoppel. See In re Microsoft Corp. Antitrust Litig., 232 F.Supp.2d 534, 538 (D.Md.2002) (denying motions for partial summary judgment where "[n]othing in the [previous] government case against *335 Microsoft demonstrate[d] that the consumer plaintiffs . . . suffered any such injuries").
3. Injunctive relief sought
The court notes that the fact that plaintiffs seek only injunctive relief rather than damages does not alter plaintiffs' obligation to establish its antitrust injuries. It does, however, provide an additional basis for the court's denial of plaintiffs' motion in view of the fact that Dentsply has already been enjoined from the monopolist activities condemned by the Third Circuit. (Civ. No. 99-005, D.I.559)
Plaintiffs assert that granting another injunction "will not be redundant but, rather, will substantially enhance the effectiveness of the injunctive relief already granted." (Civ. No. 99-255, D.I. 257 at 23) In addition to provisions that are "essentially the same" as the prohibitions set forth in the government's injunction, plaintiffs additionally request that another injunction: (1) be of unlimited duration, as compared to seven and a half years; (2) require that Dentsply (a) post the injunction on its website and (b) hire an outside, independent monitor, in contrast to the employee it has designated as the antitrust compliance officer for the government's injunction; and (3) prohibit Dentsply's participation in meetings or phone calls between dental dealers and laboratories absent the laboratories' request. (Id. at 25-28)
Aside from its theories on why additional relief would be beneficial to them, plaintiffs have not adequately explained why the government's injunction is insufficient to prevent Dentsply from engaging in anticompetitive practices. In fact, despite seeking a permanent injunction, plaintiffs assert only that they are "threatened with loss or injury proximately resulting from the recurrence of Dentsply's exclusive dealing/monopoly maintenance." (D.I. 257 at 24) Even if plaintiffs could meet the stringent requirements of the permanent injunction standard (and the court believes they cannot),[10] plaintiffs nevertheless fail to demonstrate a need for further, nonduplicative Measures to those already in place.[11] The court, therefore, denies plaintiffs' motion on the alternative basis that plaintiffs have not demonstrated that they are entitled to additional injunctive relief.[12]*336 See Harthman v. Witty, 480 F.2d 337, 339-40 (3d Cir.1973) (holding that "a second injunction was unnecessary and it would have been the duty of the court to refuse to grant it" where a first, permanent injunction of broad terms was in place, and plaintiff could have sought relief for continuing violations under that injunction) (vacating district court's order denying plaintiffs motion for damages); see also Ellis v. Gallatin Steel Co., 390 F.3d 461, 476 (6th Cir.2004) (district court committed reversible error in concluding irreparable harm had been shown, and awarding injunctive relief, three months after standing consent decree was obtained by the government).
B. The Non-Delaware Defendants' Motions to Dismiss for Lack of Personal Jurisdiction and Improper Venue
Nine non-Delaware defendants move to dismiss in the Jersey Dental action for lack of jurisdiction and improper venue pursuant to Federal Rules of Civil Procedure 12(b)(2) and (b)(3). (Civ. No. 01-267, D.I.266)[13] Defendant Nowak has filed its own motion on these grounds. (D.I.274)
1. The Clayton Act
Section 12 of the Clayton Act provides:
Any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found.
15 U.S.C. § 22 (emphasis added). The first clause relates to venue, while the second clause concerns service of process and, therefore, personal jurisdiction. In re: Automotive Refinishing Paint Antitrust Litigation (hereinafter, "Automotive Refinishing"), 358 F.3d 288, 293 (3d Cir. 2004).
2. Jurisdiction
In response to defendants' challenge to personal jurisdiction by this court, plaintiffs bear the burden of showing that personal jurisdiction exists. Marten v. Godwin, 499 F.3d 290, 294-95 (3d Cir.2007) (citing Gen. Elec. Co. v. Deutz AG, 270 F.3d 144, 150 (3d Cir.2001)). Plaintiffs must meet this burden through "affidavits or other competent evidence." Dayhoff Inc. v. H.J. Heinz Co., 86 F.3d 1287, 1302 (3d Cir.1996) (citations omitted). Personal jurisdiction must be considered separately from venue pursuant to section 12 of the Clayton Act. See Automotive Refinishing, 358 F.3d at 294-97.
Plaintiffs assert that the jurisdictional clause of the Clayton Act requires only that personal jurisdiction be demonstrated by "national contacts," rather than specific contacts with the jurisdiction in which defendants have been sued. (D.I. 289 at 6-13) Since each of the moving defendants are incorporated in one of the states of the United States, plaintiffs assert that sufficient national contacts exist. (Id. at 12) In support for their argument, plaintiffs rely on the Third Circuit's decision in Automotive Refinishing, 358 F.3d 288, 296-97 (3d Cir.2004); defendants dispute the applicability of Automotive Refinishing to the present case.
*337 Automotive Refinishing involved an antitrust class action filed against two German corporations that subsequently brought a motion to dismiss for lack of personal jurisdiction. Id. at 290. In contrast to the case at bar, the Automotive Refinishing Court was not confronted with a challenge to personal jurisdiction brought by domestic corporate defendants. The dispute involved whether the jurisdiction and venue clauses of section 12 operate independently of each other; the Automotive Refinishing Court resolved this question by stating that "the service of process provision on foreign corporations is independent of, and does not require satisfaction of, the specific venue provision under [s]ection 12 of the Clayton Act." Id. at 297 (emphasis added). The Automotive Refinishing Court next proceeded to analyze appellants' arguments that section 12 did not confer personal jurisdiction over them, and concluded that "personal jurisdiction in federal antitrust litigation is assessed on the basis of a defendant's aggregate contacts with the United States as a whole." Id. at 298.
Though this holding is not, in literal terms, limited to jurisdiction over foreign corporations, there are several compelling reasons for limiting Automotive Refinishing to its facts. First, the authority relied upon by the Automotive Refinishing Court does not concern domestic defendants. The Automotive Refinishing Court relied upon prior Third Circuit precedent set forth in Pinker v. Roche Holdings Ltd., 292 F.3d 361 (3d Cir.2002), in which the Court assessed a foreign defendant's "national contacts" in determining that jurisdiction was appropriate. Automotive Refinishing, 358 F.3d at 298-99; see also Pinker, 292 F.3d at 371-72 ("A foreign corporation that purposefully avails itself of the American securities market has adequate notice that it may be haled into an American court for fraudulently manipulating that market."). The Automotive Refinishing Court also stated that its holding is consistent with Federal Rule of Civil Procedure 4(k)(2), which establishes personal jurisdiction over foreign defendants. 358 F.3d at 298-99; see also Fed.R.Civ.P. 4(k)(2)(A) (2007) (personal jurisdiction may be established by service "if the defendant is not subject to jurisdiction in any state's courts of general jurisdiction").
Secondly, and perhaps most importantly, the Automotive Refinishing Court had no occasion to consider jurisdiction vis-a-vis domestic defendants; it acknowledged,. however, a "crucial" distinction between alien and domestic corporations in its discussion of venue. Automotive Refinishing, 358 F.3d at 297 n. 10 ("The general venue provision of 28 U.S.C. § 1391(c) governing such domestic corporations is, in contrast to § 1391(d) governing alien corporations, more difficult to satisfy than the [s]ection 12 venue requirements.") (quoting Gen. Elec. Co. v. Bucyrus-Erie Co., 550 F.Supp. 1037, 1041 (S.D.N.Y.1982)) (internal brackets omitted) (emphasis in original); see also Cumberland Truck Equipment Co. v. Detroit Diesel Corporation, 401 F.Supp.2d 415, 421 (E.D.Pa.2005) (noting that the Automotive Refinishing Court "emphasized the importance of distinguishing between out-of-state and foreign corporate antitrust defendants" in its opinion) (citing Automotive Refinishing, 358 F.3d at 296 n. 10).
Insofar as the Third Circuit has never applied a "national contacts" test for establishing personal jurisdiction over a domestic antitrust defendant, the court declines to extend the holding of Automotive Refinishing in a manner that would counterindicate traditional long-arm jurisprudence *338 with respect to such defendants.[14] The court, therefore, will review whether plaintiffs have alleged facts sufficient to satisfy both the Delaware long-arm statute,[15] i.e., specific jurisdiction, and the Constitutional due process requirements of the Fifth Amendment, i.e., general jurisdiction, with respect to the domestic defendants.[16]See Automotive Refinishing, 358 F.3d at 299 ("[P]ersonal jurisdiction under [s]ection 12 of the Clayton Act is as broad as the limits of due process under the Fifth Amendment.") (citations omitted).
Specific jurisdiction arises when a defendant has both purposefully directed its activities at residents of the forum state and the action arises from, or is directly related to, the defendant's actions within the forum state. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). As for the Constitutional basis, the court must determine whether the exercise of jurisdiction comports with the defendant's right to due process. See Reach & Assoc. P.C. v. Dencer, 269 F.Supp.2d 497, 502 (D.Del.2003); see also Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945).
In the case at bar, the moving defendants have submitted affidavits which demonstrate that they are not incorporated in Delaware, and have conducted no business within the State. (D.I. 267, exs. A-H; D.I. 276; D.I. 295, ex. A[17]) In response, plaintiffs have put forward no evidence that defendants "purposefully availed" themselves of doing business with Delaware citizens.[18] Likewise, the court is not satisfied that defendant Nowak or the non-Delaware defendants "[had] certain minimum contacts with [the State] such that the maintenance of [plaintiffs'] suit does not offend `traditional notions of fair play and substantial justice.'" Int'l Shoe, 326 U.S. at 316, 66 S.Ct. 154 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). For these reasons, the court grants the moving defendants' motions to dismiss on the basis of lack of jurisdiction. (D.I.266, 274)
3. Venue
Although the court need not address the moving defendants' arguments regarding venue in view of this holding, the court notes that there is no indication that venue in this district is appropriate and, therefore, improper venue provides an alternative basis for the court's disposition of the motions.
In order to establish that venue is improper in this case, defendants must demonstrate that they are not inhabitants *339 of, found in, or do not transact business in, the District of Delaware pursuant to section 12. 15 U.S.C. § 22. A defendant is an "inhabitant" if it is "incorporated under the laws of [Delaware]." Automotive Refinishing, 358 F.3d at 293 n. 6 (citation omitted).
Being "found" in a district is generally equated with "doing business" there, and requires greater contacts than does "transacting business." A corporation is "found" where it has "presence" and "continuous local activities" in the district.
Id. (citations omitted). Defendants' affidavits demonstrate no such activities within this district.
In response, and despite pleading that venue in this district is proper pursuant to section 12 of the Clayton Act, 15 U.S.C. § 22, plaintiffs argue that venue in the District of Delaware is proper pursuant to the general venue statute, 28 U.S.C. § 1391(c), which provides that a corporation is a resident of "any judicial district in which [defendant corporation] is subject to personal jurisdiction at the time the action is commenced." (D.I. 259 at ¶ 27; D.I. 289 at 14) Plaintiffs argue, based on their interpretation of Automotive Refinishing and the "national contacts" theory rejected above, that all defendants "reside" in Delaware because "there is personal jurisdiction in this district over each and every [d]efendant." (D.I. 289 at 14)
The court finds that domestic defendants' national contacts do not suffice to render venue appropriate in the District of Delaware. Put another way, section 12 of the Clayton Act may not be supplemented with the general venue provisions of 28 U.S.C. 1391(b) and/or (c) for purposes of establishing venue for domestic defendants, and must be considered independently of those provisions. See Cumberland Truck Equipment Co., 401 F.Supp.2d at 420-21, 424 (finding that Third Circuit precedent supported "allowing [s]ection 12's venue clause to be supplemented for alien but not domestic defendants.") (citing Automotive Refinishing, 358 F.3d at 296 & n. 10).[19] To extend Automotive Refinishing in such a manner would effectually, and improperly, create unlimited venue for antitrust actions against domestic corporations. Id. at 423.
Plaintiffs do not contest the facts as alleged in defendants' affidavits (D.I. 289 at 21), and have provided only legal argument, *340 rather than counter-evidence, in opposition to defendants' motion. The court, therefore, finds that the moving defendants have satisfied their burden to establish that venue in this district is improper; defendants' motions (D.I.266, 274) are properly denied on this alternate ground.
C. Motions to Dismiss Counts II-V in the Jersey Dental Action Pursuant to Rule 12(b)(6)
Counts II and III of the amended complaint contain plaintiffs' conspiracy to monopolize claims against the dealer defendants (count II) and Dentsply (count III). (D.I. 259 at ¶¶ 137-165) Counts IV and V of the amended complaint contain plaintiffs' exclusive dealing claims, in which plaintiffs allege that the dealers (count IV) and Dentsply (count V) conspired to restrain trade, which constituted a group boycott of Dentsply's competitors. (Id. at ¶¶ 166-187) Several defendants[20] and Dentsply have separately moved to dismiss these claims. (D.I.264, 279[21]) The court will address defendants' arguments in turn.
1. Injunctive relief sought against Dentsply for violations asserted in counts III and V
Dentsply asserts that, even assuming plaintiffs have stated viable claims against it, plaintiffs would still lack standing to seek injunctive relief in view of the injunction that has already been secured by the government. (D.I.279) As discussed above, plaintiffs have not alleged any facts that could demonstrate a threat of future injury and/or irreparable harm. Absent such a proffer, plaintiffs cannot establish that they are entitled to a second injunction against Dentsply for the same conduct currently enjoined by the government's injunction.[22] Count V, for which only injunctive relief is sought, therefore, is dismissed for failure to state a claim upon which can be granted.[23] With respect to Dentsply's conduct asserted in count III, plaintiffs also seek "a declaratory judgment that Dentsply's actions complained of herein are violations of the prohibition against combining or conspiring to monopolize, under [s]ection 2 of the Sherman Act, 15 U.S.C. § 2," and for this court to order the "divestiture of the Trubyte division from Dentsply." (D.I. 259 at ¶ 165) The parties do not address this proposed relief in their submissions; the court, therefore, proceeds to evaluate defendants' additional arguments with respect to claim III.
2. Damages sought from the dealers for violations asserted in counts II and IV
The dealer defendants assert that plaintiffs are barred from suing for damages by reason of the Third Circuit's prior decision in the Hess case, in which the *341 Court held that plaintiffs, as indirect purchasers, had no standing to sue under Illinois Brick. (D.I. 265 at 23-24 (citing Howard Hess Dental Labs., 424 F.3d at 376, 384)) Plaintiffs respond that, although plaintiffs are indirect purchasers from Dentsply, they are direct purchasers from the dealers, and should not be deemed to be "indirect purchasers" regardless of who plaintiffs' claims are brought against. (D.I. 288 at 37-40)
This court previously determined, and the Third Circuit agreed, that "[t]he intermediate dental dealers suffer the direct harm from any lost opportunity to sell a greater volume of Dentsply products or to sell competitive product lines and profit therefrom. Any harm suffered by plaintiffs remains indirect." See Howard Hess Dental Labs., 424 F.3d at 376. Plaintiffs "claim[ed] that they come within the [general] `co-conspirator exception' to Illinois Brick because their purchases from Dentsply's dealers were made [directly] from members of an exclusive-dealing conspiracy." Id. at 378. The Third Circuit disagreed, since the facts did not demonstrate that "the [dealer] middlemen would be barred from bringing a claim against [Dentsply]." Id. at 379.
Plaintiffs are correct that the Third Circuit had no occasion in Hess to evaluate plaintiffs' standing to sue the dealers for damages, as the dealers were not parties to that action. Nevertheless, counts II and IV in the case at bar allege nonvertical price-fixing conspiracies that are subject to the Third Circuit's ruling. Howard Hess Dental Labs., Inc., 424 F.3d at 378 (a general co-conspirator exception "would only exist in circumstances where . . . [the dealers'] involvement in the conspiracy was `truly complete'.") This is so regardless of the fact that plaintiffs purchased artificial teeth "directly" from the dental dealers. As in Hess, and as discussed in further detail infra, the amended complaint in the present action contains no indication that Dentsply and the dealers were equal participants in the alleged conspiracies. Consequently, there is no indication that plaintiffs may pursue overcharge damages from the dealers pursuant to the general co-conspirator exception of Illinois Brick. Dismissal of counts II and IV is appropriate, therefore, on the basis that plaintiffs cannot obtain the relief sought.
3. Counts II and III specific intent
The court also finds that dismissal of counts II and III is appropriate for failing to allege any factual allegations that support plaintiffs' claim that the dental dealers shared Dentsply's specific intent for Dentsply to monopolize the artificial tooth market. (D.I. 265 at 17-22; D.I. 279)
To state a conspiracy to monopolize claim, plaintiffs must allege: (1) an agreement or understanding between the dealers and Dentsply; (2) a specific intent to monopolize; and (3) overt acts in furtherance of the alleged conspiracy. See Untracht v. Fikri, 454 F.Supp.2d 289, 315 (W.D.Pa.2006) (citation omitted); ID Security Systems Canada, Inc. v. Checkpoint Sys., Inc., 249 F.Supp.2d 622, 657 (E.D.Pa. 2003) (citing Pontius v. Children's Hosp., 552 F.Supp. 1352, 1377 (E.D.Pa.1982)). The specific intent element requires plaintiffs to plead that both alleged conspirators "had a conscious commitment to [Dentsply's] common scheme designed to achieve an unlawful objective, namely that of endowing [Dentsply] with monopoly power." ID Security Systems Canada, Inc., 249 F.Supp.2d at 660 (citation and internal quotations omitted).
To this end, plaintiffs have pled that the dealer defendants "have conspired with Dentsply and with each other to, among other things, restrict Dentsply's dealers from carrying the artificial teeth of any *342 competing manufacturer, and to restrict which dealers are allowed to carry Dentsply's artificial teeth." (D.I. 259 at ¶ 72) Plaintiffs further assert that "the intended effect of this exclusive dealing arrangement, known to each and every [d]efendant, has been the elimination of any and all competition to Dentsply sufficiently significant to pose a threat to its monopoly of the markets for artificial teeth and/or premium artificial teeth sold in the U.S." (Id. at ¶ 73) Finally, "each and every [d]efendant knew that this exclusive dealing arrangement was and is an illegal restraint of trade designed to maintain Dentsply's monopoly." (Id. at ¶ 74)
On its face, the asserted complaint contains the general allegation that the dealers intended for Dentsply to maintain a monopoly. (Id. at ¶¶ 73, 156)[24] The court finds that plaintiffs have not, however, pled "facts from which it can reasonably be inferred that the [dealers] formulated [the] intent" that "maintaining [Dentsply's] monopolies was a goal that they themselves wanted to accomplish." In re Microsoft Corp. Antitrust Litig., 127 F.Supp.2d 728, 731 (D.Md.2001).
The amended complaint does not appear to contain and, indeed, plaintiffs do not point out any facts that could supplement their general assertion of intent. In contrast, and as discussed previously, plaintiffs have maintained throughout this litigation that the dealers were coerced into accepting Dentsply's terms. Plaintiffs have pled that Dentsply demanded the dealers' participation in the exclusive dealing arrangement (id. at ¶¶ 81, 84); in fact, several dealer, relationships were terminated by Dentsply when dealers did not accept its terms (id. at ¶¶ 91-99). Based on plaintiffs' own allegations, "it is at least as likely that the [dealer] defendants simply chose to make the best of a bad situation" in order to have access to the Dentsply tooth line. In re Microsoft Corp. Antitrust Litig., 127 F.Supp.2d at 732.
In response to Dentsply's motion, plaintiffs assert that a specific intent is "inferable, without more, from [the dealers'] participation in a conspiracy whose purpose and means is the unlawful . . . creation or maintenance of a monopoly." (D.I. 288 at 34) This logic, however, is circular; an element required to prove the existence of conspiracy cannot be inferred from the existence of a conspiracy. Plaintiffs also assert that "the fact that a conspirator has been threatened does not necessarily mean that when it finally decides to agree to conspire, its only motive is fear." (D.I. 288 at 35) (emphasis added). This argument, again, presumes the presence of a conspiracy in the first instance. Even if the dealer defendants were compensated for their acceptance of Dealer Criterion 6, it does not follow that they shared the specific intent for Dentsply to achieve a monopoly.
Finally, plaintiffs' allegation that the defendants have conspired, "each with all of the others," to achieve a Dentsply monopoly, does not substantiate plaintiffs' claim that defendants were part of a single conspiracy. No facts have been pled from which it could be inferred that the dealer defendants acted in unison, "sharing a unity of purpose" or a "meeting of the minds," rather than in parallel.[25] For all of these *343 reasons, the court finds that plaintiffs have not sufficiently pled a section 2 conspiracy to monopolize claim. See In re Microsoft Corp. Antitrust Litig., 127 F.Supp.2d at 733-34 (granting defendant's motion to dismiss conspiracy to monopolize claim under similar circumstances).
V. CONCLUSION
For the aforementioned reasons, plaintiffs' motion for summary judgment in the Hess action (Civ. No. 99-255, D.I.256) is denied, and each of the motions to dismiss in the Jersey Dental action (Civ. No. 01-267, D.I.264, 266, 274, 279) are granted. An order shall follow.
ORDER
At Wilmington this 26th day of September 2007, consistent with the memorandum opinion issued this same date;
IT IS ORDERED that:
1. Plaintiffs' motion for summary judgment (Civ. No. 99-255, D.I.256) is denied.
2. Defendants' motion to dismiss counts II and IV of the amended complaint (Civ. No. 01-267, D.I.264) is granted.
3. Defendants' motion to dismiss for lack of personal jurisdiction and improper venue (Civ. No. 01-267, D.I.266) is granted.
4. Dentsply's motion to dismiss counts III and V. of the amended complaint (Civ. No. 01-267, D.I.272) is denied as moot.
5. Defendant Nowak's motion to dismiss for lack of personal jurisdiction and improper venue (Civ. No. 01-267, D.I.274) is granted.
6. Dentsply's motion to dismiss counts III and V. of the amended complaint (Civ. No. 01-267, D.I.279) is granted.
NOTES
[1] The defendants are Dentsply; A. Leventhal & Sons, Inc.; Accubite Dental Lab, Inc.; Addium Dental Products; Arnold Dental Supply Company; Atlanta Dental Supply Company; Benco Dental Company; Burkhart Dental Supply Company; Darby Dental Laboratory Supply Co., Inc.; Dental Supplies and Equipment, Inc.; Edentaldirect.com, Inc., as successor to Crutcher Dental, Inc.; Hendon Dental Supply, Inc.; Henry Schein, Inc. and its affiliates, including, without limitation, Zahn Dental Co., Inc.; Iowa Dental Supply Co.; Jahn Dental Supply Company; JB Dental Supply Co., Inc.; Johnson & Lund Co., Inc.; Kentucky Dental Supply Company, Inc., a/k/a KDSC Liquidation Corp.; Marcus Dental Supply Co.; Midway Dental Supply Inc.; Mohawk Dental Co. Inc.; Nashville Dental, Inc.; Nowak Dental Supplies, Inc.; Patterson Dental Company, its subsidiaries, predecessors, successors, assigns, affiliates, and related companies; Pearson Dental Supplies, Inc.; Ryker Dental Supplies, Inc.; and Thompson Dental Company.
[2] The moving defendants are Arnold Dental Supply Company; Atlanta Dental Supply Company; Dental Supplies and Equipment, Inc.; Iowa Dental Supply Company. LLC; Johnson & Lund Co., Inc.; Kentucky Dental Supply Company, Inc. n/k/a/ KDSA Liquidation Corporation; Marcus Dental Supply Company, Inc.; Mohawk Dental Co.; and Ryker Dental of Kentucky, Inc.
[3] The moving defendants are Accubite Dental Lab, Inc.; Arnold Dental Supply Company; Atlanta Dental Supply Company; Benco Dental Company; Burkhart Dental Supply Company; Darby Dental Laboratory Supply Co., Inc.; Dental Supplies and Equipment, Inc.; Hendon Dental Supply, Inc.; Henry Schein, Inc.; Iowa Dental Supply Co.; Jahn Dental Supply Company; Johnson & Lund Co., Inc.; Kentucky Dental Supply Company, Inc., a/k/a KDSC Liquidation Corp.; Marcus Dental Supply Co.; Mohawk Dental Co. Inc.; Nowak Dental Supplies. Inc.; Patterson Dental Company; Pearson Dental Supplies, Inc.; and Ryker. Dental Supplies, Inc. (D.I.264)
[4] In their original complaint, the Jersey Dental plaintiffs alleged that the named defendants conspired to restrain trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1; conspired to monopolize in the relevant market in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2; and conspired to restrain trade in violation of Section 3 of the Clayton Act, 15 U.S.C. § 14.
[5] (Civ. No. 01-267, D.I. 273 at 9 (citing Appellants' Reply Br. at 23 n. 16)) Plaintiffs do not contest defendants' recount of these statements in their responsive brief. (D.I. 290 at 26)
[6] Omitted from the amended complaint are originally-named defendants A. Leventhal & Sons, Inc.; Midway Dental Supply Inc.; Nashville Dental, Inc.; and Thompson Dental Company. (D.I.259) Zila, Inc. is presently named "as successor to Ryker Dental of Kentucky, Inc." (Id.)
[7] Plaintiffs state in the heading for count V that this claim is "[a]gainst Dentsply, for [i]njunctive [r]elief," but, aside from alleging that plaintiffs have no adequate remedy at law (id. at 175), fail to particularly request injunctive relief vis-a-vis Dentsply in the body of the amended complaint. (Compare id. at ¶ 176 (seeking "damages from the [d]ealer [d]efendants, . . . and a permanent injunction enjoining the continuing violation of [s]ection 1 of the Sherman Act, 15 U.S.C. § 1"))
For each count discussed above, plaintiffs also seek a declaratory judgment that the complained-of actions constitute Sherman Act violations. (Id. at ¶¶ 149, 165, 176, 187)
[8] Plaintiffs acknowledge that the Hess complaint contains two claims against Dentsply not pled in the government action: attempt to monopolize; and conspiracy to monopolize in violation of section 2 of the Sherman Act. (Civ. No. 99-255, D.I. 257 at 2; D.I. 1 (counts III and IV)) Plaintiffs limit their motion to count II, or their "exclusive dealing/monopoly maintenance" claim. (Id. at 1, 5)
[9] The authority cited by plaintiffs on this point is not persuasive. (D.I. 257 at 19-20) In Serpa Corp. v. McWane, Inc., 199 F.3d 6 (1st Cir.1999), the First Circuit affirmed a finding that plaintiff did not have standing based on antitrust injury where plaintiff brought "its claim as [n]either a competitor [n]or a consumer but as a distributor whose injuries resulted from the loss of [market] position." Id. at 12. In Bell v. Dow Chem. Co., 847 F.2d 1179 (5th Cir.1988), the Fifth Circuit also affirmed the district court's holding that plaintiff, a manufacturer-seller who was "neither a consumer nor a competitor" in the relevant market, did not have standing where "there [was] no evidence that [defendant's] conduct caused the loss of future sales, as opposed to any number of factors e.g. price, market conditions, unproven technology, limited product uses, or [plaintiffs] inability to purchase technical material from other distributors." Id. at 1183. Finally, the Third Circuit's decision in In re Docteroff, 133 F.3d 210 (3d Cir.1997), in which the Court found that a plaintiff who was barred from contesting liability for a debt as a sanction for discovery abuses could not challenge the debt in a subsequent bankruptcy proceeding, is equally unpersuasive in this context. Id. at 215 ("We do not hesitate in holding that a party such as Docteroff, who deliberately prevents resolution of a lawsuit, should be deemed to have actually litigated an issue for purposes of collateral estoppel application.").
[10] In deciding whether to grant a permanent injunction, courts must consider whether: "(1) the moving party has shown actual success on the merits; (2) the moving party will be irreparably injured by the denial of injunctive relief; (3) the granting of the permanent injunction will result in even greater harm to the defendant; and (4) the injunction would be in the public interest." Shields v. Zuccarini, 254 F.3d 476, 482 (3d Cir.2001).
The Third Circuit has recently recognized a conflict in its precedent regarding whether irreparable harm is a prerequisite to the grant of a permanent injunction relief. See Stolt-Nielsen, S.A. v. U.S., 442 F.3d 177, 185 n. 5 (3d Cir.2006) (collecting cases).
[11] This case presents a scenario opposite to that presented in U.S. v. Borden Co., 347 U.S. 514, 74 S.Ct. 703, 98 L.Ed. 903 (1954), where the Court found a refusal to grant the government an injunction under the Clayton Act in view of the existence of a private injunction already in place. In Borden, the Court noted that a private litigant "may be expected to exercise [its remedy] only when its personal interest will be served," while the "[g]overnment [has a] right and duty to seek an injunction to protect the public interest [] without regard to any private suit or decree." Id. at 518-19, 74 S.Ct. 703.
While plaintiffs argue in this case that it would be advantageous to have over 7,000 dental laboratories police Dentsply's conduct (Civ. No. 99-255, D.I. 257 at 23), clearly any dental laboratory can notify the government of any further antitrust violations by Dentsply, regardless of the status of the instant private litigation.
[12] It appears as though the record in this case is closed; it is unclear to the court whether plaintiffs have, but did not put forward, evidence sufficient to demonstrate an thrust injury and that additional injunctive relief is warranted (notwithstanding the presence of the government's injunction). The court will provide a mechanism for the parties to address these issues.
[13] Hereinafter, all docket items referenced by the court refer to the Jersey Dental action, Civ. No. 01-267.
[14] Cf. Action Embroidery Corp. v. Atlantic Embroidery, Inc., 368 F.3d 1174, 1180 (9th Cir. 2004).
[15] 10 Del. C. § 3104(c),
[16] Defendants have not challenged the sufficiency of service under Delaware's long-arm statute.
[17] Plaintiffs assert that Ryker Dental has been succeeded by Zila, Inc., a Delaware corporation. (D.I. 289 at 20) Ryker Dental asserts that Zila, Inc. is not its successor, but its parent corporation, and has submitted a Certificate of Existence issued by the Commonwealth of Kentucky which demonstrates that Ryker Dental is a distinct corporate entity in good standing in that state. (D.I.295, ex. A) As Zila, Inc. is not a party to this litigation, and the record demonstrates that Ryker Dental and Zila, Inc. maintain distinct corporate identities, plaintiffs' assertions that Ryker Dental is an inhabitant of Delaware (and has "waived any objection to venue") are unpersuasive.
[18] Because jurisdiction based on specific contacts is lacking, there is clearly no general jurisdiction based upon "systematic" or regular contacts with this forum. 10 Del. C. § 3104(c)(4).
[19] The court in Cumberland Truck Equipment Co. v. Detroit Diesel Corporation, 401 F.Supp.2d 415 (E.D.Pa.2005), analyzed in detail three distinct approaches utilized by district courts for assessing proper venue when a plaintiff asserts personal jurisdiction pursuant to section 12:(1) courts that "suggest that a plaintiff suing a domestic defendant for antitrust violations must use the [s]ection 12 venue clause exclusively, but allow a plaintiff suing an alien defendant to, use the general alien venue statute, 28 U.S.C. § 1391(d)"; (2) courts that allow plaintiffs to establish venue under section 12 or an alternative source interchangeably; and (3) courts that "find that the [s]ection 12 venue claims is the exclusive venue for all defendants, alien and domestic, and it preempts the general venue statutes." Id. at 420 (collecting cases).
The district court in Automotive Refinishing, affirmed by the Third Circuit, noted that
[t]he broad grant of venue under [Section 1391(d)] is inapplicable to domestic corporations . . . [N]othing in Go-Video[, Inc. v. Akai Electric Co., 885 F.2d 1406 (9th Cir. 1989)] permits a domestic corporation to be sued in any district. Rather, a domestic corporation could only be sued [] according to [s]ection 12. . . .
In re Automotive Refinishing Paint Antitrust Litigation, No. Civ. A. 1426, 2002 WL 31261330, *9 (E.D.Pa. July 31, 2002) (citation omitted). The court, therefore, agrees with the rationale of Cumberland Truck that the Third Circuit approves of the first approach discussed above, or allowing supplementation of section 12 venue only for alien corporations. See Cumberland Truck Equipment Co., 401 F.Supp.2d at 420-21.
[20] Supra n. 3
[21] The current motion is a corrected version of D.I. 272, which is denied as moot.
[22] There is no indication, and the court does not assume, that the injunction sought by plaintiffs in the Jersey Dental suit would contain stricter measures than those imposed by the government's injunction, such as has been asserted by plaintiffs in the Hess action.
[23] As discussed supra (fn. 7), plaintiffs characterize count V as "[a]gainst Dentsply, for [i]njunctive [r]elief," but, aside from alleging that plaintiffs have no adequate remedy at law (id. at 175), plaintiffs fail to particularly request injunctive relief with respect to Dentsply in the body of that count. (See D.I. 249 at ¶ 187 (seeking damages from the dealer defendants, a declaratory judgment that the dealers' actions violate section 1 of the Sherman Act, and generally, "a permanent injunction enjoining the continuing violation of [s]ection 1")) The parties have not addressed this discrepancy. For purposes of the present motion, and consistently with the parties' arguments, the court has treated count V as seeking injunctive relief from Dentsply.
[24] Plaintiffs point only to paragraphs 71-74 of the amended complaint in support for their argument that specific intent was pled. (D.I. 288 at 34; D.I. 290 at 27-28)
[25] Similarly, plaintiffs have not proffered facts that could demonstrate a "concerted action" between the defendants as required for plaintiffs' section 1 claims (counts IV & V). See Cosmetic Gallery, Inc. v. Schoeneman Corp., 495 F.3d 46, 55 (3d Cir.2007) ("[u]nilateral activity by a defendant, no matter the motivation, cannot give rise to a section 1 violation.") (citation omitted); Pennsylvania ex rel. Zimmerman v. PepsiCo, Inc., 836 F.2d 173, 182 (3d Cir.1988) ("[A] plaintiff must plead the essential facts of a horizontal restraint or group boycott in order to plead either properly. . . . A general allegation of conspiracy without a statement of facts is an allegation of a legal conclusion and insufficient to constitute a cause of action.") (quoting Black & Yates v, Mahogany Ass'n, 129 F.2d 227, 231-32 (3d Cir.1941)) (internal quotations omitted).
This deficiency is especially troubling considering that the dealers had no rational motive to join a conspiracy with Dentsply which would limit the dealers' ability to sell a variety of products to its customers. See U.S. v. Dentsply, 399 F.3d at 192 (dealers "provide laboratories the benefit of `one stop shopping' and extensive credit services. Because dealers typically carry the products of multiple manufacturers, a laboratory can order, with a single phone call to a dealer, products from multiple sources."). Dismissal of these counts, therefore, is appropriate on this alternate ground. See Brunson Communs., Inc. v. Arbitron, Inc., 239 F.Supp.2d 550, 562 (E.D.Pa.2002) ("[U]nder any theory, Plaintiff has not alleged the essential statutory element of concerted activity . . . The facts alleged in the Amended Complaint are extremely vague and do not sufficiently describe any contract, combination or conspiracy") (dismissing section 1 claim). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1650582/ | (2008)
Janice MURRAY, Plaintiff,
v.
PLAYMAKER SERVICES, LLC, a Florida corporation, Joel "Brill" Maxwell, an individual, and Way Cool Playgrounds, Inc., Defendants.
No. 05-80885-CIV.
United States District Court, S.D. Florida.
April 23, 2008.
ORDER PARTIALLY GRANTING MOTION FOR ATTORNEY'S FEES
KENNETH L. RYSKAMP, District Judge.
THIS CAUSE comes before this Court upon defendants' motion for attorney's fees [DE 76] fded on November 19, 2007. Plaintiff responded [DE 80] on December 17, 2007. Defendants replied [DE 83] on December 18, 2007. The motion is ripe for adjudication.
Plaintiff commenced this action by filing a seven count complaint pursuing damages in counts one though four under the FLSA and in counts six and seven under Florida statute § 448.08.[1] This Court issued an order granting defendants' motion for summary judgment on all counts, making defendants the prevailing party. Defendants therefore seek recovery for the attorney's fees incurred in the defense of this lawsuit.[2]
Application of the FLSA Standard for Awarding Attorney's Fees
This Court granted summary judgment based on the FLSA and on plaintiffs breach of contract allegations, brought under Florida law. Defendants argue that this Court should exclusively apply the Florida fee statute because "Plaintiff brought a claim under § 448.08, because in several counts of the Complaint, she seeks attorney's fees pursuant to that statute." This Court disagrees.
First, the two causes of action based on Florida law were brought pursuant to this Court's supplemental jurisdiction. Second, two thirds of the counts alleged in the complaint were brought pursuant to the FLSA. Finally, defendants' arguments supporting granting attorney's fees under Florida statute § 448.08 all relate to plaintiff having been an independent contractor. This Court determined that plaintiff was an independent contractor pursuant to the claims raised under the FLSA. Thus, this Court holds that the FLSA statute regarding the award of attorney's fees should be applied. It appears from the motion that defendants only sought recovery from plaintiff under § 448.08. Nonetheless, this Court will construe defendants' fees request as one brought pursuant to the FLSA.
Attorney's Fee Recovery for Prevailing Defendants Under the FLSA
The traditional "American Rule" provides that attorneys fees are not to be awarded against a party where not provided for by statute, unless the party has been found to have proceeded in bad faith. See Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health and Human Res., 532 U.S. 598, 602, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001); Alyeska Pipeline Sen'. Co. v. Wilderness Soc'y, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). The Fair Labor Standards Act (FLSA) of 1938, 29 U.S.C. § 216(b) directs district courts to award reasonable attorney's fees and costs to a plaintiff, in addition to any judgment received. Since the statute is silent as to prevailing defendants, this Circuit has applied the American Rule in such circumstances and has determined that courts may award a prevailing defendant his attorney's fees and costs under the FLSA if the plaintiff conducted the litigation in "bad faith, vexatiously, wantonly or for oppressive reasons." Turlington v. Atlanta Gas Light Co., 135 F.3d 1428, 1437 (11th Cir. 1998); see also, Kreager v. Solomon & Flanagan. 775 F.2d 1541, 1543 (11th Cir.1985); Goss v. Killian Oaks House of Learning, 248 F.Supp.2d 1162, (S.D.Fla.2003). Bad faith is determined by focusing on a party's conduct and motive rather than on the validity of the case. Kreager at. 1543, citing Rothenberg v. Security Management Co., Inc., 736 F.2d 1470, 1472 (11th Cir.1984). The bad faith standard is not limited to suits filed in bad faith but also extends to acts preceding and during the litigation. Kreager at 1543.
Defendants cite this Court's statements during the summary judgment hearing to support its argument for fees under the FLSA statute. During that hearing, this Court commented that it appeared that the "employee" was actually an independent contractor, in fact, that this was the strongest case showing independent contractor status ever brought before it and that the case was accordingly frivolous. When rendering its final decision granting defendants' motion for summary judgment, this court found overwhelming evidence to show that plaintiff was an independent contractor.
This Court stands by its earlier statements but is concerned that, while plaintiffs counsel may have possessed the skill necessary to determine whether the suit was meritorious, it does not appear that plaintiff herself could make that determination. "Even if the Court perceived [an] attorney as being primarily at fault for filing the frivolous claim, that perception should play no role in its determination to assess [] fees against [the party herself]." Torres v. City of Orlando, 264 F.Supp.2d 1046, 1051 n. 9 (M.D.Fla.2003). The record does not show that plaintiff persisted with the claim in malice. In fact, it appears that she believed that she deserved payment for the months of service she provided to defendant. There is nothing in the record to indicate that plaintiff had any legal training or otherwise had any special knowledge regarding this area of the law to convince her that her claim was meritless and that she should therefore abandon it.
After considering defendants' arguments, this Court is guided by language found in Christiansburg Garment Co. v. E.E.O.C, 434 U.S. 412, 422, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978): "[e]ven when the law or the facts appear questionable or unfavorable at the outset, a party may have an entirely reasonable ground for bringing suit." Bad faith is a stringent standard that makes it difficult for a defendant to prevail. This Court agrees with plaintiff that defendants have failed to show any conduct proving that she pursued this litigation in bad faith. Rather, defendants argue that since this Court found no merit to the claim, since plaintiff lost, that this Court should award fees. As stated above, that is insufficient to prove bad faith. Accordingly, attorney's fees against the plaintiff shall not be awarded.
Plaintiffs Counsel's Personal Liability Under 28 U.S.C. § 1927
Defendants also seek an award of fees under 28 U.S.C. § 1927 against plaintiffs counsel arguing that she unreasonably and vexatiously multiplied the proceedings in this case. Section 1927 allows a party to recovery attorney's fees and costs from opposing counsel who "so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorney's fees reasonably incurred because of such conduct." As such, the statute is penal in nature and must be strictly construed. Monk v. Roadway Exp., Inc., 599 F.2d 1378, 1382 (5th Cir.1979); Smartt v. First Union National Bank, 245 F.Supp.2d 1229, 1234 (M.D.Fla.2003). An attorney acts with bad faith when he knowingly or recklessly pursues a frivolous claim; mere negligence is insufficient. Smith v. Grand Bank & Trust of Florida, 193 Fed.Appx. 833, 837 (11th Cir.2006). Bad faith can be either objective or subjective. Amlong & Amlong, P.A. v. Denny's Inc., 457 F.3d 1180, 1191 (11th Cir.2006).
Defendants support their claim by relying on an inconsistency in plaintiffs evidence found in her deposition testimony and an affidavit that she filed in support of her motion for summary judgment. In the order granting defendants' motion for summary judgment, this Court declined to consider the affidavit as it contradicted plaintiffs deposition testimony. Although plaintiffs counsel argued that the affidavit did not contradict the deposition testimony, but rather clarified the deposition, this Court disagreed.
This Court is persuaded by the weight of the evidence in the case that led it to comment during the summary judgment hearing that this case was the strongest case indicating independent contractor status that it had seen and that the case was accordingly frivolous. While plaintiff herself may not have had the legal knowledge to realize the meritlessness of her claim, her attorney should. Plaintiffs counsel has appeared before this Court numerous times on similar claims and bills herself as specializing in labor law. As explained in this Court's order granting defendants' motion for summary judgment, application of the economic realities test showed that plaintiff was an independent contractor. Plaintiff had nearly complete control over the manner that the work was to be preformed. She controlled the potential for profit or loss, there was no permanency to the relationship and, most importantly, plaintiff specifically admitted that she was economically dependent on a different job.
These facts became apparent after the conclusion of discovery where the evidence simply did not, in any form, support plaintiffs argument; her counsel should have known that and advised her client to voluntarily dismiss the case at that time. Instead, plaintiffs counsel filed an affidavit directly contradicting plaintiffs own deposition testimony in an attempt to salvage the litigation. For example, as noted in the order granting summary judgment, plaintiff testified at her deposition that she was economically dependent on her nursing job, but then stated in her affidavit that she was economically dependent on her position with defendants. This was not merely a clarification as argued by plaintiffs counsel, but rather a direct contradiction of plaintiffs prior testimony.
Although it may be true that plaintiff herself believed that her case had merit, and may have convinced her counsel that a lawsuit should be filed, after discovery, counsel should have known that no claim existed and should have advised her client to dismiss the suit accordingly. Torres v. City of Orlando, 264 F.Supp.2d 1046, 1054 (M.D.Fla.2003)("A client's good faith belief in a claim does not automatically make that claim meritorious."). As an officer of the court, every attorney have a duty to be candid and loyal and an attorney's duty to zealously prosecute a case for his client cannot outweigh his or her obligation to the court. Malautea v. Suzuki Motor Co., Ltd., 987 F.2d 1536, 1546-47 (11th Cir.1993). Accordingly, when an attorney "knows or reasonably should know that a claim pursued is frivolous ..., a trial court does not err by assessing fees attributable to such actions against the attorney." Jones v. Continental Corp., 789 F.2d 1225, 1230 (6th Cir.1986). This Court holds that plaintiffs counsel is liable for defendants' attorney's fees to the extent that she multiplied the proceedings. Thus, plaintiffs counsel will be responsible for defendants' attorney's fees incurred after the conclusion of discovery, the point at which she should have been aware that the suit was meritless.
Lodestar
The Court has discretion in awarding attorney's fees based on the lodestar framework. The lodestar framework should include only those hours that were reasonably expended on the litigation, and a prevailing party bears the burden of producing the time records that specify for each partner, associate and paralegal the date, hours expended, and nature of the work done so that the Court may audit the hours and determine what the reasonable fee award should be. See In re First Colonial Corp. Of America 544 F.2d 1291, 1300 (5th Cir.1977). A reasonable hourly rate is the "prevailing market rate in the relevant legal community for similar services by lawyers of reasonably comparable skills, experience, and reputation." ACLU v. Barnes, 168 F.3d 423, 426 (11th Cir.1999). "Satisfactory evidence" of the prevailing market rate requires more than the affidavit of the attorney performing the work and can involve direct evidence of charges by lawyers under similar circumstances. Harbaugh v. Greslin, 365 F.Supp.2d 1274, 1281 (S.D.Fla.2005).
A. Rates:
The Court has final discretion as to the reasonableness of the rates. "Evidence of rates may be adduced through direct evidence of charges by lawyers under similar circumstances or by opinion evidence." Norman v. Hons. Auth. Of City of Montgomery 836 F.2d 1292 (11th Cir.1988). The Court is itself considered an expert and can make an informed judgment as to a proper award of fees even without the benefit of outside testimony. Id. at 1303.
To determine the reasonableness of rates, this Court is guided in part by two articles regarding attorney rates. First, is the Florida Bar's 2004 Economics and Law Office Management Survey. This survey indicates that less than 50% of attorneys in Florida charge more than $200 per hour, and only 13% charge $300 or more per hour. See Fla. Bar News, Feb. 1,2005 at 14.
Second, is a December 31, 2007 article appearing in the Daily Business Review titled "Still Expanding." That article reported survey results from "the nation's 250 largest law firms to provide a range of hourly billing rates for partners and associates." Three of the reporting firms are headquartered in Florida. Broad and Cassel of Orlando reported an average fee of $361 per hour for partners and $232 for associates. Carlton Fields, of Tampa, reported an average fee of $406 for partners and $243 for associates. Finally, Gray Robinson, of Orlando, reported an average fee of $319 for partners and $198 for associates.
Based on this Court's own expertise in determining the reasonableness of attorney's fees, as well as the above articles, this Court concludes that defense counsel's rate of $250.00 per hour is reasonable.
B. Hours:
The next step in calculating attorney's fees is to calculate the reasonable hours that should be expended on similar litigation. The party seeking the fees must keep "meticulous, contemporaneous time records that reveal for each lawyer whose fees are sought, all hours for which compensation is requested and how those hours were allotted to specific tasks." Ramos v. Lamm, 713 F.2d 546, 553 (10th Cir.1983). Additionally, when considering the detailed list of tasks, the Court considers the "possibility that reported hours include duplication by reviewing with particular care the numbers of lawyers present and by evaluating the roles played by the lawyers in the litigation generally." Id. at 554.
After a thorough review of the record, this Court holds that plaintiffs counsel shall pay defendants' attorney's fees commencing at the point that she began to multiply the proceedings; after the close of discovery. It appears from the time sheet submitted by defense counsel that active discovery ended on September 14, 2006.
Finally, this Court declines to award all of the time reported for the drafting of the motion for attorney's fees. Nearly one-third of defendants' motion reargues the issues that this Court already granted in defendants' favor. Those issues were irrelevant to the determination of this motion. Plaintiffs counsel should not have to pay for time spent unnecessarily. Accordingly, the time spent drafting and reviewing the motion for attorney's fees will be reduced by one-third.
In sum, defense counsel will be awarded fees for 93.5 hours of work at a rate of $250.00 per hour. Based on the above, defendants are awarded $23,375.00 in attorney's fees. Accordingly, it is hereby:
ORDERED AND ADJUDGED that defendants' Motion for Attorney's Fees [DE 76] is PARTIALLY GRANTED as follows:
(1) Defendants Motion is DENIED as against plaintiff.
(2) Defendants' Motion is GRANTED as against plaintiffs counsel, Cathleen Scott. Cathleen Scott, P.A. is directed to pay defendants $23,375.00 in attorney's fees pursuant to 28 U.S.C. § 1927,
NOTES
[1] Count five alleged successor liability relating to the FLSA allegations.
[2] Defendants previously filed a motion to award costs, which this Court granted. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1707681/ | 564 So.2d 1060 (1990)
George PORTER, Jr., Appellant,
v.
STATE of Florida, Appellee.
No. 72301.
Supreme Court of Florida.
June 14, 1990.
Rehearing Denied September 4, 1990.
*1061 James B. Gibson, Public Defender, and Michael S. Becker, Asst. Public Defender, Daytona Beach, for appellant.
Robert A. Butterworth, Atty. Gen., and Mark C. Menser, Asst. Atty. Gen., Tallahassee, for appellee.
PER CURIAM.
George Porter, Jr., appeals his sentence of death and related criminal convictions.[1] We affirm.
Porter elected to represent himself, with the assistance of standby counsel, when he went on trial in November 1987 on two counts of first-degree murder and one count each of armed burglary and aggravated assault. The facts adduced at trial are as follows.
In 1985 in Melbourne, Florida, Porter became the live-in lover of the first victim, Evelyn Williams ("Williams"). Their relationship was stormy almost from the beginning, aggravated by hostility between Porter and Williams' children, especially Williams' daughter, Amber. Several violent incidents occurred during the course of Porter's relationship with Williams. In July 1986, Porter damaged Williams' car while she was at work, and later he telephoned and threatened to kill Williams and Amber. Porter left town shortly thereafter and was not seen again in town until early October 1986. Before Porter returned to Melbourne, Williams had entered a relationship with the second victim, Walter Burrows.
When Porter returned to town, he contacted Williams' mother, Lora Mae Meyer. He told her that he wanted to see Williams, and that he had a gift for her. Meyer told Porter that her daughter did not wish to see him anymore, and that Williams wanted nothing from him. Nevertheless, Porter persisted. During each of the two days immediately preceding the murder, Porter was seen driving past Williams' house.
A few days before the murder, Porter had a conversation with a friend, Nancy Sherwood, who testified that Porter told her, "you'll read it in the paper." She offered no explanation for Porter's remark. Porter went to the home of another friend, Dennis Gardner, and asked to borrow a gun. Gardner declined, but the gun subsequently vanished from Gardner's home.
On October 8, 1986, Porter visited Williams, who then called the police because she was afraid of him. That evening, Porter went to two cocktail lounges. He spent the night with a friend, Lawrence Jury, who said that Porter was quite drunk by 11 p.m.
*1062 At 5:30 a.m. the next morning, Amber awoke to the sound of gunshots. She ran down the hallway and saw Porter standing over her mother's body. Amber testified that Porter came toward her, pointed a gun at her head and said, "boom, boom, you're going to die." Burrows then came into the room, struggled with Porter, and forced him outside. Amber telephoned for emergency assistance.
Williams' son, John, who lived next door, testified that he heard gunshot blasts at about 5:30 a.m. He ran outside and saw Burrows lying facedown in the front lawn. Both Williams and Burrows were dead by the time police arrived at the scene.
On December 5, 1987, as the prosecution was nearly finished presenting its case-in-chief, Porter told the judge that he wanted to plead guilty to the murder charges and no contest to the other charges. When the judge sought the factual basis of the pleas from Porter, Porter denied killing Williams, although said he may have killed Burrows. The judge refused to accept the pleas on that basis. Porter consulted with his standby counsel and then said he would plead guilty to all four charges, but that he did not want to provide a factual basis for the pleas. The trial court conducted an extensive inquiry into the voluntariness of the pleas, and the prosecutor presented the factual basis in support of guilt. Porter admitted his guilt and said he changed his pleas "[b]ecause I want to get it over with." The trial court accepted the guilty pleas to all four counts.
That night, when Porter returned to his jail cell, he attempted to commit suicide by twice hurling himself to the concrete floor from a fourteen-foot catwalk. Porter broke his leg but suffered no other serious injuries. The physicians who examined Porter concluded there was no reason to believe that Porter was mentally incompetent.
On January 4, 1988, Porter filed a motion to withdraw his pleas of guilty. In a hearing on the motion, Porter testified that the night before he pleaded guilty, he learned through an inmate and a guard that two other guards had said that something bad would happen to Porter's eleven-year-old son if Porter continued to stand trial. Porter contended that this motivated his suicide attempt. However, Porter refused to reveal the names of those who informed him of the threat. The trial court denied Porter's motion to withdraw his pleas.
On January 21, 1988, the trial jury returned to hear evidence in the penalty phase, during which Porter was represented by counsel. The jury recommended death on both murder counts. The trial court imposed a death sentence for the murder of Williams, but imposed a sentence of life imprisonment for the murder of Burrows, finding that the aggravating factors in the latter instance were merely "technical."[2] The trial court also sentenced Porter to life for armed burglary and five years for aggravated assault.
Porter raises six issues on appeal.[3]
*1063 First, he argues that the trial court improperly accepted his guilty pleas and then improperly denied his motion to withdraw those pleas. The record fails to support such an assertion. "[A] plea of guilty must be voluntarily made by one competent to know the consequences of that plea and must not be induced by promises, threats or coercion." Mikenas v. State, 460 So.2d 359, 361 (Fla. 1984); see also Lopez v. State, 536 So.2d 226, 228 (Fla. 1988). To assure that the defendant entered the plea voluntarily, the trial court must make a detailed inquiry on the record. Boykin v. Alabama, 395 U.S. 238, 89 S.Ct. 1709, 23 L.Ed.2d 274 (1969); Lopez; Mikenas. The colloquy in this record reflects that the trial court made a conscientious and detailed inquiry. Indeed, the trial judge took great pains to assure that Porter's guilty pleas were the result of his own free will.
Likewise, we find no error in the trial judge's denial of Porter's motion to withdraw his pleas. In Lopez, the Court said:
Allowing the withdrawal of a guilty plea is within a trial court's discretion; it is not a matter of right. Adams v. State, 83 So.2d 273 (Fla. 1955); Adler v. State, 382 So.2d 1298 (Fla. 3d DCA 1980). The burden of proving a trial court abused its discretion in refusing to allow withdrawal of a guilty plea is on the defendant. Mikenas; Adams. After imposition of sentence, that burden means that a defendant must show manifest injustice. Adler.
Lopez, 536 So.2d at 229. Although Porter asserts that he was coerced, he refused to give the names of the officers who allegedly made the threat, and he provided no other evidence to prove his claim. Under these circumstances, we do not find that the trial court erred in rejecting his claim as unfounded.
Having found sufficient competent evidence in the record to support the verdicts in the guilt phase, we affirm each of the convictions.
Porter next argues that Williams' murder was not especially heinous, atrocious, or cruel. In the seminal case of State v. Dixon, 283 So.2d 1 (Fla. 1973), cert. denied, 416 U.S. 943, 94 S.Ct. 1959, 40 L.Ed.2d 295 (1974), the Court addressed the meaning of "especially heinous, atrocious or cruel":
It is our interpretation that heinous means extremely wicked or shockingly evil; that atrocious means outrageously wicked and vile; and, that cruel means designed to inflict a high degree of pain with utter indifference to, or even enjoyment of, the suffering of others. What is intended to be included are those capital crimes where the actual commission of the capital felony was accompanied by such additional acts as to set the crime apart from the norm of capital felonies the conscienceless or pitiless crime which is unnecessarily torturous to the victim.
Id. at 9 (emphasis added).
We agree that the murder of Williams did not stand apart from the norm of capital felonies, nor did it evince extraordinary cruelty. We see little distinction between this case and Amoros v. State, 531 So.2d 1256, 1261 (Fla. 1988), wherein the Court struck the trial court's finding of especially heinous, atrocious, or cruel on a finding that the murderer fired three shots into the victim at close range. Moreover, this record is consistent with the hypothesis that Porter's was a crime of passion, not a crime that was meant to be deliberately and extraordinarily painful. The state has not met its burden of proving this factor beyond a reasonable doubt, and the trial court erred in finding to the contrary.
However, the state did meet its burden in proving beyond a reasonable doubt that the murder was committed in a cold, calculated, and premeditated manner without any moral or legal justification. § 921.141(5)(i), Fla. Stat. (1985). To avoid arbitrary and capricious punishment, this aggravating circumstance "must genuinely narrow the class of persons eligible for the death penalty and must reasonably justify the imposition of a more severe sentence on the defendant compared to others found *1064 guilty of murder." Zant v. Stephens, 462 U.S. 862, 877, 103 S.Ct. 2733, 2742, 77 L.Ed.2d 235 (1983) (footnote omitted). Since premeditation already is an element of capital murder in Florida,[4] section 921.141(5)(i) must have a different meaning; otherwise, it would apply to every premeditated murder. Therefore, section 921.141(5)(i) must apply to murders more coldblooded, more ruthless, and more plotting than the ordinarily reprehensible crime of premeditated first-degree murder.[5]
The Court has adopted the phrase "heightened premeditation" to distinguish this aggravating circumstance from the premeditation element of first-degree murder. See, e.g., Hamblen v. State, 527 So.2d 800, 805 (Fla. 1988); Rogers v. State, 511 So.2d 526, 533 (Fla. 1987), cert. denied, 484 U.S. 1020, 108 S.Ct. 733, 98 L.Ed.2d 681 (1988). Heightened premeditation can be demonstrated by the manner of the killing, but the evidence must prove beyond a reasonable doubt that the defendant planned or arranged to commit murder before the crime began. Hamblen, 527 So.2d at 805; Rogers, 511 So.2d at 533. See, e.g., Koon v. State, 513 So.2d 1253 (Fla. 1987), cert. denied, 485 U.S. 943, 108 S.Ct. 1124, 99 L.Ed.2d 284 (1988). Hamblen and Rogers show that heightened premeditation does not apply when a perpetrator intends to commit an armed robbery of a store but ends up killing the store clerk in the process. Nor does it apply when a killing occurs during a fit of rage because "rage is inconsistent with the premeditated intent to kill someone," unless there is other evidence to prove heightened premeditation beyond a reasonable doubt. Mitchell v. State, 527 So.2d 179, 182 (Fla.), cert. denied, 488 U.S. 960, 109 S.Ct. 404, 102 L.Ed.2d 392 (1988).
This is not a case involving a sudden fit of rage. Porter previously had threatened to kill Williams and her daughter. He watched Williams' house for two days just before the murders. Apparently he stole a gun from a friend just to kill Williams. Then he told another friend that she would be reading about him in the newspaper. While Porter's motivation may have been grounded in passion, it is clear that he contemplated this murder well in advance.
Finally, Porter argues that the death penalty is not proportional in this instance. We disagree. Because death is a unique punishment, e.g., Fitzpatrick v. State, 527 So.2d 809, 811 (Fla. 1988), it is necessary in each case to engage in a thoughtful, deliberate proportionality review to consider the totality of circumstances in a case, and to compare it with other capital cases. It is not a comparison between the number of aggravating and mitigating circumstances. See, e.g., Hallman v. State, 560 So.2d 223 (Fla. 1990) (reversing a jury override despite a finding of four valid aggravating circumstances weighed against only nonstatutory mitigating circumstances). The circumstances of this case depict a cold-blooded, premeditated double murder. The imposition of the death penalty is not disproportionate to *1065 other cases decided by this Court. See, e.g., Turner v. State, 530 So.2d 45 (Fla. 1987) (on rehearing), cert. denied, ___ U.S. ___, 109 S.Ct. 1175, 103 L.Ed.2d 237 (1989).
For the foregoing reasons, we affirm each of the convictions and the sentence of death.
It is so ordered.
EHRLICH, C.J., and OVERTON, SHAW and GRIMES, JJ., concur.
McDONALD, J., concurs in result only.
BARKETT, J., concurs in part and dissents in part with an opinion, in which KOGAN, J., concurs.
BARKETT, Justice, concurring in part and dissenting in part.
I agree that Porter's convictions should be affirmed. I believe, however, that a proportionality review mandates reversal of the penalty. I am not persuaded that the aggravating factor of cold, calculated, and premeditated has been established beyond every reasonable doubt. I do not suggest that there is an "unrequited love" exception to the death penalty. Nonetheless, this Court consistently has accepted as substantial mitigation the inflamed passions and intense emotions of such situations. In almost every other case where a death sentence arose from a lovers' quarrel or domestic dispute, this Court has found cause to reverse the death sentence, regardless of the number of aggravating circumstances found, the brutality involved, the level of premeditation, or the jury recommendation. See Blakely v. State, 561 So.2d 560 (Fla. 1990) (death penalty disproportional despite finding of heinous, atrocious, or cruel, and cold, calculated, and premeditated); Amoros v. State, 531 So.2d 1256, 1261 (Fla. 1988); Garron v. State, 528 So.2d 353, 361 (Fla. 1988); Fead v. State, 512 So.2d 176, 179 (Fla. 1987), receded from on other grounds, Pentecost v. State, 545 So.2d 861, 863 n. 3 (Fla. 1989); Irizarry v. State, 496 So.2d 822, 825-26 (Fla. 1986); Wilson v. State, 493 So.2d 1019, 1023 (Fla. 1986); Ross v. State, 474 So.2d 1170, 1174 (Fla. 1985); Herzog v. State, 439 So.2d 1372, 1381 (Fla. 1983); Blair v. State, 406 So.2d 1103, 1109 (Fla. 1981); Phippen v. State, 389 So.2d 991 (Fla. 1980); Kampff v. State, 371 So.2d 1007 (Fla. 1979); Chambers v. State, 339 So.2d 204 (Fla. 1976); Halliwell v. State, 323 So.2d 557 (Fla. 1975); Tedder v. State, 322 So.2d 908 (Fla. 1975); cf. Hamilton v. State, 547 So.2d 630 (Fla. 1989) (aggravating circumstances and judgment of guilt reversed, remanded for new trial). The Court has even reversed death sentences where, as in Porter's case, the defendant murdered two people during the same violent outburst. See Garron; Wilson; Phippen; cf. Hamilton. Generally when we have affirmed death sentences in analogous situations, we have noted that the defendants had prior, unrelated convictions of violent felonies. See Hudson v. State, 538 So.2d 829 (Fla.) (defendant was on community control for sexual battery when he committed the murder), cert. denied, ___ U.S. ___, 110 S.Ct. 212, 107 L.Ed.2d 165 (1989); Lemon v. State, 456 So.2d 885 (Fla. 1984) (defendant committed murder shortly after serving prison sentence for assault with intent to commit first-degree murder), cert. denied, 469 U.S. 1230, 105 S.Ct. 1233, 84 L.Ed.2d 370 (1985); Williams v. State, 437 So.2d 133 (Fla. 1983) (defendant had been convicted of aggravated assault, and was on parole for possession of firearm by a convicted felon, when he committed the murder), cert. denied, 466 U.S. 909, 104 S.Ct. 1690, 80 L.Ed.2d 164 (1984); King v. State, 436 So.2d 50 (Fla. 1983) (defendant had a prior conviction of manslaughter for killing a woman with an axe), cert. denied, 466 U.S. 909, 104 S.Ct. 1690, 80 L.Ed.2d 163 (1984). There is no finding that Porter had any prior, unrelated violent felony convictions before this case arose.
Furthermore, the record discloses that Porter had been drinking heavily, to the point of drunkenness, in the late night hours prior to the murder. Shortly after the murder he purchased more liquor and beer. This evidence, combined with evidence of Porter's emotionally charged, desperate, frustrated desire to meet with his former lover, is sufficient to render the *1066 death penalty disproportional punishment in this instance, although it certainly does not excuse the killing.
KOGAN, J., concurs.
NOTES
[1] We have jurisdiction pursuant to article V, section 3(b)(1) of the Florida Constitution.
[2] As to both counts of murder, the trial court found aggravating circumstances that: (1) the defendant was previously convicted of another capital felony or a felony involving the use or threat of violence to that person (these two murders and the accompanying aggravated assault), § 921.141(5)(b), Fla. Stat. (1985); and (2) the capital felonies were committed while the defendant was engaged in the commission of a burglary, id. § 921.141(5)(d).
The trial court found two additional aggravating circumstances as to the murder of Williams: (1) the murder was especially heinous, atrocious, or cruel, id. § 921.141(5)(h); and (2) the murder was committed in a cold, calculated, and premeditated manner without any pretense of moral or legal justification, id. § 921.141(5)(i).
The trial court found no mitigating circumstances.
[3] Porter includes a claim that the trial court's instructions violated Caldwell v. Mississippi, 472 U.S. 320, 105 S.Ct. 2633, 86 L.Ed.2d 231 (1985). This issue already has been decided adversely to Porter. Combs v. State, 525 So.2d 853 (Fla. 1988); Grossman v. State, 525 So.2d 833 (Fla. 1988), cert. denied, ___ U.S. ___, 109 S.Ct. 1354, 103 L.Ed.2d 822 (1989). His argument that the Florida death penalty statute is unconstitutional also is without merit. Proffitt v. Florida, 428 U.S. 242, 96 S.Ct. 2960, 49 L.Ed.2d 913 (1976); State v. Dixon, 283 So.2d 1 (Fla. 1973), cert. denied, 416 U.S. 943, 94 S.Ct. 1950, 40 L.Ed.2d 295 (1974).
[4] Premeditation as an element of first-degree murder, § 782.04(1)(a)(1), Fla. Stat. (1985),
is a fully-formed conscious purpose to kill, which exists in the mind of the perpetrator for a sufficient length of time to permit of reflection, and in pursuance of which an act of killing ensues. Weaver v. State, 220 So.2d 53 (Fla. 2d DCA), cert. denied, 225 So.2d 913 (1969). Premeditation does not have to be contemplated for any particular period of time before the act, and may occur at a moment before the act. Hernandez v. State, 273 So.2d 130 (Fla. 1st DCA)[,] cert. denied, 277 So.2d 287 (1973). Evidence from which premeditation may be inferred includes such matters as the nature of the weapon used, the presence or absence of adequate provocation, previous difficulties between the parties, the manner in which the homicide was committed and the nature and manner of the wounds inflicted. It must exist for such time before the homicide as will enable the accused to be conscious of the nature of the deed he is about to commit and the probable result to flow from it insofar as the life of the victim is concerned. Larry v. State, 104 So.2d 352 (Fla. 1958).
Sireci v. State, 399 So.2d 964, 967 (Fla. 1981), cert. denied, 456 U.S. 984, 102 S.Ct. 2257, 72 L.Ed.2d 862 (1982); Provenzano v. State, 497 So.2d 1177 (Fla. 1986), cert. denied, 481 U.S. 1024, 107 S.Ct. 1912, 95 L.Ed.2d 518 (1987).
[5] See generally Kennedy, Florida's "Cold, Calculated and Premeditated" Aggravating Circumstance in Death Penalty Cases, 17 Stetson L.Rev. 47 (1987). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1886687/ | 221 B.R. 238 (1998)
In re Steven Robert MAMMEL, Debtor.
Bankruptcy No. 98-01184-C.
United States Bankruptcy Court, N.D. Iowa.
June 9, 1998.
Henry E. Nathanson, Cedar Rapids, IA, for Debtor.
Carol F. Dunbar, Waterloo, IA, Chapter 13 Trustee.
ORDER
PAUL J. KILBURG, Bankruptcy Judge.
On May 21, 1998, the above-captioned matter came on for confirmation hearing on Debtor's proposed Chapter 13 plan. Debtor was present with Attorney Henry Nathanson. The Chapter 13 Trustee, Carol Dunbar, was also present. As objections were filed, the hearing was treated as a preliminary *239 hearing. Objections were argued after which the Court took the matter under advisement. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(L).
STATEMENT OF THE CASE
Debtor, Steven Robert Mammel, filed his Chapter 13 petition on April 22, 1998. Debtor's Schedule F (Creditors Holding Unsecured Nonpriority Claims) lists a total of $60,672.38 in unsecured claims. Included in these claims are five separate student loans:
a. Great Lakes Northstar in the amount of $8,450;
b. Mellon Bank Center in the amount of $4,962.59;
c. Norwest Bank in the amount of $16,971.52;
d. Sallie Mae in the amount of $12,875.20; and
e. Windham Professionals in the amount of $3,232.07.
These student loans, which total $46,491.38, constitute approximately three-fourths of the total unsecured debt.
Debtor filed his plan simultaneously with the Chapter 13 petition. The plan proposes to pay $70.00 per month for 36 months. Debtor estimates his total payment to unsecured creditors to be not less than 3%. The Trustee, in her brief, estimates a payment to unsecured creditors of about 3.8%. The student loan creditors were provided standard notice of the filing of the Chapter 13 bankruptcy and plan. None of these creditors appeared at the § 341 meeting, none filed an objection to the plan, and none appeared at the time of the preliminary confirmation hearing.
While no objections were filed by creditors, the Trustee objected to the plan on several grounds including the following:
The trustee objects to the provision in paragraph 3(I) of the plan which proposes to have the student loans declared dischargeable upon confirmation of the plan. Debtor must instead file an adversary proceeding in this case against each student loan creditor under Bankruptcy Rule 7001 to determine a debt's dischargeability.
At the time of the confirmation hearing on May 21, 1998, all objections except for the foregoing were resolved. The Trustee indicated a willingness to withdraw the objection to Debtor's proposed plan treatment of the student loans. The Court, however, indicated that it wished further briefs on this issue and allowed the Trustee and Debtor's counsel a period of two weeks within which to file briefs. The Chapter 13 Trustee and counsel for Debtor have timely filed briefs.
The controversy preventing confirmation at the preliminary confirmation hearing involves inclusion in Debtor's Chapter 13 plan of the following provision:
Pursuant to 11 U.S.C. § 523(a)(8) excepting the government guaranteed education loans from discharge will impose an undue hardship on the debtor and debtor's dependents. Confirmation of debtor's plan shall constitute a finding to that effect and that said debts are dischargeable.
The specific issue for resolution is whether it is appropriate to confirm a plan which contains this provision.
DISCUSSION
The Trustee withdrew her objection at the time of the confirmation hearing but has reasserted it in her brief. Whether the Trustee has filed an objection or not, the Court has the independent right and duty to review proposed Chapter 13 plans for compliance with the Code. Therefore, whether or not an objection is presently lodged in this case, the Court retains the authority to review this plan and deny confirmation if it fails to comply with the confirmation standards of the Code. In re Northrup, 141 B.R. 171, 173 (N.D.Iowa 1991).
Debtor, at the time of confirmation and in his brief, relies primarily upon In re Andersen, 215 B.R. 792 (10th Cir. BAP 1998). Debtor asserts that Andersen stands for the proposition that if a lender is accorded due process in the confirmation process, a plan provision similar to that proposed here constitutes a binding res judicata determination. This opinion is generally consistent with the holding of Great Lakes Higher Education Corp. v. Pardee, 218 B.R. 916, 922 (9th Cir. BAP 1998), which concludes that a Chapter *240 13 plan is res judicata as to all issues that could have or should have been litigated at the confirmation hearing.
The results obtained in these cases are based on principles of res judicata which bar further litigation post-confirmation under 11 U.S.C. § 1327(a). Section 1327(a) states:
The provisions of a confirmed plan bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.
Reviewing courts have been troubled by the tension created by inclusion of arguably inappropriate plan provisions and the need for finality in confirmed plan. One court has noted that:
[t]he true extent of the res judicata effect of a Chapter 13 confirmation order entered pursuant to § 1327(a) is, however, a complex and thorny conundrum which has vexed courts and parties, and on which there is a broad spectrum of diverse opinion.
In re Strong, 203 B.R. 105, 113 (Bankr. N.D.Ill.1996).
A number of circuit courts have addressed the § 1327 issue. See, e.g., In re Linkous, 990 F.2d 160 (4th Cir.1993); In re Howard, 972 F.2d 639 (5th Cir.1992); In re Pence, 905 F.2d 1107 (7th Cir.1990); In re Simmons, 765 F.2d 547 (5th Cir.1985); In re Tarnow, 749 F.2d 464 (7th Cir.1984). The Eighth Circuit Court of Appeals has not ruled on the issue in a Chapter 13 case though it has discussed somewhat similar issues in In re Be-Mac Transport Co., 83 F.3d 1020 (8th Cir.1996) and in Harmon v. United States, 101 F.3d 574 (8th Cir.1996); see also In re Harnish, No. 97-02185-C (Bankr.N.D.Iowa June 2, 1998).
Most courts ultimately defer to the doctrine of res judicata because of the compelling need for finality in confirmed plans. They, therefore, enforce offending plan provisions even though acknowledging that a provision may be contrary to the Code. This is the majority view. Northrup, 141 B.R. at 173. This view, however, is not universally held. See Pardee, 218 B.R. at 927 (Klein, J., dissenting).
Fortunately, the potentially troublesome provision in this case was identified before confirmation. This allows an unrestricted examination of the merits of the provision unfettered by res judicata issues. While unnecessary to resolve the res judicata issue in this opinion, it was discussed in general terms because of its relevance to the impact this provision will have if this plan is confirmed. The issue is solely whether this plan should be confirmed while containing this provision. For the reasons set out hereafter, the Court finds this provision objectionable in numerous respects.
First, confirmation of Debtor's plan will allow immediate discharge of a category of debts without the necessity of completing plan payments. This is inconsistent with § 1328 of the Code which states:
§ 1328. Discharge
(a) As soon as practicable after completion by the debtor of all payments under the plan, unless the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter, the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt
. . .
(2) of the kind specified in paragraph (5), (8), or (9) of sections 523(a) or 523(a)(9) of this title;
Section 1328(a)(2).
To summarize this provision, a debtor is entitled to the entry of a discharge of all debts provided for by the plan after the plan is completed with certain exceptions discussed later in this opinion. The discharge provision proposed by Debtor is inconsistent with § 1328 which provides for a discharge only upon completion of all plan payments. The Court in In re Key, 128 B.R. 742, 743 (Bankr.S.D.Ohio 1991) stated as follows:
Section 1328 provides that the court shall grant a discharge, after completion of all payments under the plan, except for those debts specifically excepted, i.e., student loans, alimony and child support, debts *241 arising from operation of a motor vehicle while legally intoxicated, restitution included in a sentence resulting from a criminal conviction, and those debts arising from certain long term obligations. There is no provision that would grant a discharge upon confirmation of a Chapter 13 plan even for those debts not specifically excepted.
If Debtor's plan is confirmed, Debtor will be granted a discharge from the student loans immediately upon confirmation. This would allow discharge of the student loan debt at the beginning of the plan while the remainder would only be discharged upon completion. Debtor could immediately convert to a Chapter 7, claim applicability of the doctrine of res judicata and argue that the educational loans are discharged. If successful, the loans would be discharged without the necessity of an adversary proceeding. This result is inconsistent with the intent of Congress when § 1328 was drafted.
Second, allowing discharge of these debts through the confirmation process defeats the adversary requirements for determining dischargeability. The Code provides in § 523 that:
§ 523. Exceptions to discharge
(a) A discharge under section 727, 1141, 1128(a), 1128(b), or 1328(b) of this title does not discharge an individual debtor from any debt
. . .
(8) for an educational benefit overpayment or loan made, insured or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution, or for any obligation to repay funds received as an educational benefit, scholarship or stipend, unless
(A) such loan, benefit, scholarship or stipend overpayment first became due more than 7 years (exclusive of any applicable suspension of the repayment period) before the date of the filing of the petition; or
(B) excepting such debt from discharge under this paragraph will impose a undue hardship on the debtor and the debtor's dependents;
Obtaining a hardship discharge under the provisions of § 523(a)(8) requires the filing of an adversary complaint under Federal Bankruptcy Rules 4007(c) and 7001(6). Debtor, through counsel, asserts that filing of an adversary complaint would be expensive and Debtor cannot afford to pursue this procedure. Obviously, pursuing a hardship discharge through an adversary complaint can be costly. The requirements for resolving dischargeability issues, however, are defined by the Code and Rules in a manner best suited to provide the appropriate forum in an adversarial format within which to provide due process and procedural safeguards to all parties. The shortcut proposed by Debtor undermines that process and renders superfluous those rules relating to adversary complaints.
Third, Debtor seeks to have the debts declared dischargeable without satisfying the evidentiary elements of § 523(a)(8). This section allows a hardship discharge under only two circumstances. Debtor must establish that (1) the debt became due more than seven years prior to the filing of the bankruptcy petition or (2) repayment of the loan would impose an undue hardship. Debtor does not claim that a factual basis exists to have these claims discharged on either of the two statutory grounds. He asserts only that the act of confirmation of the plan by itself would constitute such a ground. Approving this provision would, in effect, judicially create a third method of obtaining a discharge.
Fourth, Debtor relies on the general provisions of 11 U.S.C. § 1322(b)(10) to assert that flexible plan drafting is allowed by the Code. This Code provision provides:
Subject to subsections (a) and (c) of this section, the plan may include any other appropriate provision not inconsistent with this title.
Debtor also relies on 11 U.S.C. § 1322(b)(2) which provides that a debtor may "modify the rights of holders . . . of unsecured claims . . . ".
Debtor argues that § 1322(b)(10) of the Code allows creative plan formulation *242 and wide latitude in the formulation of a Chapter 13 plan. He further argues that through this plan process, the rights of unsecured creditors, such as the student loan creditors, may have their rights altered. It is correct that § 1322 was included in the Code to allow flexibility in plan treatment. Some commentators view these provisions broadly and feel they provide an opportunity for the artful debtor to propose a plan with "unique features". 4 William L. Norton, Jr., Norton Bankruptcy Law and Practice, § 121:13 (2d ed.1997). Other courts hold a less appreciative view of this type of provision. The dissent held in Pardee, 218 B.R. at 927, "An affirmance in this appeal would license ambushes and would function as judicial legislation substituting our judgment for that of Congress."
While § 1322(b)(10) allows flexibility in the treatment of complex obligations, it is intended to do so within the parameters of more specific Code provisions. It does not provide a method to negate other Code provisions. Section 1328 excepts student loans from discharge even after completion of all plan payments except under limited circumstances defined in 11 U.S.C. § 523(a)(8). To allow a hardship discharge in the manner proposed by Debtor would be to negate the requirements of 523(a)(8). This is impermissible.
Fifth, Debtor's plan may be construed to unfairly discriminate against the class of student loan creditors. Section 1322(b)(1) provides that a debtor may "designate a class or classes of unsecured claims, as provided in § 1122 of this title but may not discriminate unfairly against any class so designated." Most cases which propose this type of plan treatment tender payment of a part of the obligation along with other unsecured creditors on an equal basis. Debtor's position here is less clear. It appears that the plan includes the claims of the student loan creditors in the plan payments to unsecured creditors based on the estimated amount of unsecured claims. However, there is no precise language in the plan to that effect and the provision under discussion contradicts such a conclusion.
If the student loans are dischargeable immediately upon confirmation, no reason exists for Debtor to pay a pro rata share of these claims. If true, this class of claims is being treated unfairly because other unsecured creditors are being offered 3.8% toward their unsecured claims while the student loan creditors are being offered nothing. Debtor may arguably take the position that this treatment does not constitute unfair discrimination because the student loans are being discharged. If Debtor does so, it reveals the deficiency in this plan in that Debtor is not treating the claims of the various student loan creditors fairly but rather is proposing this provision solely to defeat their claims.
Sixth, much of Debtor's cited authority was decided on res judicata principles. As res judicata does not apply in this case, Debtor argues that it is nevertheless appropriate to confirm this plan since the creditors were given notice, due process, and an opportunity to be heard. He argues, in essence, that they should be defaulted and the plan confirmed. However, even though no creditor has appeared to object, the Court retains an independent obligation to examine plan provisions and ensure that they comply with the Code. Northrup, 141 B.R. at 173. Also, as the Trustee correctly points out, significant due process issues exist concerning the rights of these creditors when a plan provision such as this is proposed. While Debtor lists five separate student loans, none are specifically named in the plan provision discharging the student loan debt. It is well known that many times these loans are transferred to other agencies for collection and notice to student loan creditors is always problematic. There can be no assurance that these creditors received sufficient notice in this case to satisfy due process.
These student loan creditors have until August of 1998 within which to file claims. Under ordinary circumstances, it is unnecessary for student loan creditors to file a claim as they are entitled to rely on the nondischargeability provisions of 11 U.S.C. § 523(a)(8). For these reasons, it is inappropriate to confirm this plan by default, particularly *243 when confirmation irrevocably binds these creditors to this provision.
Finally, all of the foregoing ultimately coalesces into an issue of good faith. The procedure proposed by Debtor in this case is convenient, but ultimately unfair. If approved, Debtor will eliminate 75% of his unsecured debt through a procedure which is not recognized in the Code or Rules. Approving this procedure allows Debtor to change the law upon which issues of dischargeability are determined. Under the Code, Debtor has the burden to raise the issue of dischargeability. Allowing this provision would shift the burden to the student loan creditors. It would require them to appear at the confirmation hearing and raise the issue or lose the rights preserved to them by the Code. It is inappropriate to bind these creditors to a determination which unilaterally changes the rules. This is particularly true when a default is sought in a proceeding in which the student loan creditors may well have no reasonable expectation that they were required to participate to preserve their rights.
The philosophy of Chapter 13 is to allow a debtor in good faith, to pay legitimate obligations on a pro rata basis. The provision proposed by Debtor is not only contrary to the provisions of the Code but also to its philosophy. The purpose of the provision is not to pay a proportionate percentage of debt but rather to avoid payment completely. This constitutes a trap for unwary creditors particularly where Debtor has made no showing that he would be entitled to a hardship discharge if put to his proof.
Ultimately, this type of provision trivializes the entire process and reduces it to a game of chance. If Debtor can obtain confirmation before the creditors, the Court, or the Trustee identify such a provision, the objectionable plan provision is elevated to a status beyond challenge. It is the opinion of this Court that this type of plan provision should be discouraged rather than encouraged under the guise of creativity.
WHEREFORE, for all of the reasons set forth herein, the objection of the Chapter 13 Trustee to the confirmation of Debtor's plan is SUSTAINED because the specific provision proposed by Debtor prevents this plan from being confirmed.
FURTHER, Debtor is granted 14 days from the date of this order within which to amend the plan to satisfy the Trustee's objection. If no amendment is filed within that time period, this case will be dismissed without further notice or hearing. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1765317/ | 534 So. 2d 983 (1988)
STORK-WERKSPOOR DIESEL V.V. and SW Diesel Gulf, Inc.
v.
H.C. KOEK.
No. 88-CA-332.
Court of Appeal of Louisiana, Fifth Circuit.
November 16, 1988.
*984 G. Edward Merritt, Walter Carroll, Jr., New Orleans, for plaintiffs-appellees.
Philip A. Fant, New Orleans, for defendant-appellant.
Before CHEHARDY, GAUDIN and DUFRESNE, JJ.
DUFRESNE, Judge.
This is an appeal by H.C. Koek, defendant-appellant, from a preliminary injunction prohibiting him from divulging trade secrets of his former employer in violation of his employment contract and the Louisiana Uniform Trade Secrets Act, La.R.S. 51:1431, et seq. Because the employment contract is now terminated under its own terms, that portion of the injunction prohibiting him from violating that contract has likewise expired. The question of whether that injunction properly issued is therefore moot. As to the Trade Secrets Act, because we find that the act is not applicable to the facts before us, and that the petitioner has an adequate remedy at law, we conclude that this portion of the preliminary injunction improperly issued, and hereby dissolve it.
The pertinent facts are these. In 1983, H.C. Koek, a Dutch citizen, was employed by Stork-Werkspoor Diesel B.V. (SWD) in the Netherlands. He was assigned to work in Louisiana at one of that company's subsidiaries here. On October 1, 1985, Koek *985 left that employment, but has remained in Louisiana as a resident alien.
In 1981, a container ship, the Elma Tres, sank during a storm in the Bermuda Triangle. In 1984, the cargo owners brought suit in U.S. District Court for the Southern District of New York, seeking damages of twenty million dollars, and naming SWD, among others, as a defendant. The allegations against this defendant are that it defectively designed and manufactured the engines in the ship, thus causing the sinking. During discovery in that matter, SWD learned, in answers to interrogatories, that Koek had been employed as an expert by the cargo owners. The pertinent answer stated as follows:
... Mr. Koek was consulted for the purpose of giving his expert engineering opinion concerning the loss of the ELMA TRES, to advise on Stork-Werkspoor Diesel B.V. operations, record keeping, engineering, research and development programs, and to assist in translating documents in Dutch.
Then, on November 19, 1987, Koek appeared with counsel for the cargo owners at a deposition of one of SWD's employees. Counsel for SWD objected to Koek's presence, but to no avail.
Nothing in the record shows whether relief was sought on this issue by SWD in the federal court. Nonetheless, the present action to enjoin Koek from further assisting the cargo owners was commenced here shortly after the deposition. The allegations of the petition for injunctive were that Koek was violating his employment contract with SWD, and also violating the Louisiana Trade Secrets Act; La.R.S. 51:1431 et seq. After a hearing at which extensive testimony was heard, a preliminary injunction issued prohibiting Koek from violating his contract, and further "from misappropriating or otherwise divulging confidential information and/or trade secrets obtained in the course and scope of his employment" with the petitioner. This appeal followed.
The clause of the contract at issue here is as follows:
Employee shall during the contract term and during three years after termination of it, exercise secrecy toward third parties concerning all special features such as amongst others, machinery, inventions, patents, drawings, models, contracts, suppliers and customers, of which he has taken knowledge during the contract term and which belong to the working procedures or results of Employer.
It is not contested that Koek left the employment of SWD on October 1, 1985, more than three years ago. Since that contract has expired by its own terms, as of October 1, 1988, the injunction prohibiting him from violating that contract is now no longer in force. Because Koek does not seek damages or attorney fees for wrongful issuance of the injunction, we need not resolve that question. This entire issue is therefore moot.
As to the second portion of the injunction, it is this court's opinion that the Trade Secrets Act is not applicable to the present dispute. In Engineered Mechanical Services v. Langlois, 464 So. 2d 329 (La.App. 1st Cir.1984), the court discussed the history and underlying policy considerations of our Trade Secrets Act. It noted that prior to passage of this act, trade secrets were protected in this state by La. R.S. 51:1405, which makes it unlawful to engage in unfair trade practices. The court further noted that "unfair methods of competition are against public policy".... (at 334).
Although the Trade Secrets Act does not directly state its purpose, the comments following each section of the act (all of which appear in the original Acts 1981, No. 462) are replete with references to unfair commercial advantage resulting from disclosure of trade secrets to competitors. The conclusion of this court is, therefore, that the prohibitions of the act are to prevent one perosn or business from profiting from a trade secret developed by another, because it would thus be acquiring a free competitive advantage. The act was never intended to apply to discovery in civil actions and we decline to so interpret it.
*986 In the present case, there is no allegation, much less proof, that any information which has been or might be supplied by Koek to the cargo owners will be used by them to compete unfairly with SWD. Instead, they are attempting to acquire information for the sole purpose of determining whether or not the engines in the ship were defective in design or manufacture. Although the information sought will certainly be of economic advantage if they prevail in their federal suit, that advantage does not derive from use of the information in an unfairly competitive manner. In these circumstances, it is this court's opinion that the Trade Secrets Act is not applicable.
We are further persuaded that the act is not applicable here because to hold otherwise would lead to absurd consequences. Proof in products liability cases often involve trade secrets of design, manufacturing, testing and other information, which would provide competitors with an unfair advantage were it made known to them. However, both Rule 26(c) of the Federal Rules of Civil Procedure send La. Code Civ.Pro. art. 1426, provide protection to litigants when such information is sought for discovery purposes. Their remedy is to seek protective orders from the court which will prevent disclosure of those secrets to others who could use them for unfair competitive purposes. To permit such litigants, in addition, to enjoin disclosure of such information by all of its employees under the Trade Secrets Act would have the effect of rendering all discovery devices totally ineffective. The result would be that meritorious claims could never be fairly litigated where crucial information was cloaked in the mantle of "trade secrets". Such a result would, in this court's opinion, be absurd and would lead to manifest injustice.
Finally, injunctive relief is not available to parties who have an adequate remedy at law, Tubular Threading, Inc. v. Scandaliato, 443 So. 2d 712 (La.App. 5th Cir.1983). Because petitioner has an adequate remedy under the Federal Rules of Civil Procedure by which to prevent any trade secrets from coming into the wrong hands, injunctive relief is inappropriate in this case.
For the foregoing reasons, the preliminary injunction which issued in this case is hereby dissolved.
INJUNCTION DISSOLVED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1247408/ | 555 S.E.2d 514 (2001)
252 Ga. App. 56
RODRIGUEZ
v.
NUNEZ.
No. A01A1151.
Court of Appeals of Georgia.
October 17, 2001.
*515 Smolar, Roseman, Brantley & Seifter, Yehuda Smolar, G. Grant Brantley, Atlanta, Antoinette D. Johnson, Marietta, Douglas J. Davis, Atlanta, for appellant.
Alembic, Fine & Callner, Seth A. Litman, G. Michael Banick, Michael K. Watson, Atlanta, for appellee.
*516 BARNES, Judge.
The administrator of an estate, Father Isaias Rodriguez, appeals the grant of summary judgment to a minor child who sued in superior court to establish that the decedent of the estate was her father. He argues (1) that the trial court erred in dismissing his notice of appeal on jurisdictional grounds; (2) that he was entitled to appeal the summary judgment directly rather than by application for discretionary appeal; (3) that the trial court did not have jurisdiction to determine paternity under OCGA § 19-7-40; and (4) that the trial court erred in granting summary judgment on the merits.
We hold that the trial court did not have jurisdiction to dismiss the direct appeal, that the summary judgment was directly appealable, and that the plaintiff failed to state a claim for relief pursuant to OCGA § 19-7-40 et seq., the "Determination of Paternity" article of the "Parent and Child Relationship Generally" chapter of the "Domestic Relations" title of the Code. The appellant's enumeration of error regarding the merits of the summary judgment is therefore moot.
Mario Adolfo Rivas died in a motor vehicle accident on March 9, 1997. He was unmarried and intestate. Father Rodriguez petitioned the Probate Court of Carroll County in March 1998 for letters of administration, indicating that Rivas' mother and two sisters were his only heirs and had selected him to serve as administrator. The probate court granted the petition a month later. As administrator, Rodriguez filed a wrongful death suit in June 1998 in Fulton County State Court against the other driver in the automobile collision.
Almost a year later, in May 1999, Sandra Elizabeth Echeverria Nunez, as the natural mother and guardian of Hilda Catalina Rivas (Hilda), petitioned the probate court to revoke Rodriguez's letters of administration, asserting that Hilda is the daughter and only child of the decedent.[1] The probate court entered an order that day directing Rodriguez to show cause why his letters of administration should not be revoked. The only other evidence in the record regarding the probate court action is Rodriguez's October 19, 1999 motion to dismiss the petition for revocation of his letters, but no order on the motion appears and both parties agree that the revocation petition remains pending in the probate court.
Meanwhile, on October 15, 1999, Nunez filed a "Complaint for Determination of Paternity" in Carroll County Superior Court, in her capacity as Hilda's next friend and guardian against Rodriguez in his capacity as the administrator of Rivas' estate. She alleged in the complaint that Rivas' estate was created in the Carroll County Probate Court, that Rodriguez resides in Georgia, and that he was subject to the jurisdiction of the Carroll County Superior Court by virtue of his capacity as the estate administrator. She further asserted that Hilda was the estate's sole heir pursuant to OCGA § 53-2-1(b), that she was entitled to select the estate administrator under OCGA § 53-6-20, and that the superior court had "exclusive jurisdiction over the issue of paternity in Georgia pursuant to OCGA § 19-7-40." Nunez prayed for a declaration pursuant to OCGA § 19-7-49(a) that Rivas was Hilda's father and an order "requiring genetic testing of the decedent and Plaintiff pursuant to OCGA §§ 19-7-43, 19-7-45, and 19-7-46." Rivas, who was in Georgia on a work visa when he died, is buried in Guatemala City, Guatemala, which is the domicile of Nunez and her daughter Hilda.
Rodriguez answered and moved to dismiss the complaint, asserting among other affirmative defenses that Nunez failed to state a claim or cause of action upon which relief could be granted and that the probate court, not the superior court, had jurisdiction to determine Rivas' heirs. Nunez responded to the motion, then moved for summary judgment, tendering copies of numerous Guatemalan documents and translations, family pictures, letters, and pleadings from the federal case. Rodriguez opposed the motion, arguing the merits and incorporating by reference all pleadings in the file.
*517 The trial court granted summary judgment to Nunez. In its order, the trial court held that "Hilda Catalina Rivas is the natural daughter of the decedent, Mario Adolfo Rivas Rivas[,] based upon the decedent's signature appearing on Hilda Catalina Rivas' certified birth certificate pursuant to OCGA § 19-7-46.1, and the defendant[`]s failure to rebut this presumption with any admissible evidence."
Rodriguez filed a timely notice of direct appeal, but Nunez moved in the trial court to dismiss the appeal because it was a domestic relations matter that should have been brought by application for discretionary appeal. The trial court agreed and dismissed Rodriguez's appeal. From this order of dismissal Rodriguez then filed an application for discretionary appeal, but because the dismissal of an appeal by the trial court is subject to direct appeal, we granted the application. See OCGA § 5-6-35(j). Rodriguez then filed his notice of appeal, and the case is thus before us for consideration.
1. This case is properly before us because the dismissal of an appeal by the trial court is subject to direct appeal. Brown v. E.I. du Pont de Nemours & Co., 240 Ga.App. 893, 894(1), 525 S.E.2d 731 (1999).
2. Rodriguez contends that the trial court erred in dismissing his appeal. "Those circumstances under which a trial court may properly dismiss an appeal are strictly limited." Castleberry's Food Co. v. Smith, 205 Ga.App. 859, 860(1), 424 S.E.2d 33 (1992). Those circumstances include causing an unreasonable delay in having the transcript prepared, the record transmitted, or costs paid, OCGA § 5-6-48(c), when no final judgment has been entered and no certificate of immediate review obtained, Jones v. Singleton, 253 Ga. 41, 42(1), 316 S.E.2d 154 (1984), or when the appeal becomes moot. Attwell v. Lane Co., 182 Ga.App. 813, 814(1), 357 S.E.2d 142 (1987). In Castleberry's Food Co. v. Smith, supra, however, we held a trial court had no authority to dismiss an application for discretionary appeal because it should have been a direct appeal. "We are not willing to construe legislation so broadly as to divest ourselves of the responsibility for delineating the scope of appellate jurisdiction pursuant to OCGA § 5-6-35, and to place that responsibility on overburdened trial courts." Id. at 860(1), 424 S.E.2d 33. Therefore, the trial court erred in dismissing Rodriguez's appeal.
3. We next consider Nunez's argument that we have no jurisdiction to consider the grant of summary judgment, because Rodriguez filed a direct appeal of the trial court's grant of summary judgment to Nunez. Nunez argues the appeal should have been by discretionary application, citing cases in which we have held that "[a]ppeals arising out of paternity petitions are domestic relations cases which require compliance with the discretionary appeal procedure of OCGA § 5-6-35." Brown v. Dept. of Human Resources, 204 Ga.App. 27, 418 S.E.2d 404 (1992); see also Smoak v. Dept. of Human Resources, 221 Ga.App. 257, 471 S.E.2d 60 (1996). We must read these cases in context, however, and recognize that they involve actions against a father or putative father for child support.
The facts of this case are closer to those in Families First v. Gooden, 211 Ga. App. 272, 439 S.E.2d 34 (1993), involving a declaratory judgment action to determine which man had the right to consent to a child's adoption. The appellee moved to dismiss that appeal on the ground that it involved a paternity case subject to the discretionary appeal procedures in OCGA § 5-6-35. We did not agree that the case was "an appeal of a paternity case. While one issue involves paternity, it is ancillary to more significant issues in this appeal." Id. at 274(1), 439 S.E.2d 34. Similarly, the paternity issue in the case before us is ancillary to the more significant issues of estate administration and inheritance, which do not fall under OCGA § 5-6-35(a)(2). The propriety of the trial court's grant of summary judgment to Nunez is therefore properly before us on direct appeal.
Moreover, the fact that Nunez asserted this was a claim under OCGA § 19-7-40 et seq. does not make it so. There is no magic in the title given to her complaint; under our rules of pleading, it is substance and not mere nomenclature that controls.
*518 Anderson v. Bruce, 248 Ga.App. 733, 736(2), 548 S.E.2d 638 (2001); Manning v. Robertson, 223 Ga.App. 139, 142(2), 476 S.E.2d 889 (1996).
Further, not all appeals involving a child's relationship with her parents are subject to the discretionary appeals procedures. For example, a final order in a deprivation proceeding is not a "child custody" order subject to the discretionary appeal process, because the issue is primarily whether the child is deprived, and only secondarily where she will be placed. In the Interest of J.P., 267 Ga. 492, 493, 480 S.E.2d 8 (1997). "Domestic relations" cases are subject to the discretionary appeal process "[w]here the underlying subject matter, i.e., the issues sought to be appealed, clearly arises from or is ancillary to divorce proceedings, or is derived from a marital relationship and divorce." (Punctuation omitted.) Id. This is not one of those cases.
4. Before reaching the merits of the summary judgment grant, we consider whether the trial court should have granted Rodriguez's motion to dismiss for failure to state a claim under OCGA § 19-7-40 et seq. "A trial court should grant a motion to dismiss... when, assuming the allegations in the complaint are true, the plaintiff would not be entitled to any relief under the facts as stated and the defendant demonstrates that the plaintiff could not introduce evidence that would justify granting the relief sought. Our review is de novo." (Footnotes omitted.) Moore v. BellSouth Mobility, 243 Ga.App. 674, 534 S.E.2d 133 (2000).
Nunez brought her complaint against estate administrator Rodriguez pursuant to the paternity statutes, OCGA § 19-7-40 et seq. The Supreme Court of Georgia, while considering whether the paternity statutes violated principles of equal protection, recently clarified that "[o]ur paternity statutes were enacted to deal with the problem of defaulting fathers." Palmer v. Bertrand, 273 Ga. 475, 476, 541 S.E.2d 360 (2001).
The paternity statutes recognize the intrinsic differences in the circumstances of fathers and mothers of illegitimate children. Indeed, such statutes have eliminated the gender-based discrimination of the common law, which placed a duty of support on the mother, but not on the father. The very purpose of those statutes is to establish the father's duty of child support. OCGA § 19-7-49(a).
(Citation omitted; emphasis supplied.) Id. at 476, 541 S.E.2d 360.
In fact, the paternity article is contained within the title "Domestic Relations" and the chapter "Parent and Child Relationship Generally." This case clearly does not involve "domestic relations" or family law, because the putative father is not alive, and includes no issues of child support, adoption, custody, or visitation. The probate court has jurisdiction to determine paternity when the issue arises in the context of inheritance; for one thing, OCGA § 53-2-3 specifically governs the rights of inheritance of a child born out of wedlock, within the title "Wills, Trusts, and Administration of Estates" and the chapter "Descent and Distribution." See, e.g., In re Estate of Slaughter, 246 Ga.App. 314, 540 S.E.2d 269 (2000).
To consider the matter from another angle, if Nunez sought to establish her ward's right to inherit from anyone other than a putative father, such as a grandfather or cousin or sibling, the proper forum to decide the issue would clearly be the probate court. No parallel system exists to determine fraternity, for example, in the superior court rather than the probate court, and it is illogical to place this issue within the framework of OCGA § 19-7-40 et seq., simply because the decedent is the putative father rather than, say, the putative brother or any other relative. Nunez could not recover on her complaint for a determination of paternity pursuant to OCGA § 19-7-40 et seq. under any conceivable set of facts, because that statute is not the proper vehicle to resolve the descent and distribution issues involved.
While Nunez asserts in her brief that the probate court stayed action on the petition to revoke Rodriguez's letters of administration, and that Rodriguez consented to the stay, no evidence of those facts appears in the record. The record does show, however, that Rodriguez raised the affirmative defense of failure *519 to state a claim in his superior court answer and motion to dismiss.
The probate court has exclusive jurisdiction over this matter. OCGA § 15-9-30(a)(10); Heath v. Sims, 242 Ga.App. 691, 692(1), 531 S.E.2d 115 (2000) ("[P]robate courts have `original, exclusive, and general jurisdiction' of `all ... matters and things as appertain or relate to estates of deceased persons.'"). Therefore, we vacate the judgment of the superior court, remand this case, and direct the trial court to dismiss Nunez's complaint without prejudice.
5. Rodriguez's remaining argument on the merits of the summary judgment is rendered moot in light of Division 4.
Judgment vacated and case remanded with direction.
SMITH, P.J., and PHIPPS, J., concur.
NOTES
[1] Nunez had filed a wrongful death action in the U.S. District Court for the Northern District of Georgia on February 2, 1999. Rodriguez intervened, and the trial court stayed discovery on August 16, 1999, until further order. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2406502/ | (2008)
Gregory B. MONACO, etc., et ano., Plaintiffs,
v.
Michael F, HOGAN,[1] etc., et alia, Defendants.
No. CV-98-3386 (CPS)(RML).
United States District Court, E.D. New York.
August 29, 2008.
MEMORANDUM OPINION AND ORDER
SIFTON, Senior District Judge.
Plaintiffs Gregory B. Monaco ("Monaco"), on behalf of himself and similarly situated individuals, and the Mental Disability Law Clinic, Touro Law Center (the "Clinic")[2] (collectively "plaintiffs") bring this class action for declaratory and injunctive relief against the following defendants: Sharon Carpinello, in her official capacity as Acting Commissioner of the New York State Office of Mental Health ("OMH");[3] Catherine Cahill, in her official capacity as Justice of the East Hampton Town Justice Court, on behalf of herself and all other local criminal court judges in New York State;[4] Benjamin Chu, in his official capacity as the Director of the New York City Health and Hospitals Corporation ("HHC"); Mark Sedler, M.D., in his official capacity as Chairman of the Department of Psychiatry at University Hospital of the State University at Stony Brook; Kenneth Skodnek, in his official capacity as Chairman of Psychiatry at Nassau University Medical Center; Alfred Tisch, in his official capacity of Sheriff of Suffolk County; and Martin Horn, in his official capacity of Commissioner of the New York City Department of Corrections.[5]
Plaintiffs allege violations of the Fourth Amendment, the Due Process and Equal Protection Clauses of the Fourteenth Amendment to the United States Constitution, and 42 U.S.C. § 1983, as well as state law claims for false imprisonment negligence, and medical malpractice. As amended, the complaint contains two major components: 1) a challenge to the constitutionality of the practices of Cahill, Horn, and Tisch, who are alleged to have unnecessarily prolonged the confinement of individuals found incompetent to stand trial for minor felonies and misdemeanors and those awaiting such a determination; 2) a challenge to the constitutionality of the procedures allegedly used by defendants Commissioner, Chu, Sedler, Skodnek, and Licht to hospitalize individuals deemed mentally ill involuntarily.[6]
Now before this Court is defendant Commissioner's motion for summary judgment on plaintiffs' Seventh, Eighth, Ninth, and Eleventh Causes of Action and defendant Cahill's motion for abstention and dismissal of the First and Second Causes of Action or, in the alternative, an order decertifying the defendant class of local criminal court justices. For the reasons set forth below, defendant Commissioner's motion and defendant Cahill's motion are granted.
Background
I. Statutory Scheme At Issue
A brief description of the statutory scheme at issue is necessary to understand plaintiffs' claims.
A. CPL § 730.40
When a criminal court determines that a defendant lacks capacity to stand trial, N.Y.Crim. Pro. Law ("CPL") § 730.40(1) requires the court to "issue a final or temporary order of observation, committing him to the custody of the [Commissioner of Mental Health] for care and treatment ... for a period not to exceed ninety days from the date of the order." If the charge is a misdemeanor, the order must be a "final order of observation." If the accusatory instrument is a felony complaint, the order must be a "temporary order of commitment" unless the District Attorney consents to a final order. Id. A final order of observation bars any further prosecution on the charge in the accusatory instrument, as the court, upon its issuance, is required to dismiss the charges against the defendant. The issuance of an order of observation results in the remand of the defendant to the custody of the OMH Commissioner. Id.
In Ritter v. Surles, 144 Misc. 2d 945, 545 N.Y.S.2d 962 (N.Y.Sup.1988), the court found that aspects of CPL § 730.40 violated the United States Constitution. To comport with Ritter, the OMH instituted a policy that directed its facilities to confine individuals remanded pursuant to § 730.40 for a period not to exceed 72 hours, rather than the 90-day period provided in the statute, see Charles W. v. Maul, 214 F.3d 350, 355-56 (2d Cir.2000),[7] and to determine in this period whether civil commitment was appropriate for the defendant. Id. If the criteria for civil commitment are not met, the defendant is to be released.
B. Civil Commitment
Article 9 of New York's Mental Hygiene Law sets out the state's civil commitment scheme. Under Article 9, a psychiatric hospital may involuntarily admit a patient upon the certificates of two physicians and a confirmation of the need for hospitalization by a third physician. See N.Y. Mental Hyg. Law ("MHL") § 9.27(a) & (e). In an emergency, a hospital may admit a patient upon the certificate of one doctor who has determined that the patient has a mental illness that requires immediate inpatient care and is likely to result in serious harm to himself or others.[8]See id. §§ 9.37(a); 9.39(a); 9.40(a). The need for immediate hospitalization must be confirmed by a staff physician prior to admission. See id. § 9.37(a).
Although not explicitly stated by MHL § 9.27, several court decisions have made clear that involuntary commitment under this section requires a finding that the mentally ill individual poses a threat of harm to himself or others. See O'Connor v. Donaldson, 422 U.S. 563, 572, 95 S. Ct. 2486, 45 L. Ed. 2d 396 (1975) (violation of due process to confine a person solely because he or she is mentally ill); Project Release v. Prevost, 722 F.2d 960, 973-74 (2d Cir.1983) (With dangerousness requirement, New York's statutory scheme governing involuntary commitments facially sufficient to meet the requirements of due process); In re Harry M., 96 A.D.2d 201, 206-08, 468 N.Y.S.2d 359 (2d Dep't 1983); In re Scopes, 59 A.D.2d 203, 205-06, 398 N.Y.S.2d 911 (3d Dep't 1977).
II. Procedural Background
On March 12, 1999, I certified Gregory Monaco as the representative of a plaintiff class ("Original Plaintiff Class") of all individuals who have been or will be (1) charged with a minor felony or misdemeanor, (2) evaluated to determine whether or not they are competent to stand trial; (3) found by court appointed psychiatrists to lack the capacity to stand trial and awaiting a determination of the competency issue by the local criminal court. Monaco v. Stone, 187 F.R.D. 50, 63 (E.D.N.Y. 1999) ("Monaco I"). I also certified a subclass ("Original Plaintiff Subclass") of all individuals who have been or will be (1) charged with a minor felony or misdemeanor, (2) evaluated to determine whether or not they are competent to stand trial, (3) found by court appointed psychiatrists to lack the capacity to stand trial, and (4) confined to a local jail pending a determination of competency by the local criminal court. Id. at 63-64. I further certified a defendant class, represented by defendant Cahill, of all local criminal court judges who have the authority pursuant to CPL § 730.40 to involuntarily commit incompetent defendants. Id. at 64.
In 2002, plaintiffs sought to certify a new class and two subclasses. The new class was to comprise of persons who satisfied one or more of the following criteria: (1) they are or will be confined to a jail pending a competency determination; (2) they have been or will be found incompetent to stand trial and remanded to an OMH facility pursuant to CPL § 730.40; and/or they are or will be subject to a civil commitment evaluation pursuant to Article 9 of the MHL. I declined to certify this class, as plaintiffs failed to satisfy the commonality requirement. Monaco v. Stone, 2002 WL 32984617, at *37 (E.D.N.Y. Dec.18, 2002) ("Monaco II"). I did, however, certify what I and the parties termed subclasses because Fed. R. Civ. Pro. 23(c)(4)(B) (2002) required subclasses be treated as classes for the purposes of certification.
The first subclass, to be represented by Monaco and the Clinic, comprises all individuals who have been or will be (1) charged with a minor felony or misdemeanor, (2) evaluated to determine whether or not they are competent to stand trial, (3) found by court appointed psychiatrists to lack capacity to stand trial, who are awaiting a determination of the by the local criminal court, and (4) if remanded pursuant to CPL § 730.40, subject to a civil commitment evaluation pursuant to New York Criminal Procedure Law article 9 ("Incompetency Subclass"). Monaco II, at *37. I further divided the Incompetency Subclass into two sub-subclasses. Id. at **37-38.
I also certified a Civil Commitment Subclass, to be represented by the Clinic, which consists "of all individuals in the counties of Kings, Queens, Richmond, Nassau, and Suffolk[9] who are subject to civil commitment evaluations pursuant to Mental Hygiene Law article 9 at facilities operated by the Office of Mental Health or other state entities, local governments, and private entities." Id. at *43.[10] The subclass was subsequently modified to delete the reference to private entities. Monaco v. Stone, Memorandum Opinion & Order, at *11 (E.D.N.Y. Nov. 17, 2003).[11]
On December 17, 2004, plaintiffs filed a Fifth Amended Complaint. The causes of action relevant to these motions are one, two, seven through nine, and eleven.[12]
The First Cause of Action alleges:
By maintaining a system by which defendants who may lack capacity to stand trial are required to remain in jail for a period of up to thirty days or longer while a question of capacity is before the local criminal court, defendant Cahill and the defendant class of judges violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983 because the duration of confinement does not bear a reasonable relation to its purpose.
Fifth Amended Complaint (hereinafter "FAC") ¶ 190.
The Second Cause of Action alleges:
By failing to notify OMH of the existence of an incompetent defendant who may well be found incompetent to stand trial during a period of time that would enable OMH to designate a facility to which the defendant could be sent if he was found incompetent prior to the date of the incompetency hearing defendant Cahill and the defendant class of judges violate the Due Process Clause of the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983 because the duration of the confinement of the incompetent defendant does not bear a reasonable relation to its purpose and such deprivation of liberty is not the least intrusive possible while meeting the legitimate interests of the state.
FAC ¶ 192.
The Seventh Cause of Action alleges:
As a result of physicians at OMH and HHC operated facilities, Stony Brook and NUMC certifying individuals who have been evaluated for civil commitment purposes as dangerous because the physicians believe that such individuals' clinical condition warrants in-patient care and treatment, defendants Carpinello, Chu, Skodnek, Sedler, and Licht are responsible for the confinement of nondangerous individuals, which violates the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983.
FAC ¶ 202.
The Eight Cause of Action alleges:
By failing to examine and employ significant criteria related to the likelihood of causing harm when examining allegedly mentally ill individuals for civil commitment purposes, physicians at OMH and HHC operated facilities, Stony Brook and NUMC make clinical determinations that do not promise some degree of accuracy and such decisions result in the confinement of nondangerous individuals, both of which violate the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983.
FAC ¶ 204.
The Ninth Cause of Action alleges:
By conducting clinical evaluations that frequently do not last more than five or ten minutes when examining allegedly mentally ill individuals for civil commitment purposes, physicians at OMH and HHC operated facilities, Stony Brook, and NUMC make clinical determinations that do not promise some degree and accuracy and such decisions result in the confinement of nondangerous individual [sic], both of which violate the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983.
FAC ¶ 206.
The Eleventh Cause of Action alleges:[13]
The failure of physicians at OMH and HHC operated facilities, Stony Brook and NUMC to use guidelines that inform physicians of the likelihood and magnitude of harm that must exist before a physician certifies a mentally ill person for hospitalization results in the arbitrary exercise of physicians at OMH and HHC operated facilities, Stony Brook and NUMC when they certify an allegedly mentally ill person for involuntary hospitalization, which violates the Due Process Clause of the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983.
FAC ¶ 210.[14]
III. Factual Background Relevant to Defendant Commissioner's Motion for Summary Judgment
The following facts are taken from the parties' submissions in connection with these motions as well as the Local Rule 56.1 statements. Disputes are noted.
Creedmoor is the receiving hospital for individual requiring intermediate and extended care who reside in Queens. Iverson Affidavit in Support of Comm'r's Motion for Summary Judgment (hereinafter "Iverson Aff. ¶ ___") ¶ 2.[15] Hudson River is the receiving hospital for individuals requiring intermediate and extended care who reside in the counties of Dutchess, Putnam, and Ulster. Shriver Affidavit in Support of Comm'r's Motion for Summary Judgment (hereinafter "Shriver Aff. ¶ ___") ¶ 2.[16] According to defendant Commissioner, the patients at Creedmoor and Hudson River are individuals whose mental illnesses are so severe that they are unable to function safely in the community. Iverson Aff. ¶ 3; Shriver Aff. ¶ 3. Plaintiff contends that the institutions confine nondangerous patients who can function independently in the community. Lubit Affidavit in Opposition to Comm'r's Motion for Summary Judgment (hereinafter "Lubit Aff. ¶ ___") ¶¶ 30; 35-54.[17]
Many patients admitted to Creedmoor and Hudson River are transferred from other hospitals that are unable to provide intermediate or extended care, or sent from prisons or jails after having been found incompetent to stand trial on criminal charges, pursuant to CPL § 730.40, or not responsible by reason of mental disease or defect, pursuant to CPL ¶ 330.20. Iverson Aff. ¶ 3; Shriver Aff. ¶ 3. Other patients are admitted to Creedmoor on an emergency basis from crisis residences or outpatient programs. Iverson Aff. ¶ 3. Neither Creedmoor or Hudson River admits patients directly from the general community. Iverson Aff. ¶ 3; Shriver Aff. ¶ 3.
Drs. Julius LaGuerre, Mitchell Barden, Franck Paul, Pushpa Patil, and Kantilal Shah are psychiatrists at Hudson River who conduct civil commitment evaluations. Drs. Cynthia de los Santos, Syamala Das, Baljit Singh, and Aneta Predanic are psychiatrists at Creedmoor who conduct civil commitment evaluations.
When an individual arrives from another hospital or a jail, Creedmoor and Hudson River are given certain information about that person. Das Tr. 92-93; Shriver Tr. 73-75. If the individual is transferred from another hospital, Creedmoor and Hudson River have a referral packet containing information about the patient that was obtained by the transferring hospital. Id. The referral packet contains, among other things, an initial psychiatric assessment, a social assessment, a physical assessment, laboratory reports, progress notes, and information about medications. Id. If the individual is sent from jail, Creedmoor and Hudson River receive a designation form prepared by OMH's Bureau of Forensic Services, which lists the patient's name, address, age, and criminal charge. Das. Tr. 68; Shriver Tr. 104. They also receive two examination reports for each patient completed by psychologists or psychiatrists who were appointed by local criminal courts to examine the individuals to assess their capacity to stand trial. Id. If an individual was admitted previously to Creedmoor or Hudson river, discharge summaries from the previous admissions and the individual's chart are also available. Das Tr. 76-77; Shriver Tr. 83.
On the day that an individual arrives at Creedmoor or Hudson River, a psychiatrist conducts an initial evaluation of the patient. Iverson Aff. ¶ 5; Shriver Aff. ¶ 5. The psychiatrist must complete an initial assessment, or screening, form. Id. The initial assessment forms elicit information about, inter alia, the history of the present illness and the chief complaint, the individual's psychiatric, medical, substance abuse, and family history, risk factors, and the individual's mental status and admitting diagnosis. Iverson Aff., ¶ 5 & Exhs. A & B; Shriver Aff. ¶ 5 & Ex. A.
In addition to the psychiatric evaluation, other evaluations are conducted on the day that an individual arrives at Creedmoor or Hudson River. Iverson Aff. ¶ 7; Shriver Aff. ¶ 7. A physician conducts a physical exam and completes a physical evaluation form. Id. A nurse also conducts an examination and completes an assessment form. Id. A social worker may also interview a patient, if there is time. Id.
When the process for involuntary commitment under MHL § 9.27 begins, an application for involuntary commitment is completed and two psychiatrists are assigned to conduct, separately, involuntary commitment evaluations. Iverson Aff. ¶¶ 9-11; Shriver Aff. ¶¶ 9-11. These psychiatrists also have at their disposal the initial forms completed upon a patient's arrival, as well as any other records that are from prior admissions or sent by local hospitals or jails. Iverson Aff. ¶¶ 11-13; Shriver Aff. ¶¶ 11-13; Shar Tr. 277; Singh Tr. 224, 228-29; Paul Tr. 51; Predanic Tr. 67-68.
If the psychiatrists determine that the patient is mentally ill and poses a danger to himself or others, each completes a certificate to that effect, pursuant to MHL § 9.27. Iverson Aff. ¶ 14; Shriver Aff. ¶ 14. A third psychiatrist, who is a member of the facilities staff, must then confirm that the admission is warranted. Iverson Aff. ¶ 15; Shriver Aff. ¶ 15. Pursuant to MHL § 9.27, the two certificates and the confirmation from the third psychiatrist authorize the director of the facility to commit the patient involuntarily.
The parties agree that there are three methods to assessing risk; the actuarial, the structured professional judgment, and the clinical judgment methods. Norko Tr. 31[18] & Peeples Declaration in Support of Comm'r's Motion for Summary Judgment (hereinafter "Peeples Dec.") Exhs. B & F. Neither party disputes that the clinical judgment method or, as some of plaintiffs' witnesses refer to it as, the unstructured professional judgment method, is the standard method used to assess risk in the psychiatric community. See Commissioner's Local Rule 56.1 Statement (hereinafter "Def.'s Stmt. ¶ ___") ¶ 102; Plaintiffs' Local Rule 56.1 Counter-Statement (hereinafter "Pls.' Ctr. Stmt. ¶ ___") ¶ 102; see also Rosenfeld Tr. 74-76.[19] Under this method, the clinician reaches an opinion about whether an individual poses a risk of harm based on his or her evaluation of the individual using his or her observation of and professional judgment about risk factors relevant to harm. Rosenfeld Tr. 59-60; Norko Tr. 90, 101-02; Peeples Dec. Ex. B.[20]
The most pertinent risk assessment factors regarding dangerousness to others are the presence of "threat/control override" psychotic symptoms; the presence of co-morbid substance abuse; medication non-compliance; prior episodes of serious violence; the lack of stable environmental resources (e.g.relationships, employment, homelessness), insight and compliance with necessary treatment regiments; and the stability of current symptoms. Rosenfeld Affidavit in Opposition to Comm'r's Motion for Summary Judgment (hereinafter "Rosenfeld Aff. ¶ ___") ¶ 2. Other factors include anger, command hallucinations to act violently, violent fantasies, and abuse as a child. Id; Lubit Aff. ¶ 13.
Known risk factors relating to suicide include the presence of mood disorders, divorce, prior suicide attempts, suicidal intent, firearms in the home, a humiliating event, and hopelessness. Lubit Aff. ¶ 18. Key factors for assessing danger because of an inability to meet one's needs include whether a person is meeting his medical needs, the individual's nutritional state, the current climate and environment and the individual's ability to clothe, feed, and medicate himself accordingly, and support from the community. Lubit Aff. ¶ 19.
According to defendant Commissioner, the psychiatrists who have conducted the evaluations at Creedmoor and Hudson River assessed the individuals' dangerousness as well as their mental status and that they believed those whom they certified as dangerous were, in fact, dangerous. Barden Tr. 8-10, 16, 46-47; Paul Tr. 8-11, 20-21, 23-24, 83-88, 111-13, 117, 164-70, 221-23, 239-42, 244-47, 259-61; Shah Tr. 35-36, 131-37, 150-52, 163-66, 232-34, 253-55; LaGuerre 2001 Tr. 41-44, 59-61; LaGuerre 2006 Tr. 5-7, 29-30, 33-34, 45-48, 62-64, 68-70, Ex. 1; Patil 2001 Tr. 8-10; Patil 2006 Tr. 4-7 & Ex. 1; Singh Tr. 15-16, 32, 35, 105-07, 161, 235-36, 242-44, 251-57, 270-71; Das Tr. 16, 50-52; De Los Santos Tr. 12, 31, 57-60, 64-67; Predanic Tr. 9, 51, 54-55, 144-47, 148-51.
According to the Clinic, however, various psychiatrists at Creedmoor and Hudson River could not have concluded that at least 23 of the 464 individuals involuntarily committed during the relevant period posed a danger to themselves or others. See Lubit Aff. ¶¶ 35-54. Plaintiffs also dispute the accuracy of the clinical judgment method and assert that evaluations under the method are accurate at a level no greater than chance. Rosenfeld Aff. ¶ 13.
There is no dispute that all the psychiatrists who conduct initial psychiatric assessments and involuntary commitment evaluations at Creedmoor and Hudson River are licensed to practice medicine by the State of New York, and have completed the necessary schooling, training, and residencies. It is also undisputed that psychiatrists at Creedmoor and Hudson River receive and give presentations and training on risk assessment issues, although the psychiatrists are not formally tested on this knowledge.
IV. Factual Background Relevant to Defendant Cahill's Motion for Abstention and Dismissal or, In the Alternative, to Decertify the Defendant Class
For the purposes of defendant Cahill's motion, it is sufficient to state the following. Local criminal courts typically rule on whether a criminal defendant lacks capacity to stand trial within two to four weeks of the date that the court first orders a competency evaluation. Alexander Tr. 6-9, 13-14; Jolie Tr. 11-13; Velte Tr. 14-16.[21] If the defendant is found incompetent, the final order of observation is sent by the Court's clerk, typically by mail, to OMH. Alexander Tr. 16-17, 21; Jolie Tr. 18; Velte Tr. 27. Once a facility is designated by OMH, the defendant is transferred to that facility, usually by the Sheriff. See Murphy Tr. 8-9.[22]
Generally, in Dutchess County, individuals are transported to the designated OMH facility within three days of the time the Sheriff receives the order of observation. Id. at 33-34. Of the twenty-two individuals admitted to Pilgrim Psychiatric Center, in Suffolk County, however, over the course of a one and one-half year period from January 2005 through August 2006, six individuals waited in jail four or more days for admission following the issuance of a final order of observation and four waited six days or more. Brooks Declaration in Opposition to Defendant Cahill's Motion to Dismiss (hereinafter "Brooks Cahill Dec.") Ex. I.
Discussion
I. Defendant Commissioner's Motion for Summary Judgment
A court must grant a motion for summary judgment if the movant shows that "there is no genuine issue as to any material fact" and that "the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). Summary judgment is appropriate "[w]hen the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). "An issue of fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Elec. Inspectors, Inc. v. Vill. of E. Hills, 320 F.3d 110, 117 (2d Cir.2003). A fact is material when it "might affect the outcome of the suit under the governing law." Id.
The party seeking summary judgment has the burden of demonstrating that no genuine issue of material fact exists. Apex Oil Co. v. DiMauro, 822 F.2d 246, 252 (2d Cir.1987). In order to defeat such a motion, the non-moving party must raise a genuine issue of material fact. Although all facts and inferences therefrom are to be construed in the light most favorable to the non-moving party, the non-moving party must raise more than a "metaphysical doubt" as to the material facts. See Matsushita, 475 U.S. at 586, 106 S. Ct. 1348; Harlen Assocs. v. Inc. Vill. of Mineola, 273 F.3d 494, 498 (2d Cir.2001). The nonmoving party may not rely on conclusory allegations or unsubstantiated speculation. Twin Labs., Inc. v. Weider Health & Fitness, 900 F.2d 566, 568 (2d Cir.1990). Rather, the non-moving party must produce more than a scintilla of admissible evidence that supports the pleadings. First Nat'l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289-90, 88 S. Ct. 1575, 20 L. Ed. 2d 569 (1968); Niagara Mohawk Power Corp. v. Jones Chem. Inc., 315 F.3d 171, 175 (2d Cir.2003). In deciding such a motion the trial court must determine whether "after resolving all ambiguities and drawing all inferences in favor of the non-moving party, a rational juror could find in favor of that party." Pinto v. Allstate Ins. Co., 221 F.3d 394, 398 (2d Cir.2000).
A. EIGHTH CAUSE OF ACTION[23]
As discussed above, in order to commit an individual under Article 9 of New York's Mental Hygiene Laws, a psychiatrist must determine that the individual poses a substantial risk of harm to himself or others. "[D]ue process does not require a guarantee that a physician's assessment of the likelihood of serious harm be correct ..." Rodriguez v. City of New York, 72 F.3d 1051, 1061 (2d Cir.1995). The Second Circuit continued that "due process does demand that the decision to order an involuntary [] commitment be made in accordance with a standard that promises some reasonable degree of accuracy." Id. at 1062. Lastly, the Second Circuit stated:
Though committing physicians are not expected to be omniscient, [MHL § 9.39] implicitly requires that their judgment-affecting whether an individual is to be summarily deprived of her liberty-be exercised on the basis of substantive and procedural criteria that are not substantially below the standards generally accepted in the medical community. Due process requires no less.
Id. at 1063.
Plaintiffs contend that Rodriguez stands for the proposition that, even if the generally accepted standards within the psychiatric community are used, due process is not satisfied when they do not promise a reasonable degree of accuracy. Plaintiffs' Opposition to Defendant Comm'r's Motion for Summary Judgment (hereinafter "Pls.' Opp. ___") 22. Contrary to plaintiffs' argument, however, the final quotation in the preceding paragraph demonstrates that the Second Circuit has equated a "reasonable degree of accuracy" with a professional judgment standard. Moreover, in Youngberg v. Romeo, 457 U.S. 307, 323, 102 S. Ct. 2452, 73 L. Ed. 2d 28 (1982), the Supreme Court made clear that a physician's decision is presumptively valid and liability may be imposed only when an action is a substantial departure from accepted professional judgment, practice, or standards.[24]
Courts interpreting Rodriguez also equate accuracy with a professional judgment standard. See Monaco v. Carpinello, 2004 WL 3090598, at *8 (E.D.N.Y. Jul.22, 2004) ("Monaco III") (due process requires that involuntary commitment determinations be made in accordance with a standard that must not fall substantially below that which is generally accepted in the medical community) (citing Katzman v. Khan, 67 F. Supp. 2d 103, 109-10 (E.D.N.Y. 1999)); Fisk v. Letterman, 501 F. Supp. 2d 505, 524 (S.D.N.Y.2007) (granting summary judgment on claim that commitment violated right to substantive due process where plaintiff presented no evidence that doctor's determination that she presented a danger to herself or others fell below generally accepted medical standards); Dove v. City of New York, 2005 WL 2387587, at *3 (E.D.N.Y. Sept.28, 2005); see also Olivier v. Robert L. Yeager Mental Health Ctr., 398 F.3d 183, 191 (2d Cir.2005) (overturning jury verdict rendered in favor of person involuntarily committed because jury was not competent to evaluate the professional propriety of the defendant doctors' actions without the assistance of expert testimony). Plaintiffs have cited no decision in which a court concluded that due process was not satisfied when physicians conformed to generally accepted medical standards.
It is undisputed that psychiatrists at Creedmoor and Hudson River are to use the clinical method, and that this method is the standard method in the psychiatry community used to assess risk. Def.'s Stmt. ¶ 102-03; Pls.' Ctr. Stmt. ¶ 102-03. Plaintiffs cannot show a due process violation simply on the ground that psychiatrists at Creedmoor and Hudson River use the clinical method.
Plaintiffs further argue, however, that, even if OMH psychiatrists use the clinical method, their clinical evaluations fall below generally accepted medical standards because they fail to examine and employ significant criteria. Pls.' Opp. 25.[25] Dr. Lubit has submitted a report setting forth the various risk factors that psychiatrists use in assessing dangerousness. Peeples Dec. Ex. H. There is no genuine dispute that most of the criteria set forth by Dr. Lubit, including those that are most important, such as command hallucinations and substance abuse, are generally accepted in the medical community as indicative of risk.[26] Moreover, Dr. Lubit, having reviewed the patients' hospital records and deposition transcripts of the committing physicians, concluded that, to a reasonable degree of clinical certainty, 23 individuals were not dangerous. Lubit Aff. ¶¶ 35-54.
Defendant Commissioner argues that Dr. Lubit's conclusion that the individuals were not dangerous "to a reasonable degree of medical certainty" is not the same as saying that no reasonable psychiatrist could conclude that the 23 individuals met the criteria for involuntary commitment. Accordingly, defendant argues, plaintiff has failed to show that the commitment decisions at issue are such a substantial departure from accepted professional judgment, practice, or standards as to demonstrate that the psychiatrists responsible actually did not base their decisions on their professional judgment.[27]Youngberg, 457 U.S. at 323, 102 S. Ct. 2452.
Dr. Lubit did indeed decline to testify that a psychiatrist could not reasonably conclude that these individuals met the criteria for involuntary commitment. Lubit Tr. 379-83, 387-88. Dr. Lubit's hesitancy, however, was based on his need "to better understand what [was meant] by reasonably conclude and how it differs from someone saying that to a reasonable degree of medical certainty something was true." Lubit Tr. 389. He did testify that "I could not understand how people could have felt ... these particular individuals met criteria so perhaps that is saying that I did not feel the conclusions were reasonable." Lubit Tr. at 383; see also id. at 388; Lubit Aff. ¶ 4.[28]
Accordingly, plaintiffs, through the report and testimony of Dr. Lubit, have submitted sufficient evidence from which a trier of fact could conclude the evaluations done by OMH psychiatrists fell substantially below generally accepted medical standards and thus did not promise a reasonable degree of accuracy. See Fisk, 501 F.Supp.2d at 522 (plaintiff bears the burden of producing competent evidence, typically in the form of expert testimony, regarding applicable medical standards and the defendants' alleged failure to meet those standards); see also Olivier, 398 F.3d at 191 (plaintiffs failure to submit evidence as to medical standards meant that there was no legally sufficient basis for a reasonable jury to find for plaintiff on claim that involuntary commitment did not meet generally accepted medical community standards); Rodriguez, 72 F.3d at 1065 (an expert affidavit asserting that the treating physicians made incorrect and objectively unreasonable decisions created an issue of fact for trial regarding whether the doctors acted within the realm of professional competence in treating the plaintiff).[29][30]
i. Psychiatrists Actions Do Not Shock the Conscience
In Cty. of Sacramento v. Lewis, 523 U.S. 833, 847, 118 S. Ct. 1708, 140 L. Ed. 2d 1043 (1998) the Supreme Court held that to make out a substantive due process claim, a plaintiff must establish that the challenged conduct shocks the conscience. Defendant Commissioner argues that to succeed on their Eighth Cause of Action plaintiffs must not only demonstrate an issue of fact as to whether the conduct of OMH psychiatrists falls below accepted medical standards but also show the method of conducting commitment evaluations generally, as well as individual evaluations, at Creedmoor and Hudson River shocks the conscience. See Comm'r's Mem. 38-41. Plaintiffs argue that this standard is not applicable in the civil commitment context. Pls.' Opp. 26. Neither side cites any authority directly on point.
In Rodriguez, which concerned civil commitment, the Second Circuit reversed the district court's grant of summary judgment, concluding there was a triable issue of fact as to whether the actions of a physician who committed plaintiff fell substantially below generally accepted medical standards, but did not discuss any additional factors required to demonstrate liability. Rodriguez, 72 F.3d at 1061-65. Other Circuits, however, have explicitly required a showing that the conduct at issue in an involuntary commitment shocks the conscience. Benn v. Univ. Health Sys., Inc., 371 F.3d 165, 174 (3d Cir.2004); see also Norris v. Engles, 494 F.3d 634, 638 (8th Cir.2007); James v. Grand Lake Mental Health Center, Inc., 161 F.3d 17 (Table) (10th Cir.1998) (involuntary commitment claims must be brought under Fourth Amendment, but even if brought under due process, plaintiff failed to show conduct shocked the conscience). Further, two cases in the Northern District of New York have required a plaintiff to allege conduct that satisfied this standard in the civil commitment context. See Abascal v. Hilton, 2008 WL 268366 (N.D.N.Y. Jan.30, 2008); Disability Advocates, Inc. v. McMahon, 279 F. Supp. 2d 158 (N.D.N.Y. 2003).[31]
The Second Circuit has applied the "shocks the conscience" standard in a variety of contexts. Russo v. City of Bridgeport, 479 F.3d 196, 209-10 (2d Cir.), cert. denied, ___ U.S. ___, 128 S. Ct. 109, 169 L. Ed. 2d 24 (2007) (failure of police officers to investigate and turn over to prosecutor exculpatory evidence causing arrestee to remain incarcerated for prolonged period); Lombardi v. Whitman, 485 F.3d 73 (2007) (failure to provide accurate information to rescue workers concerning air quality in lower Manhattan following September 11, 2001 terrorist attacks did not shock the conscience); O'Connor v. Pierson, 426 F.3d 187, 203 (2d Cir.2005) (applying shocks the conscience standard to substantive due process claim of teacher who was placed on involuntary sick leave when he refused to submit to psychiatric exam and sign a broad medical release); Natale v. Town of Ridgefield, 170 F.3d 258, 262-63 (2d Cir.1999) (applying standard and holding that jury should have been given charge that conduct of the defendants in denying the building permits was so outrageously arbitrary as to constitute a gross abuse of governmental authority); Lowrance v. Achtyl, 20 F.3d 529, 537 (2d Cir. 1994) (prisoner's two day administrative confinement pending disciplinary hearing was not arbitrary or conscience-shocking in the constitutional sense). Moreover, the Second Circuit has stated that "it should go without saying that due process must be evaluated under a standard that allows physicians to operate effectively to protect the interests of the individuals about whom they make such judgments and of the public." Olivier, 398 F.3d at 189 (citing Youngberg, 457 U.S. at 320, 102 S. Ct. 2452).
In addition, the shocks the conscience standard recognizes "the dilemma of conflicting obligations." Lombardi, 485 F.3d at 82. The Second Circuit has acknowledged the competing obligations psychiatrists making a civil commitment decision face. Olivier, 398 F.3d at 198 (noting physicians must be able "to operate effectively to protect the interests of the individuals about whom they [make assessments of risk] and of the public"); see also Lombardi, 485 F.3d at 82 ("In the apparent absence of harmless options at the time decisions must be made, an attempt to choose the least of evils is not itself shocking"). Because the standard has been applied in a wide variety of contexts and because application in the civil commitment context would recognize the difficulty and uncertainty of risk assessment and the competing obligations faced by psychiatrists, I conclude plaintiffs must show that the psychiatrists' conduct shocks the conscience.
The Second Circuit has read the shocks the conscience requirement "to mean that while `a purpose to cause harm' might be required in a situation such as a high-speed chase, `deliberate indifference'but not negligencecan support a finding of liability in situations where the government owes a special duty of care to those in its charge." Russo, 479 F.3d at 209-10. Whether an individual was brought to an OMH facility pursuant to a final order of observation or was evaluated following initial admission pursuant to §§ 9.27, 9.37, or 9.39, the individual is in the custody of the state during the period he is evaluated by OMH psychiatrists. Accordingly, the deliberate indifference standard applies.
Deliberate indifference is defined as the reckless disregard of a risk of harm of which a person is aware. See Farmer v. Brennan, 511 U.S. 825, 837, 114 S. Ct. 1970, 128 L. Ed. 2d 811 (1994). The Second Circuit has noted, however, that there is a "potent qualification" to the deliberate indifference standard:
Deliberate indifference that shocks in one environment may not be so patently egregious in another, and our concern with preserving the constitutional proportions of substantive due process demands an exact analysis of circumstances before any abuse of power is condemned as conscience-shocking.
Lombardi, 485 F.3d at 82 (citing Lewis, 523 U.S. at 850, 118 S. Ct. 1708).
Although plaintiffs have created a triable issue of fact as to whether OMH psychiatrists failed to consider all the relevant criteria of dangerousness in certain cases, all of the psychiatrists testified that they at least assessed dangerousness and plaintiffs have not shown that the psychiatrists committed anyone they did not believe to dangerous.[32] Trainings, if not tests, are held on identifying and assessing risk. There is also no evidence that the psychiatrists, much less defendant Commissioner, were aware that their methods of assessing risk might result in erroneous findings of dangerousness. As deliberate indifference requires an actor to be aware of the risk of harm plaintiffs have failed to make this required showing. Accordingly, defendant Commissioner's motion for summary judgment on plaintiffs' Eighth Cause of Action is granted.
B. SEVENTH CAUSE OF ACTION
The Seventh Cause of Action asserts that because psychiatrists at Hudson River and Creedmoor improperly detain individuals known not to be dangerous because the psychiatrists believe the individuals nevertheless require inpatient treatment and care, defendant Commissioner is responsible for the confinement of nondangerous individuals, in violation of the individuals' due process rights under the Fourteenth Amendment. The Second Circuit has not determined if the subjective intent of a committing psychiatrist has any implications for due process analysis. Olivier, 398 F.3d at 191-192. For the reasons set forth below, I need not decide the issue as plaintiffs "did not elicit evidence sufficient to establish to the satisfaction of a reasonable jury that the [OMH psychiatrists] acted for non-medical or otherwise improper reasons in having [certain individuals] temporarily committed." Id.
Defendant Commissioner argues that there is no evidence that physicians certify patients as dangerous even though they do not believe the patients to actually be so. Indeed, every OMH psychiatrist at Creedmoor and Hudson River testified that they believed the individuals they committed were dangerous. Plaintiffs argue that there is evidence from which a reasonable factfinder could conclude that the psychiatrists' findings of dangerousness are pretextual and that, accordingly, there is a triable issue of fact as to whether the dangerousness assessments are substantially below generally accepted standards. Pls.' Opp. 32-35.[33]
Plaintiffs point first[34] to the deposition of Dr. Das, who testified, in response to a question of whether Creedmoor can retain a § 730.40 patient if the patient does not so desire, stated, "In my mind there are only two things, either they are involuntaryI mean either they give them the option to sign voluntary otherwise they meet the criteria for involuntary." Das. Tr. 66. Immediately prior to this response, however, Dr. Das testified, in response to essentially the same question, that an individual could be retained beyond 72 hours, if he did not wish to be committed, "only if they meet the criteria for involuntary admissions, convert them to involuntary. So it has to be there." Id. Accordingly, in context, Dr. Das's statement must be interpreted to mean that she believes that an individual may be committed only upon consent or upon a finding that the criteria for involuntary commitment are met.
Plaintiffs also point to portions from the deposition testimony of Dr. Shah. The sections cited do not support the Clinic's contention that Dr. Shah believes he cannot find a patient remanded pursuant to CPL § 730.40[35] ineligible for civil commitment, thereby requiring his release. Pls.' Opp. 33 (citing Shah Tr. 69-70, 97-100).
Plaintiffs further suggest that Dr. LaGuerre testified that the prevailing philosophy is "commit first, ask questions later." Pls.' Opp. 33 (citing LaGuerre Tr. at 122-23). Dr. LaGuerre never said these words. Rather, Dr. LaGuerre acknowledged that he would not seek out alternate forms of care until after commitment. Id. at 122-23. He unequivocally testified earlier that he applied the relevant risk factors before certifying any individual for treatment. Id. 11-18. Finally, contrary to plaintiffs' assertion, Dr. LaGuerre did not testify that he failed to apply relevant risk factors upon commitment. Rather, after discussing an article on risk assessment and management, he testified that he usually applied this information at the discharge stage. Id. at 128-29. As noted, he previously testified he applied the risk factors at the commitment stage.[36]
Similarly, that three psychiatrists cannot recall any instance in which they concluded that a patient needed hospitalization but nevertheless found that the patient was not dangerous, Pls.' Opp. 34 (citing Shah Tr. at 42, LaGuerre Tr. at 53, and Barden Tr. at 82), does not show that the committed patients were not in fact dangerous, that the psychiatrists did not believe them to be so, or that there were no such instances.
Plaintiffs lastly argue that an examination of certain individual commitment decisions demonstrates there is a question of fact as to whether physicians fail to adhere to legal constraints when the legal requirements interfere with their clinical decision making.[37] Plaintiff contends that Drs. Paul, LaGuerre, De Los Santos, and Singh, among others, certified individuals for civil commitment without considering all the relevant risk assessment criteria. Pls.' Opp. 34-37. Each of these doctors, however, explained why they thought the individuals they committed were dangerous.
For example, Dr. Paul stated he certified M.T. because M.T. was taking drugs, stopped taking his medication, had a short temper and poor judgment, and hallucinated. Paul Tr. 141-2. Dr. Paul certified S.B. because he had delusions, thought disorder, and pressured speech. Id. at 155. He certified D.R. because he set a fire-and lay down next to it. Id. at 86-87. Dr. Paul also testified that R.B. was a danger to himself because he was depressed, had an element of psychosis, was apparently stealing and begging, and had impaired judgment. Id. at 164-70. Lastly, Dr. Paul testified that R. Bu. was a danger to himself because he was depressed, disheveled with poor hygiene, seemed to have no community support, and was otherwise unable to meet his needs. Id. at 177-80. Drs. LaGuerre similarly explained his reasons for commitment. LaGuerre Tr. 42-48, 59-63, 144.[38]
The two commitment certificates specifically pointed to by plaintiffs, those of Drs. De Los Santos and Singh, also reflect consideration of relevant risk assessment factors. Dr. De Los Santos committed M.B. because she was depressed, had been noncompliant with treatment, had violated an order of protection, and had delusional thinking. Brooks Dec. Ex. U. Dr. Singh's commitment certificate for E.S. details that E.S. was uncooperative, paranoid, grossly impaired, had a prior history of psychiatric hospitalizations and noncompliance with treatment, was disheveled upon arrest and incapable of being managed in the community. Brooks Ex. V.[39]
The only reason that plaintiffs offer to explain why OMH psychiatrists would make up pretextual reasons to commit individuals is the assertion that many physicians, when they believe someone requires inpatient treatment, dislike the constraints on clinical discretion imposed by the law. Pls.' Opp. 34. Initially, I note that even if it were true that some psychiatrists dislike legal constraints, such a conclusion says nothing about the psychiatrists at Creedmoor and Hudson River. Moreover, the connection between dislike and disobedience is too tenuous to create a triable issue of fact when each and every psychiatrist testified to their belief that the committed individuals were dangerous and contemporaneously, as evidenced by the commitment certificates, gave reasons that reflected evaluation of at least some of the risk factors plaintiffs agree are relevant. See Olivier, 398 F.3d at 191 (granting summary judgment because it was "entirely speculative to leap from [evidence that doctor told plaintiff and his sister that he could not commit plaintiff] to a conclusion that plaintiff was committed for reasons other than the defendant doctors' conclusion that [plaintiff] posed an imminent danger to himself or others").
At most, plaintiffs have demonstrated that they disagree with the psychiatrists' assessments or, as with the Eighth Cause of Action, an issue of fact that the assessments fell below accepted medical standards. But they have offered no evidence that the OMH psychiatrists committed individuals on pretext. Accordingly, defendant Commissioner's motion for summary judgment on the Seventh Cause of Action is granted.
C. NINTH CAUSE OF ACTION
Plaintiffs withdraw their assertion that patients at Hudson River and Creedmoor have been subject to five to ten minute evaluations. Pls.' Opp. 5. Accordingly, summary judgment in favor of defendant Commissioner on this claim is granted.
D. ELEVENTH CAUSE OF ACTION
Defendant argues that this cause of action should be dismissed under the law of the case. Thomas v. City of New York, 2007 WL 2156652, at *5 n. 14 (E.D.N.Y. Jul.26, 2007) ("[W]hen a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages of the same case") (citations omitted). In Monaco III, I found the Eleventh Cause of Action duplicative of the Eighth, as against defendant Sedler, because plaintiffs acknowledged that in Eleventh Cause of Action, they were contending not that New York's commitment statutes were void for vagueness, but rather they were acceptable but being applied in a manner that violates the Constitution. Monaco III, at *7-8.
Plaintiffs allege these same Eighth and Eleventh Causes of Action against defendant Commissioner. Plaintiffs do not dispute that the Eleventh Cause of Action is duplicative of the Eighth or make any attempt to argue that the Eleventh Cause of Action should not be dismissed. Accordingly, I grant summary judgment in favor of defendant Commissioner on the Eleventh Cause of Action.[40]
E. Conclusion
For the reasons set forth above, defendant Commissioner's motion for summary judgment on plaintiffs' Seventh, Eighth, Ninth, and Eleventh Causes of Action is granted.
II. DEFENDANT CAHILL'S MOTION TO ABSTAIN AND DISMISS THE FIRST AND SECOND CAUSES OF ACTION
Federal courts may not entertain actions that seek to impose "an ongoing federal audit of state criminal proceedings." O'Shea v. Littleton, 414 U.S. 488, 500, 94 S. Ct. 669, 38 L. Ed. 2d 674 (1974) (declining to issue injunction against alleged racially discriminatory administration of criminal justice system in Illinois county because such injunction would lead to the precise federal interference in state judicial proceedings that Younger v. Harris, 401 U.S. 37, 91 S. Ct. 746, 27 L. Ed. 2d 669 (1971), was designed to prevent). Under Younger, a federal court must abstain from exercising jurisdiction when plaintiff's federal constitutional claims could be raised in an ongoing state matter. The requirements of Younger are that there be an ongoing state court proceeding, entailing an important state interest, and that plaintiff have an opportunity to raise her constitutional claims during or after the state court proceeding. Grieve v. Tamerin, 269 F.3d 149, 152 (2d Cir.2001).
The Second Circuit has also previously examined the role of federal courts with respect to litigation challenges concerning the internal workings of state courts. See Wallace v. Kern, 481 F.2d 621 (2d Cir. 1973) (Wallace I) (reversing injunction requiring clerk of state court to calendar all pro se motions filed by members of plaintiff class), cert. denied 414 U.S. 1135, 94 S. Ct. 879, 38 L. Ed. 2d 761 (1974); Wallace v. Kern, 499 F.2d 1345 (2d Cir.1974) (Wallace II) (reversing injunction requiring that inmates under indictment be permitted to demand trial after six-month pretrial incarceration (nine months in case of inmates accused of murder) and be released on their own recognizance if not brought to trial within 45 days of their demand), cert. denied 420 U.S. 947, 95 S. Ct. 1329, 43 L. Ed. 2d 425 (1975); Wallace v. Kern, 520 F.2d 400 (2d Cir.1975) (Wallace III) (reversing injunction requiring evidentiary hearings and a written statement of reasons by state judges for fixing bail), cert. denied 424 U.S. 912, 96 S. Ct. 1109, 47 L. Ed. 2d 316 (1976). In so holding, the Second Circuit wrote that "`under the principle known as comity a federal district court has no power to intervene in the internal procedures of the state courts.'" Id. at 405 (quoting Wallace I, 481 F.2d at 622). The Circuit further observed that the federal courts cannot "legislate and engraft new procedures upon existing state criminal practices." Id. at 404. Abstention in this case is appropriate under Younger and the Second Circuit's Wallace line of cases.[41]
There is no dispute that the second Younger prong is satisfied. "[A] state's interest in the administration of criminal justice within its borders is an important one." Hansel v. Town Court for Town of Springfield, N.Y., 56 F.3d 391, 393 (2d Cir.1995) (dismissing, on Younger grounds, complaint alleging use of non-lawyer judges in town court violated criminal defendant's constitutional rights). Additionally, the third prong is satisfied as members of the Incompetency Subclass, upon behalf of whom the First and Second Causes of Action are asserted, may assert their claims via a state writ of habeas corpus. N.Y. Const. art. I, § 4; CPLR §§ 7001-7002; see also Wallace III at 407 (New York's habeas corpus statute satisfies the third prong of the Younger test).
Plaintiffs argue that abstention is inappropriate because the first requirement of Younger will not always be met. First, they note that many class members are not parties to state criminal proceedings where they can challenge the length of their confinement because they have not yet been charged with a crime. They further note that, at least with regards to the Second Cause of Action, abstention is inappropriate because the final order of observation terminates the state court proceeding.[42]
Such arguments ignore the holdings in the Wallace line of cases. Indeed, the Second Circuit has stated that "[t]he proposition that the principles underlying Younger are applicable only where the federal court is seeking to enjoin a pending state criminal prosecution is not supportable." Wallace III, at 405. Moreover, the Second Circuit did not rely on Younger in either Wallace I or Wallace II. Further, in Wallace III, the Second Circuit, although discussing Younger, noted its warning in Wallace I that "`under the principle known as comity a federal district court has no power to intervene in the internal procedures of the state courts.'" Wallace III, at 405. (quoting Wallace I, at 622). Accordingly, assuming, without deciding, that certain of the Younger factors will not be satisfied as to all members of the Incompetency Subclass at all times, such will not be fatal to defendant Cahill's motion.
Plaintiffs' principle argument in opposition to dismissal is that defendants, by waiting several years to raise this issue, have waived their right to argue for abstention.[43] The Supreme Court, however, has recognized waiver of the Younger abstention defense only when a state expressly urges a federal court to adjudicate the constitutional claims before it. Ohio Civil Rights Comm. v. Dayton Christian Schools, 477 U.S. 619, 626, 106 S. Ct. 2718, 91 L. Ed. 2d 512 (1986).[44] Indeed, in two cases, the Supreme Court has raised the issue of abstention sua sponte, after issues on the merits had been determined, although it ultimately decided the merits because the state so urged. Sosna v. Iowa, 419 U.S. 393, 396-97 n. 3, 95 S. Ct. 553, 42 L. Ed. 2d 532 (1975); Ohio Bureau of Empl. Servs. v. Hodory, 431 U.S. 471, 479-80, 97 S. Ct. 1898, 52 L. Ed. 2d 513 (1977).
Contrary to plaintiffs contention, In re Dairy Mart Convenience Stores v. Nickel, 411 F.3d 367, 373 (2d Cir.2005) does not stand for the proposition that failure to timely raise Younger (and Wallace) abstention results in a waiver. Rather, the Second Circuit deemed the abstention issue waived because the state had never raised the issue at any level, including on appeal. Id. Plaintiff also cites Federation of Puerto Rican Org. of Brownsville, Inc. v. Howe, 157 B.R. 206, 211 (E.D.N.Y.1993). This case, however, concerned 28 U.S.C. § 1334(c) (2)'s requirement that a motion to abstain in a bankruptcy proceeding be timely filed, and not Younger (or Wallace) abstention.
Plaintiffs further attempt to analogize Younger (and Wallace) abstention to lack of personal jurisdiction or insufficient service issues. However, "Younger is not a jurisdictional bar based on Article III requirements, but instead a prudential limitation on the court's exercise of jurisdiction grounded in equitable considerations of comity." Spargo v. New York State Comm'n on Judicial Conduct, 351 F.3d 65, 74 (2d Cir.2003). Moreover, Federal Rule of Civil Procedure 12(b) requires any motion to dismiss based on lack of jurisdiction or insufficient service of process be made before a responsive pleading is filed, but there is no corresponding rule concerning abstention. Accordingly, the cases plaintiff cites concerning personal jurisdiction and insufficient service are inapposite.
Plaintiff additionally argues that declining jurisdiction over the First Cause of action is not appropriate because the claim raises an issue that relates directly to the Incompetency Subclass members' fundamental right to liberty. The Second Circuit has addressed and dismissed reliance on one of the cases plaintiff cites, Gerstein v. Pugh, 420 U.S. 103, 95 S. Ct. 854, 43 L. Ed. 2d 54 (1975). Indeed, the Second Circuit held that because New York provided for habeas corpus, while Florida did not, Pugh was inapposite.[45]Wallace III, 520 F.2d at 406-07. Similarly, County of Riverside v. McLaughlin, 500 U.S. 44, 47, 56, 111 S. Ct. 1661, 114 L. Ed. 2d 49 (1991) and Williams v. Ward, 845 F.2d 374, 381, 387 (2d Cir.1988), cert. denied, 488 U.S. 1020, 109 S. Ct. 818, 102 L. Ed. 2d 807 (1989), also cited by plaintiffs, dealt with the issue of how long an individual arrested without a warrant could be detained without a probable cause hearing. Plaintiffs in this case do not challenge the legality of their arrests, simply the time it takes to calendar their competency hearings and the time it takes to notify OMH once an incompetency finding is made.
Plaintiffs finally argue that the Court should not abstain from adjudicating the Second Cause of Action because the relief does not challenge the manner in which state courts conduct their proceedings. But requiring a state court to notify OMH of the possibility that an individual may be found incompetent prior to the issuance of a final order of observation and directing the method by which the state court must advise OMH of the issuance of a final order of observation (which plaintiff seeks leave to amend his complaint to allege) is exactly the sort, of interference Younger, the Wallace cases, and O'Shea seek to avoid.[46]See Kaufman v. Kaye, 466 F.3d at 87 ("we cannot resolve the issues raised here ... without committing to resolving the same issues as to the remedy chosen by the state and as to the subsequent case-by-case implementation of the [remedy]. This is exactly what O'Shea forbids").[47][48]
Accordingly, defendant Cahill's motion for abstention and dismissal of the First and Second Causes of Action is granted.
Conclusion
For the reasons set forth above, defendant Commissioner's motion for summary judgment on plaintiffs' Seventh, Eighth, Ninth, and Eleventh Causes of Action as to Creedmoor and Hudson River is granted. Defendant Cahill's motion to dismiss the First and Second Causes of Action is granted.
Having raised the issue of whether, pursuant to Fed.R.Civ.P. 54(b), I could certify a judgment granting such relief as a final judgment, and having received submissions from the parties, I conclude I may not enter final judgment in favor of either defendant Cahill or defendant Commissioner. See Fed.R.Civ.P. 54(b). In determining whether to direct entry of a final judgment, courts are to consider "the relatedness of the pending and adjudicated claims, the factual bases for the claims and the effect a decision on the pending claims would have on questions raised on appeal." Federal Deposit Ins. Corp. v. Bernstein, 944 F.2d 101, 108-109 (2d Cir.1991).
The First and Second Causes of Action, although fully determining the rights and liabilities of defendant Cahill, are not distinct and separable claims from others in the Complaint. For example, the Fourth Cause of Action alleges that defendant Commissioner violates the Due Process Clause of the Fourteenth Amendment and 42 U.S.C. § 1983 because she does not designate a facility to which an incompetent defendant is to be transferred prior to the hearing on a defendant's capacity. Resolution of this claim will surely require reference to the procedures of criminal court judges, such as defendant Cahill, challenged in the Second Cause of Action. Further, defendant Tisch may raise an abstention defense in relation to the Sixth Cause of Action. Accordingly, the claims are not "separate and distinct."
Additionally, my decision on the Seventh, Eighth, Ninth and Eleventh Causes of Action does not eliminate defendant Commissioner as a party since the Commissioner is also named in the Third, Fourth, and Fifth Causes of Action. Further, plaintiffs may continue to assert the Seventh, Eighth, Ninth and Eleventh Causes of Action against defendant Commissioner as to facilities other than Creedmoor and Hudson River.[49]
The Clerk is directed to transmit a copy of the within to all parties and the assigned Magistrate Judge.
SO ORDERED.
NOTES
[1] Michael F. Hogan is now the Commissioner of New York's Office of Mental Hygiene and should be substituted for Sharon Carpinello as the named party, pursuant to Fed. R. Civ. Pro. 25(d).
[2] The Clinic is operated as part of the clinical program of the Jacob D. Fuchsberg Law Center at Touro College. It is designated as a protection and advocacy agency by the PAMII Act, 42 U.S.C. § 10801 et seq. under which it is authorized to investigate incidents of abuse and neglect of individuals with mental illness and to provide legal representation to institutionalized mentally ill individuals. Congress enacted PAMII in 1986 "to ensure that the rights of individuals with mental illness are protected" and "to assist States to establish and operate a protection and advocacy system for individuals with mental illness which will... protect and advocate the rights of such individuals through activities to ensure the enforcement of the Constitution and Federal and State statutes...." 42 U.S.C. § 10801(a)(1), (b)(1), (2)(A).
In New York State, the Commission on Quality of Care for the Mentally Ill (the "Commission") receives funding under the PAMII Act to maintain a statewide system of advocacy services for the mentally ill. The Commission has contracted with six organizations that serve as regional focal points. Plaintiff Clinic serves as the regional office for Nassau and Suffolk counties, but it has and exercises discretion to provide services to individuals located elsewhere. Monaco v. Stone, 2002 WL 32984617, at *10-11 (E.D.N.Y. Dec.18, 2002).
[3] The parties use Carpinello's name throughout their papers. As defendant Hogan has been substituted, see footnote 1, supra, I will refer to this defendant as "Commissioner."
[4] The local criminal courts of New York State are comprised of the district courts, the New York City criminal court, other city courts, the town courts, and the village courts. N.Y.C.P.L. § 10.10.
[5] In a previous decision, Monaco v. Stone, 2002 WL 32984617 (E.D.N.Y. Dec.20, 2002), this Court dismissed the claims against Arnold Licht, in his official capacity as Director of the psychiatric unit of Long Island College Hospital, and granted summary judgment in favor of four doctors sued personally. In their fifth amended complaint, plaintiffs reasserted these claims against these defendants in order to preserve their right to appeal this Court's judgment. Plaintiffs and these defendants have all agreed to dismissal of the reasserted claims by stipulation.
[6] The Fifth Amended Complaint also alleges individual damages claims on behalf of plaintiff Monaco. These causes of action, set forth below for the sake of completeness, have either been dismissed, see footnote 4, supra, or are not at issue on the motions before the Court.
The Sixteenth Cause of Action alleges:
By discontinuing a treatment regimen of lithium in the Suffolk Correctional Facility when it was the unquestioned treatment of choice for the bipolar disorder that the plaintiff suffered from, defendant Packard provided medical treatment that was both deliberately indifferent to the plaintiff's medical needs and constituted a substantial departure from accepted judgment, practices and standards. As a result, defendant Packard violated the Eighth and Fourteenth Amendments to the United States Constitution and 42 U.S.C. § 1983.
Fifth Amended Complaint (hereinafter "FAC") ¶ 220.
The Seventeenth Cause of Action alleges:
By authorizing the confinement of the plaintiff when he did not pose a danger to himself or others, defendants Sarwal, PalmaAcquino and Tuzel violated the Due Process Clause of the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983.
FAC ¶ 222.
The Eighteenth Cause of Action alleges:
By threatening to (1) confine the plaintiff indefinitely and (2) withhold the provision of off-ward treatment unless the plaintiff agreed to remain as a voluntary patient, defendant Dave impermissibly induced a waiver of the plaintiff's rights to challenge his confinement under the Due Process Clause of the Fourteenth Amendment to the United States Constitution and further violated 42 U.S.C. § 1983.
FAC ¶ 224.
The Nineteenth Cause of Action alleges:
By discontinuing a treatment regimen of lithium in the Suffolk Correctional Facility when it was the unquestioned treatment of choice for the bipolar disorder that the plaintiff suffered from, defendant Packard committed medical malpractice.
FAC ¶ 226.
[7] The Charles W. court found this 72-hour period did not run afoul of due process concerns. 214 F.3d at 358-60.
[8] For the purposes of Article 9 of the MHL, "likelihood to result in serious harm" means:
1. substantial risk of physical harm to himself as manifested by threats of or attempts at suicide or serious bodily harm or other conduct demonstrating that he is dangerous to himself, or
2. a substantial risk of physical harm to other persons as manifested by homicidal or other violent behavior by which others are placed in reasonable fear of serious physical harm.
MHL §§ 9.01 and 9.39(a)(1-2). The threatened harm to oneself can include harm resulting from a failure to meet one's essential needs for food, clothing, or shelter, or neglect or refusal to care for oneself. In re Scopes, 59 A.D.2d 203, 205-06, 398 N.Y.S.2d 911 (3d Dep't 1977).
[9] Plaintiffs' counsel limited the subclass to these counties "because a larger class may overextend the resources of plaintiffs' counsel." Monaco II, at *46, n. 43 (citing Pls.' Aff. Supp. Class Cert. Mot. ¶ 13).
[10] There is a dispute as to whether the Civil Commitment Subclass includes all individuals subject to civil commitment in the counties comprising the Eastern District of New York or only those found incompetent to stand trial who are subsequently subject to civil commitment evaluations. For the reasons set forth below, it is not necessary to decide the issue.
[11] The Civil Commitment Subclass has settled its claims with the HHC. The Incompetency Sub-subclass settled its claims with the DOC on May 26, 2004. See Docket Entry # 386 ("Stipulation and Order of Settlement Concerning Counsel Fees, Costs, Expenses, and Disbursements with Respect to Claims Against the City Defendants").
[12] As a means of managing discovery, plaintiffs and defendant Commissioner, with the approval of the Court, agreed to focus upon causes of action seven through eleven, as applied to two facilities operated by OMH, one to be selected by the Commissioner, and the other by plaintiffs. This agreement was without prejudice to further prosecution or defense, if warranted. See 7/28/2005 Minute Entry. The Commissioner selected Creedmoor Psychiatric Center ("Creedmoor"), in Queens, and the plaintiffs selected Hudson River Psychiatric Center ("Hudson River"), in Poughkeepsie, as the OMH facilities.
[13] The Tenth Cause of Action is not asserted against OMH facilities or employees and is thus not at issue here. This cause of action provides:
By failing to apply the statutory criteria of the provisions of the New York Mental Hygiene Law pursuant to which the physicians act, physicians at HHC operated facilities, Stony Brook, and NUMC violate the procedural component of the Due Process Clause of the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983.
FAC ¶ 208.
[14] I list the remaining causes of action not already quoted above, although they are not the subject of defendants' motions.
The Third Cause of Action, asserted on behalf of the Incompetency Subclass, alleges:
By automatically subjecting plaintiff Greg Monaco and the plaintiff class members to either the requirements of CPL § 730.60, MHL § 29.11(h) and 14 NYCRR Part 540 or an informal forensic review, while not automatically subjecting civilly admitted patients to the same provisions or informal process, defendant Carpinello denies such individuals equal protection of the laws in violation of the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983.
FAC ¶ 194.
The Fourth Cause of Action, asserted on behalf of the Incompetency Subclass, alleges:
By failing to designate a facility to which an incompetent defendant is to be transferred prior to the date of a hearing on a defendant's capacity, defendant Carpinello violates the Due Process Clause of the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983 because such failure to act results in confinement of incompetent defendants the duration of which does not bear a reasonable relation to its purpose and such deprivation of liberty is not the least intrusive possible while meeting the legitimate interests of the state.
FAC ¶ 196.
The Fifth Cause of Action, asserted on behalf of the Incompetency Subclass, alleges:
The involuntary confinement by defendant Carpinello of the plaintiff and plaintiff class members who are not dangerous but for whom there has been no out-patient residence obtained violates the Due Process Clause of the Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983.
FAC ¶ 198.
The Sixth Cause of Action, asserted on behalf of the Incompetency Subclass, alleges:
By failing to immediately transfer Mr. Monaco and other incompetent defendants from the time they receive notification of an OMH designation, defendants Tisch and Horn violate the violate the [sic] Fourth and Fourteenth Amendment to the United States Constitution and 42 U.S.C. § 1983 because such failure to act results in the unnecessary confinement of incompetent defendants for whom there is no necessary basis to believe satisfies the civil commitment criteria, further results in confinement of incompetent defendants whose nature does not bear a reasonable relation to its purpose and such deprivation of liberty is not the least intrusive possible while meeting the legitimate interests of the state.
FAC ¶ 200.
The Twelfth Cause of Action, asserted on behalf of the Civil Commitment Subclass, alleges:
As a result of certifying individuals who have been evaluated for civil commitment purposes as dangerous because it is believed that such individuals' clinical condition warrants in-patient care and treatment, physicians at HHC operated facilities and NUMC falsely imprison members of the civil commitment [sic].
FAC ¶ 212.
The Thirteenth Cause of Action, asserted on behalf of the Civil Commitment Subclass, alleges:
By failing to examine significant criteria related to the likelihood of causing harm when examining allegedly mentally ill individuals for civil commitment purposes, physicians at HHC operated facilities and NUMC negligently diagnose members of the civil commitment subclass and such action results in the wrongful confinement of nondangerous individuals.
FAC ¶ 214.
The Fourteenth Cause of Action, asserted on behalf of the Civil Commitment Subclass, alleges:
By conducting clinical evaluations that frequently do not last more than five or ten minutes when examining mentally ill individuals for civil commitment purposes, physicians at HHC operated facilities and NUMC negligently diagnose members of the civil commitment subclass and such action results in the wrongful confinement of nondangerous individuals.
FAC ¶ 216.
The Fifteenth Cause of Action, asserted on behalf of the Civil Commitment Subclass, alleges:
By failing to apply the statutory criteria of the provisions of New York Mental Hygiene Law pursuant to which the physicians act, physicians at HHC operated facilities and NUMC falsely imprison members of the plaintiff subclass of individuals facing civil commitment.
FAC ¶ 218.
[15] Iverson is the Executive Director of Creedmoor.
[16] Shriver is the Director of Clinical Services at Hudson River.
[17] Dr. Lubit is a physician licensed in New York and is board certified in psychiatry and neurology, child and adolescent psychiatry, and forensic psychiatry. At the Clinic's request, he reviewed the files of certain patients involuntarily committed to Creedmoor or Hudson River.
[18] Dr. Michael Norko is an Associate Professor of Psychiatry at the Yale School of Medicine, hired by defendant Commissioner to opine on the case.
[19] Dr. Barry Rosenfeld is a licensed clinical psychologist and Professor at Fordham University hired by plaintiffs to opine on the case.
[20] No body or organization that has any role in certifying or accrediting, regulating, or overseeing psychiatric hospitals has published or announced any statements, guidelines, or requirements on how to conduct involuntary commitment evaluations. Comm'r's Mem. at 21.
[21] Irene Alexander is the Court Director and Chief Clerk of the Riverhead Justice Court; Cheryl Jolie is the Deputy Chief Clerk of the Poughkeepsie City Court; and Barry Velte is the Senior Court Office Assistant for the Suffolk County District Court.
[22] Peter Murphy is a Corrections Sergeant with the Dutchess County Sheriff's Office.
[23] The Seventh Cause of Action will be discussed after the Eighth.
[24] Plaintiffs attempt to distinguish Youngberg by arguing that the decision in that case concerned the obligations of clinicians to provide treatment rather than the deprivation of liberty at issue in this case. Second Circuit case law has not made any such distinction and plaintiff has cited only an article from the Yale Law Journal in support of its argument that the two situations should be treated differently. Pls.' Opp. 24 (citing Susan Stefan, Leaving Civil Rights to the "Experts": From Deference to Abdication Under the Professional Judgment Standard, 102 Yale L.J. 639, 667-670 (1992)).
[25] I note that this argument more closely tracks the language of plaintiffs' Eighth Cause of Action. See supra. Indeed, the Eighth Cause of Action alleges only that OMH psychiatrists (and others) failed to examine and employ significant criteria in their commitment decisions. It does not allege that this failure was due to adherence to generally accepted medical standards.
[26] Defendant Commissioner argues that the factors set forth by Dr. Lubit cannot be used to establish a due process violation because they are derived from a study described by the parties as the MacArthur Study. Comm'r Rep. 10. Defendant originally noted, however, that OMH psychiatrists are familiar with, and use, many of the same risk factors that Dr. Lubit identified as the most important. Comm'r's Mem. at 34, n. 13. Thus, defendant's argument is unpersuasive.
[27] Defendant Commissioner also points out that five of these individuals were adjudicated dangerous in later state court proceedings.
[28] Defendant Commissioner argues that, to the extent Dr. Lubit's affidavit attempts to offer opinions that vary from those expressed in his report and deposition, they should be disregarded. Dr. Lubit's affidavit, however, is consistent with report and testimony.
[29] Defendant Commissioner's citation to Kulak v. City of New York, 88 F.3d 63, 75 (2d Cir.1996) is inapposite. In Kulak, the plaintiff's expert submitted affidavits asserting that, because he concluded plaintiff was not psychotic, it was an abuse of discretion for the defendants to prescribe certain drugs. The Second Circuit noted that this conclusion failed to create an issue of fact because the expert did not state the finding that plaintiff was psychotic fell below accepted medical standards. In this case, Dr. Lubit has articulated the applicable standards and his understanding that, to a reasonable degree of medical certainty, the 23 committed individuals did not meet those standards.
[30] Plaintiffs further contend that, separate and apart from simply failing to properly apply known risk factors, OMH psychiatrists commit individuals solely based on the presence of mental illness and a belief that inpatient treatment is required, regardless of dangerousness. Pls.' Opp. 25. If based on this ground, however, this Cause of Action would be duplicative of the Seventh, discussed infra.
[31] Although other involuntary civil commitment cases in the Second Circuit, cited by plaintiffs, do not refer to this standard either, these cases arise in situations where it was not relevant. See, e.g., Project Release v. Prevost, 722 F.2d 960, 971 (2d Cir.1983) (upholding facial validity of New York's civil commitment scheme); Glass v. Mayas, 984 F.2d 55, 57 (2d Cir.1993) (qualified immunity).
[32] For the reasons set forth below, in the discussion of the Seventh Cause of Action, the argument that these decisions are pretextual cannot be used to support a conclusion that the psychiatrists acted with deliberate indifference.
[33] Plaintiffs do not specify the cause of action to which this argument is relevant. For the reasons set forth below, I find it applicable to the Seventh Cause of Action.
[34] Plaintiff argues that at least 20 years ago, OMH "moved very slowly" to direct compliance with the law that required a finding of dangerous. Pls.' Opp. 6-7. Such distant conduct does not bear on this case, which seeks prospective injunctive relief.
[35] Plaintiff argues that the Civil Commitment Subclass comprises only individuals remanded pursuant to § 730.40. Pls.' Opp. at 28.
[36] Plaintiffs also argue that Dr. Barden does not know the standards set forth in MHL § 9.37. Review of Dr. Barden's deposition transcript, however, demonstrates that he testified to his understanding that an individual must have a mental illness that causes him to be imminently dangerous to himself or others, which is a generally correct paraphrase of the statute. Barden Tr. 7-10; MHL § 9.37.
[37] Plaintiff cites the testimony of Richard Miraglia for the proposition that psychiatrists dislike the constraints imposed by law on their clinical discretion to commit individuals requiring inpatient care, regardless of their dangerousness. Miraglia Tr. 142-43.
[38] A portion of Dr. LaGuerre's deposition testimony indicates that he may have committed one individual although, at the time of commitment, he did not believe the individual would be a danger to himself or others. LaGuerre Tr. 141-42. He later clarified, however, that there was the possibility of risk because of the individual's delusions. Id. at 144.
[39] Moreover, a factfinder could not conclude from the commitment certificates alone that the findings of dangerousness were pretextual. There is no dispute that the many documents available to psychiatrists at the time of commitment must be considered. Indeed, even Dr. Lubit, plaintiffs' expert, admits that commitment certificates are simply required forms and do not need to be as detailed as, or repeat information in, the initial assessment forms. Lubit Tr. 287-89.
Moreover, several courts have found short, general statements in commitment forms legally sufficient. See, e.g., Drozdik v. City of New York, 2003 WL 366639, at *4 (S.D.N.Y. Feb.20, 2003) ("schizophrenic, psychotic, paranoid [and] threatening" and "not able to take care of [him]self"); dePoel v. City of New York, 772 F. Supp. 106, 107 (E.D.N.Y.1991) ("Pt has been disorganized, unkempt, grossly delusional, paranoid, unable to take care of herself or house" and affirmative answer to question "Does the patient show a tendency to injure himself").
[40] Defendant Commissioner argues that Causes of Action Seven through Eleven do not apply to Hudson River because it is in Dutchess County and the Civil Commitment Subclass, on whose behalf these claims are asserted, is limited to individuals in the Eastern District of New York. Assuming, without deciding, that these Causes of Action do apply to Hudson River, summary judgment is appropriate on the record before me for the reasons stated above. Accordingly, plaintiff's request to amend the FAC to make the Seventh through Eleventh Causes of Action applicable to Hudson River is futile, and is denied.
Defendant Commissioner also argues that he cannot be enjoined to, among other relief, train OMH psychiatrists and staff members in specified ways, compel OMH psychiatrists and administrators to use a risk assessment form when evaluating individuals for commitment, or require videotaping of all involuntary commitment sessions because plaintiffs have not demonstrated numerous, widespread constitutional violations. Again, as I grant the Commissioner's motion for the reasons set forth above, I need not discuss these arguments or plaintiffs' counter-arguments.
[41] Plaintiffs seek only a declaration that maintaining a system that requires incompetent defendants to remain in jail for up to thirty days while awaiting a competency determination and failing to notify OMH of a potentially incompetent individual violate the constitutional due process rights of the Incompetency Subclass. FAC pp. 50-51 (Requests for Relief a and b). As such declarations would require the state courts to change their methods of operations, and therefore have the same practical effect as an injunction, the above principles remain applicable.
[42] Plaintiffs also argue that abstention is not appropriate because the issues raised by the First and Second Causes of Action cannot be raised as a defense in the state court proceedings. Pls.' Opp. to Defendant Cahill's Mot. to Dismiss (hereinafter "Pls.' Cahill Opp.") 10. The Second Circuit, however, has explicitly rejected such a requirement. Bedrosian v. Mintz, 518 F.2d 396, 399 (2d Cir.1975).
[43] Plaintiffs' arguments focus on Younger only, but I apply them to the Wallace line as well.
[44] Plaintiffs cite to the dissent in a recent Sixth Circuit case which states that "express repudiation" of the Younger defense is not the only circumstance that warrants a finding of waiver. O'Neill v. Coughlan, 511 F.3d 638, 644-45 (6th Cir.2008). The majority in O'Neill, however, found that the Younger defense had not been waived although the state had addressed the merits and a preliminary injunction had been issued.
[45] The language of Pugh upon which plaintiffs sought to rely on in Wallace III and this case comes from footnote 9 of the opinion, which states:
The District Court correctly held that respondents' claim for relief was not barred by the equitable restrictions on federal intervention in state prosecutions, Younger v. Harris, 401 U.S. 37 (91 S. Ct. 746, 27 L. Ed. 2d 669) (1971). The injunction was not directed at the state prosecutions as such, but only at the legality of pretrial detention without a judicial hearing, an issue that could not be raised in defense of the criminal prosecution. The order to hold preliminary hearings could not prejudice the conduct of trial on the merits. See Conover v. Montemuro, 477 F.2d 1073, 1082 (3rd Cir.1973); cf. Perez v. Ledesma, 401 U.S. 82 (91 S. Ct. 674, 27 L. Ed. 2d 701) (1971); Stefanelli v. Minard, 342 U.S. 117 (72 S. Ct. 118, 96 L. Ed. 138) (1951).
Pugh, 420 U.S. at 108, n. 9, 95 S. Ct. 854. The Second Circuit determined in Wallace III that this language, although facially supportive of plaintiff's position, could not be divorced from Pugh's factual context.
[46] Plaintiffs seek leave to amend the FAC to seek this relief if the Court determines abstention is required on the Second Cause of Action as well. Pls.' Cahill Opp. 13. For the reason set forth above, I deny this request as futile.
[47] Oregon Advocacy Center v. Mink, 322 F.3d 1101, 1119-1122 (9th Cir.2003) is inapposite, as plaintiff in that case sought an injunction requiring state hospital to accept patients certified as incompetent. Bell v. Wolfish, 441 U.S. 520, 99 S. Ct. 1861, 60 L. Ed. 2d 447 (1979), also cited by plaintiffs, concerned a federally operated facility.
[48] Although it is now unnecessary, I touch briefly upon defendant Cahill's motion to decertify the class of local criminal court judges. Defendant argues that, since plaintiffs no longer challenge the constitutionality of CPL § 740.30 or any other statute, plaintiffs altered claims deprive them of the basis for commonality and typicality, since they essentially challenge the practice of each local criminal court judge. I, and plaintiffs, agree, see Pls.' Cahill Opp. 6, that, in the absence of abstention, the class would have to decertified, as it is now analogous to the class of local sheriffs I declined to certify in 1999. See Monaco I, 187 F.R.D. at 67. Plaintiff argues, however, that it should be permitted to amend the FAC to assert its claims against individual local criminal court justices, including New York's Chief Administrative Judge. Such claims, however, are barred under Younger and the Wallace line of cases, for the reasons stated above, and the request is denied as futile.
[49] Plaintiff argues that there is a basis for appeal of my decision pursuant to 28 U.S.C. § 1292(b) on the Eighth Cause of Action because of my determination that due process is not violated when generally accepted medical standards are used and that the actions of OMH's physicians actions must shock the conscience.
The Second Circuit has repeatedly emphasized that a district court is to "exercise great care in making a § 1292(b) certification." Primavera Familienstifung v. Askin, 139 F. Supp. 2d 567, 570 (S.D.N.Y.2001) (quoting Westwood Pharmaceuticals, Inc. v. National Fuel Gas Dist. Corp., 964 F.2d 85, 89 (2d Cir.1992)); see also Klinghoffer v. S.N.C. Achille Lauro, 921 F.2d 21, 25 (2d Cir.1990). "Certification is only warranted in `exceptional cases,' where early appellate review `might avoid protracted and expensive litigation.'" Primavera, 139 F. Supp.2d at 570 (quoting Telectronics Proprietary, Ltd. v. Medtronic, Inc., 690 F. Supp. 170, 172 (S.D.N.Y.1987)). "Section 1292(b) was not intended to open the floodgates to a vast number of appeals from interlocutory orders in ordinary litigation or to be a vehicle to provide early review of difficult rulings in hard cases." Id. (citations and internal quotation marks omitted).
"In determining whether a controlling question of law exists the district court should consider whether: reversal of the district court's opinion could result in dismissal of the action; reversal of the district court's opinion, even though not resulting in dismissal, could significantly affect the conduct of the action; or, the certified issue has precedential value for a large number of cases." Id. at 570 (citing Klinghoffer, 921 F.2d at 24-25).
Reversal of these the decisions plaintiff cites would not result in dismissal of the action or have precedential value for a large number of cases. Additionally, it affects only one of nineteen causes of action. Accordingly, certification is denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1286461/ | 687 S.E.2d 185 (2009)
PIERCE
v.
The STATE.
No. A09A1261.
Court of Appeals of Georgia.
November 19, 2009.
*188 Lavender, Baker & Slider, Donald J. Slider, for appellant.
Kenneth W. Mauldin, Dist. Atty., Jon R. Forwood, Asst. Dist. Atty., for appellee.
BARNES, Judge.
Michael Pierce appeals his convictions for aggravated battery, aggravated assault, terroristic threats, false imprisonment, family violence battery (three counts), simple battery (two counts), and criminal trespass. Pierce contends the trial court erred by (1) finding the evidence sufficient to sustain the convictions of aggravated battery, criminal trespass, and false imprisonment; (2) denying his motion for new trial based on ineffective assistance of counsel; (3) denying his motion to quash the indictment; (4) denying his motion to strike a juror for cause; (5) refusing to give a jury charge on lesser included offenses; (6) instructing the jury incorrectly on the crime of terroristic threats; and (7) failing to merge his conviction for battery with aggravated battery. For the reasons stated below we affirm in part, but vacate the conviction and sentence for Count 6.
On appeal from a criminal conviction, the evidence is reviewed in the light most favorable to the jury's verdict, giving deference to the jury's determination on the proper weight and credibility to be given the evidence. Dean v. State, 273 Ga. 806, 806-807(1), 546 S.E.2d 499 (2001).
So viewed, the evidence shows that Pierce broke the chain on the door to the apartment he shared with the victim, dragged the victim from her bed, and began to strike her repeatedly with his hands, shoes, a belt, and a giraffe statue. While holding a knife to her throat, Pierce threatened to kill the victim and continued to beat her for hours as she *189 begged him to stop. Pierce accused the victim of cheating on him with another person and told her he would stop beating her if she told him the name of that person. At times Pierce restrained the victim to prevent her from leaving and other times he physically blocked her from leaving. When Pierce stepped into the shower, the victim grabbed her keys and drove to the apartment of a friend who called the police.
The victim had bruises and "dark ... big welts" all over her trunk and all down her legs, her face was bleeding and bruised, her lip was "busted," her ears were blackened, her hair had been ripped out in places, and she had a knife wound on her hand.
1. Pierce contends the evidence was insufficient to sustain his convictions for aggravated battery, criminal trespass, and false imprisonment. When evaluating the sufficiency of evidence, the proper standard of review is whether a rational trier of fact could have found from the evidence that the defendant was guilty beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979).
(a) Pierce was charged with aggravated battery by seriously disfiguring the victim by repeatedly beating her thighs, resulting in scar tissue and discoloration. He argues that the discoloration of the victim's thigh did not "seriously disfigure" her, an essential element of aggravated battery. The statute provides that "[a] person commits the offense of aggravated battery when he or she maliciously causes bodily harm to another by ... seriously disfiguring his or her body or a member thereof." OCGA § 16-5-24(a). The disfigurement need not be permanent, however, and whether an injury causes serious disfigurement is almost always a jury question. Williams v. State, 248 Ga.App. 316, 318(1), 546 S.E.2d 74 (2001).
To rise to the level of "disfigurement" the injury sustained must be more than just a superficial wound. Williams v. State, supra, 248 Ga.App. at 319(1), 546 S.E.2d 74. The injury suffered by the victim in this case was more than normal bruising. The belt Pierce used to hit the victim created knots deep under her skin. The severity and depth of those knots put the victim at risk for blood clots and deep vein thrombosis. To cause an injury that deep, the victim must have been hit with "very heavy and pointed blunt force." A physician's assistant testified for the State that the victim's thigh injury was not a normal bruise, caused knots under her skin, was "very deep," and was still dark blue at the time of the trial a year later. The physician's assistant further testified that superficial, normal bruising generally resolves itself within six to eight weeks. This evidence was sufficient for the jury to determine that the victim was seriously disfigured and to sustain Pierce's conviction for aggravated battery.
(b) Pierce claims the evidence did not prove the monetary amount of damages to the door, a necessary element to sustain his criminal trespass conviction.
A person commits the offense of criminal trespass when he or she intentionally damages any property of another without consent of that other person and the damage thereto is $500.00 or less or knowingly and maliciously interferes with the possession or use of the property of another person without consent of that person.
OCGA § 16-7-21(a).
The indictment charged Pierce with criminal trespass by intentionally damaging the front door by kicking it in, without the victim's consent, "said damage being less than $500." Although the officer did not remember seeing evidence of forced entry, the victim testified the door was chained when Pierce "busted the door down" and broke the chain. Absent evidence that the amount of damage done was more or less than $500, a conviction for criminal trespass generally will not stand. Cox v. State, 243 Ga.App. 582, 583(1), 532 S.E.2d 697 (2000). If the evidence shows that the damage was to everyday objects, however, an exception exists that allows the trier of fact to form its own estimates of value and damage. Id.; Burrell v. State, 293 Ga.App. 540, 542(2), 667 S.E.2d 394 (2008). The chain lock on the door was an everyday object, and the victim's testimony authorized the jury to estimate the *190 amount of damage done to it. Therefore, sufficient evidence existed for the jurors to determine the door was damaged and to draw on their own experiences to decide the amount of damage to the front door.
(c) Pierce argues the evidence used to prove false imprisonment had already been used to prove battery, and therefore it was not sufficient to establish false imprisonment. False imprisonment occurs when a person, "in violation of the personal liberty of another, ... arrests, confines, or detains such person without legal authority." OCGA § 16-5-41(a).
The evidence shows Pierce grabbed the victim by the hair and dragged her from room to room in the apartment while beating her. He dragged the victim from the bedroom to the living room, to the bathroom several times, and finally took her clothes off and "threw" her in the shower. She testified she was unable to escape because Pierce was holding her, she did not give him permission to hold her, and she wanted to get away.
To sustain a conviction for false imprisonment, the State must show evidence of an arrest, confinement, or detention, and detention for a brief amount of time is sufficient. Rehberger v. State, 235 Ga.App. 827, 828(1), 510 S.E.2d 594 (1998). It is for the jury to decide if the detention amounted to false imprisonment. Id. The victim's testimony that she was unable to leave the apartment because Pierce was holding her is enough evidence for the jury to determine the victim was detained against her will.
Pierce argues the facts the State used to prove battery are the same facts it used to establish false imprisonment, and the same facts cannot be used to establish two different crimes, citing Garza v. State, 284 Ga. 696, 670 S.E.2d 73 (2008). In Garza, the Supreme Court of Georgia held that the State must establish a kidnapping offense with evidence that the element of asportation was more than simply incidental to another offense. Id. at 701-702, 670 S.E.2d 73. Pierce was not charged with kidnapping, which requires proof of asportation. Rather, he was charged with false imprisonment, which requires only that the State show the victim was held against her will. Throughout the victim's ordeal, she was held against her will, even when Pierce was not striking her, so that the crime of false imprisonment was proved by facts separate and distinct from those used for the battery conviction. "Under these circumstances, it cannot be said that the (S)tate `used up' the evidence establishing false imprisonment in proving the (other charges). Each offense was established by proof of separate and distinct facts...." (Punctuation omitted.) Butler v. State, 194 Ga.App. 895, 898(3), 392 S.E.2d 324 (1990). Therefore, this enumeration of error is without merit.
2. Pierce also contends his convictions should be reversed because his defense counsel was ineffective within the meaning of Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984).
To prevail on a claim of ineffective assistance, a defendant must show that counsel rendered deficient performance and that actual prejudice resulted. Counsel are strongly presumed to have rendered adequate assistance and made all significant decisions in the exercise of reasonable professional judgment, and counsel's performance is evaluated without reference to hindsight. A petitioner has suffered actual prejudice only where there is a reasonable probability (i.e., a probability sufficient to undermine confidence in the outcome) that, but for counsel's unprofessional errors, the result of the proceeding would have been different. Ineffective assistance claims are mixed questions of law and fact. We accept the [trial] court's findings of fact unless clearly erroneous and independently apply the law to those facts.
(Citations and punctuation omitted.) Head v. Hill, 277 Ga. 255, 266(VI), 587 S.E.2d 613 (2003). Further, when considering a claim of ineffectiveness, a critical distinction exists between inadequate preparation and unwise trial strategy. Hudson v. State, 250 Ga. 479, 486(8), 299 S.E.2d 531 (1983). Especially in matters of trial tactics, a Sixth Amendment claim cannot be judged by hindsight or result. Slade v. State, 270 Ga. 305, 307(2), 509 S.E.2d 618 (1998).
*191 (a) Pierce alleges that his trial counsel had a conflict of interest that required her to withdraw because complaints Pierce made to the attorney and the State Bar about her effectiveness created an insurmountable conflict.
Pierce's trial counsel promptly answered Pierce's letter requesting that she withdraw as counsel with a detailed letter and a visit to the jail to discuss his issues and concerns. In addition, counsel was unaware that Pierce filed a complaint with the State Bar. The trial court held an ex parte hearing with Pierce and his counsel days before trial, which revealed only that Pierce was generally unhappy with his representation and wanted trial counsel "to do her job." He presented no evidence his trial counsel had a conflict of interest. As the trial court discussed in its order denying Pierce's motion for new trial, his trial counsel believed the discussions between her and Pierce were "productive" and she had addressed all of Pierce's concerns. Any disagreement over defense strategies did not create a conflict of interest or a breach in the attorney-client relationship that resulted in ineffective assistance. Williams v. State, 273 Ga.App. 213, 218(3)(c), 614 S.E.2d 834 (2005).
(b) Pierce contends his trial counsel failed to alert the trial court about a potential discovery violation because the State may have possessed three letters the victim wrote to Pierce. The victim testified she may have written three letters to Pierce, and his trial counsel cross-examined her about two of the letters. Pierce's trial counsel testified at the new trial hearing that Pierce initially refused to give her either originals or copies of any of these letters, that she eventually persuaded him to give her some of the letters, and that Pierce claimed he could not give her the rest of the letters because sheriff's deputies seized them during a search of his cell. The State denied possessing any letters that trial counsel did not have. Lacking evidence the State withheld any discovery material, trial counsel was not ineffective for failing to raise a meritless complaint. Garrett v. State, 285 Ga.App. 282, 287(5)(c), 645 S.E.2d 718 (2007).
(c) Pierce contends trial counsel was ineffective for not advising him to take the State's offer to dismiss the aggravated assault charge and recommend a sentence of ten years to serve four in confinement if he pled guilty to aggravated battery and several misdemeanor crimes. His trial counsel testified that she told Pierce about that offer, but "it was not an offer he was interested in accepting." Additionally, defense counsel did not have all the discovery related to the aggravated battery charge then, and thus she took a neutral position on advising Pierce whether to take the offer. Although Pierce later expressed regret that the offer was not still available to him, he knew when he declined it that it was a time-limited offer. Pierce argues his lawyer should have obtained the victim's medical records before recommending whether he should have accepted the plea offer, but the records were not in the State's file and thus were not available to his trial counsel. The victim would not talk to Pierce's trial counsel, who could not subpoena her medical records, and the State was not required to provide them to her sooner than it did, ten days before trial. Accordingly, even though trial counsel admitted that maybe in retrospect Pierce should have accepted the plea when it was offered, she did not urge him to do so because she had not seen evidence that the State could carry its burden on the aggravated battery charge. She communicated the plea offer, and Pierce did not accept it; thus her assistance in that regard was not ineffective.
(d) Pierce contends his trial counsel was ineffective for failing to call an expert witness to testify about the severity of the victim's thigh injury. "As a general rule, matters of reasonable tactics and strategies, whether wise or unwise, do not amount to ineffective assistance of counsel." (Punctuation omitted.) Grier v. State, 273 Ga. 363, 365(4), 541 S.E.2d 369 (2001). The decision on which defense witnesses to call is a matter of trial strategy and tactics and does not usually constitute ineffective assistance of counsel. Austin v. Carter, 248 Ga. 775, 779(2)(c), 285 S.E.2d 542 (1982). How to deal with an expert witness presented by the opposing side, including whether to present counter-expert testimony, to rely upon cross-examination, to forego cross-examination, or *192 to develop certain expert opinion is a matter of trial strategy which, if reasonable, cannot be the basis of a successful ineffective assistance of counsel claim. Eason v. State, 283 Ga. 116, 118-119(4), 657 S.E.2d 203 (2008); Smith v. State, 283 Ga. 237, 238-239(2)(a), 657 S.E.2d 523 (2008); Wallace v. State, 272 Ga. 501, 505(3)(b), 530 S.E.2d 721 (2000).
Trial counsel explained at the motion for new trial hearing that after receiving the victim's medical records she did not ask for a continuance to obtain an expert to review them because she was concerned it would give the State enough time to secure its witnesses for similar transaction evidence against Pierce. Also, trial counsel advised Pierce that a continuance would keep him in jail longer before the trial would begin. Finally, it was not clear that an expert would be beneficial to Pierce. Trial counsel discussed these factors with Pierce and he agreed that a continuance was not in his best interest. This was a tactical decision made by trial counsel with Pierce's consent and does not amount to ineffective assistance.
Pierce has not established that trial counsel's actions were deficient, and therefore his claims for ineffective assistance of counsel fail under the first prong of the Strickland test. Taylor v. State, 298 Ga.App. 145, 146-147(2), 679 S.E.2d 371 (2009). Accordingly, the trial court did not err by denying Pierce's claims of ineffective assistance of counsel.
3. Pierce contends the trial court erred by denying his motion to quash the indictment. He contends the indictment should have been quashed because the State's practice was to give the grand jurors a general presentation on domestic violence during their orientation, which he argues was extremely prejudicial because of the allegations against him. The State responded that Pierce made no showing that the grand jury was tainted by an outside influence that prejudiced it. Because the transcript of the hearing on Pierce's motion to quash is not in the record, we must presume the evidence supports the trial court's decision. If
the transcript or record does not fully disclose what transpired at trial, the burden is on the complaining party to have the record completed in the trial court under the provisions of OCGA § 5-6-41(f).... When this is not done, there is nothing for the appellate court to review.
Baker v. State, 247 Ga.App. 25(2), 543 S.E.2d 70 (2000).
4. Pierce claims the trial court should have granted his motion to strike juror number 40 for cause because her daughter had recently experienced domestic violence and the juror was a registered nurse. Whether to strike a juror for cause lies within the sound discretion of the trial court, and the trial court's decision will not be disturbed absent an abuse of discretion. Rocha v. State, 248 Ga.App. 53(1), 545 S.E.2d 173 (2001). To strike a juror for cause, "it must be shown that an opinion held by the potential juror is so fixed and definite that the juror will be unable to set the opinion aside and decide the case based upon the evidence or the court's charge upon the evidence." Id.
The transcript shows the juror was concerned that her personal experiences with domestic violence and her medical background might affect her decision. The juror had a daughter who had been involved in a violent relationship within the past year and she was concerned about the medical testimony that might be presented during trial. The State and the juror had the following exchange:
State: Do you believe that you could put your situations aside and could view the testimony ...?
Juror No. 40: No, I would like, I would like to think that I can be impartial.
Trial counsel questioned the juror about her daughter's domestic dispute by asking, "Would it be fair to say that there's at least some lingering concern about her safety that you carry with you?" The juror replied, "Not at this time. At the time, at the time, yes, very much so." The trial court held that the juror's response indicated she would be able to set aside her personal feelings and be fair to both parties. As the juror did not exhibit bias that showed she was incapable of rendering an impartial verdict, the trial court did not abuse its discretion in denying *193 Pierce's motion to strike her for cause. See Rocha v. State, supra, at 54, 545 S.E.2d 173.
5. Pierce claims the trial court erred by refusing to charge that simple assault was a lesser included offense of aggravated assault. The indictment charged Pierce with committing aggravated assault by holding a knife to the victim's throat, threatening her with the knife, and placing the victim in "reasonable apprehension of receiving a violent injury." The victim testified that "off and on through-out the whole thing" Pierce held her on the ground "20 or 30 times" with a knife to her throat threatening to kill her, and she was afraid she was about to die. Although Pierce contends the victim was uncertain about the knife, the evidence shows her uncertainty was about how she was cut with the knife. As the only evidence is that Pierce held a knife to the victim's throat while threatening to kill her and that she was afraid he would kill her, and no evidence was presented that the knife was not used in that manner, no charge on the lesser included offense of simple assault was authorized.
The complete rule with regard to giving a defendant's requested charge on a lesser included offense is: where the state's evidence establishes all of the elements of an offense and there is no evidence raising the lesser offense, there is no error in failing to give a charge on the lesser offense. Where a case contains some evidence, no matter how slight, that shows that the defendant committed a lesser offense, then the court should charge the jury on that offense.
(Citation and punctuation omitted.) Edwards v. State, 264 Ga. 131, 133, 442 S.E.2d 444 (1994). Thus, the trial court did not err in denying Pierce's request to charge on simple assault as a lesser included offense of aggravated assault.
6. Pierce alleges that the jury charge on terroristic threats was improper because it did not match the indictment. The trial court charged the jury as follows:
A person commits the offense of terroristic threats when that person threatens to commit any crime of violence with the purpose of terrorizing another. No person shall be convicted of terroristic threats on the unsupported testimony of the party to whom the threat is made. Whether there is sufficient support is a matter solely for you, the jury, to decide.
The indictment charges Pierce with terroristic threats for threatening "to commit a crime of violence, to wit: Murder, with the purpose of terrorizing another in reckless disregard of the risk of causing such terror...." Pierce contends the jury charge defining a terroristic threat as threatening to commit "any crime of violence" instead of threatening to commit the crime specifically charged in the indictment was confusing, because the jury could think that even a "threat of a kick" would be sufficient to convict him of making terroristic threats. Pierce contends the trial court should have charged the jury that a person commits terroristic threats when he threatens to commit murder because that is what he was charged with in the indictment. The statute defines terroristic threat as one in which a person "threatens to commit any crime of violence." OCGA § 16-11-37(a).
Jury instructions must be read and considered as a whole. And if the instructions sufficiently limited the jury's consideration to the elements of the offense as charged in the indictment such that no reasonable possibility exists that the jury could have convicted the defendant of committing the crime in a manner not alleged in the indictment, no reversible error occurred.
Hammonds v. State, 263 Ga.App. 5, 7(2), 587 S.E.2d 161 (2003).
The trial court read the indictment to the jury and gave them a copy to take to the jury room, and advised the jury that the indictment and the plea formed the issue they were to decide. Considering the charge as a whole, the jury was not misled or confused about the charge of terroristic threats in the indictment. Therefore, no reversible error has occurred.
7. Pierce's last enumeration is that his family violence battery conviction in Count 6 should have merged with his family violence aggravated battery conviction in *194 Count 1. His sentence for Count 1 was 20 years confinement with 12 years to serve and the remainder on probation, and his sentence for Count 6 was 12 months probation consecutive to the sentence in Count 5, which was a sentence of 12 months probation consecutive to the sentence in Count 1.
In determining whether offenses merge, Georgia applies the "required evidence" test. Under that analysis, where the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one, is whether each provision requires proof of a fact which the other does not. Thus, a crime does not merge into another unless it is established by proof of the same or less than all the facts required to support the other offense.
(Citation and punctuation omitted.) Smashum v. State, 293 Ga.App. 41, 42-43(2), 666 S.E.2d 549 (2008). Pierce was charged in Count 1 with aggravated battery (family violence) by maliciously causing bodily harm to the victim, a person with whom he formerly lived, by "seriously disfiguring a member of her body by repeatedly beating the thighs of said victim, resulting in scar tissue and discoloration." He was charged in Count 6 with family violence battery by intentionally causing substantial physical and visible bodily harm to the victim, a person with whom he formerly lived, by beating her with a belt.
Pierce contends that he cannot be punished twice for the same offense.
The prohibition against double jeopardy has two separate aspects. The first, embodied by OCGA § 16-1-8, amounts to a prohibition against successive prosecutions for the same offense. This has been referred to as the procedural bar against double jeopardy. The second, embodied by OCGA § 16-1-7, amounts to a prohibition against successive punishments for the same offense. This has been referred to as the substantive bar against double jeopardy.
(Citation omitted; emphasis in original.) McClure v. State, 179 Ga.App. 245, 246(1), 345 S.E.2d 922 (1986).
The crime charged in Count 1 is aggravated battery with the punishment enhanced because Pierce and the victim formerly lived together:
(a) A person commits the offense of aggravated battery when he or she maliciously causes bodily harm to another by depriving him or her of a member of his or her body, by rendering a member of his or her body useless, or by seriously disfiguring his or her body or a member thereof.
. . .
(h) If the offense of aggravated battery is committed between past or present spouses, persons who are parents of the same child, parents and children, stepparents and stepchildren, foster parents and foster children, or other persons excluding siblings living or formerly living in the same household, the defendant shall be punished by imprisonment for not less than three nor more than 20 years.
OCGA § 16-5-24(a) and (h). The crime charged in Count 6 is battery with the punishment enhanced because Pierce and the victim formerly lived together:
(a) A person commits the offense of battery when he or she intentionally causes substantial physical harm or visible bodily harm to another.
(b) As used in this Code section, the term "visible bodily harm" means bodily harm capable of being perceived by a person other than the victim and may include, but is not limited to, substantially blackened eyes, substantially swollen lips or other facial or body parts, or substantial bruises to body parts.
. . .
(f) If the offense of battery is committed between past or present spouses, persons who are parents of the same child, parents and children, stepparents and stepchildren, foster parents and foster children, or other persons living or formerly living in the same household, then such offense shall constitute the offense of family violence battery and shall be punished as follows: (1) Upon a first conviction of family violence battery, the defendant shall be guilty of and punished for a misdemeanor; and (2) Upon a second or subsequent conviction *195 of family violence battery against the same or another victim, the defendant shall be guilty of a felony and shall be punished by imprisonment for not less than one nor more than five years. In no event shall this subsection be applicable to reasonable corporal punishment administered by parent to child.
OCGA § 16-5-23.1(a), (b), and (f).
Thus, to convict Pierce of family violence aggravated battery, the State had to prove that he maliciously caused bodily harm to the victim, with whom he once lived, by seriously disfiguring her thighs resulting in scar tissue and discoloration. On the other hand, to convict Pierce of family violence battery as alleged in Count 6 the State had to prove that he intentionally caused substantial physical harm and visible bodily harm, i.e., "bodily harm capable of being perceived by a person other than the victim and may include, but is not limited to, substantially blackened eyes, substantially swollen lips or other facial or body parts, or substantial bruises to body parts, to the victim, with whom he once lived, by beating her with a belt."
Although the State contends the counts are based on different facts and constitute two separate crimes, nothing in the indictment shows that the charges are based upon Pierce's actions at different times or places, or that the victim's injuries charged in Count 1 were different from those in Count 6. Thus, each battery "was not a separate and complete criminal act but rather was part of a continuous criminal act, committed at the same time and place and inspired by the same criminal intent." Ingram v. State, 279 Ga. 132, 133(2), 610 S.E.2d 21 (2005). Therefore, the conviction of and sentence for Count 6 must be vacated.
Judgment affirmed in part and vacated in part.
MILLER, C.J., and ANDREWS, P.J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1303174/ | 162 Mich. App. 294 (1987)
412 N.W.2d 719
NORTHWEST ACCEPTANCE CORPORATION
v.
ALMONT GRAVEL, INC
Docket Nos. 85508, 86582, 87008.
Michigan Court of Appeals.
Decided August 17, 1987.
Butzel, Keidan, Simon, Myers & Graham (by Jack J. Mazzara and Mark L. Kowalsky), for plaintiff.
Schier, Deneweth & Parfitt, P.C. (by Ronald A. Deneweth and Richard D. Massuch), for defendants Almont Gravel, Inc., and National Asphalt Paving, Inc.
Benjamin T. Hoffiz, Jr., P.C., for defendants Fred D. and Dessalee D. Peake.
Before: BEASLEY, P.J., and HOOD and E.E. BORRADAILE,[*] JJ.
E.E. BORRADAILE, J.
The primary question in this case involves a finding by the trial judge, as the trier of fact, that unconscionability existed in a commercial equipment lease setting. Based upon this finding the trial court denied relief to the plaintiff financing agent. We affirm.
The facts show that defendant Fred D. Peake, owner of defendant National Asphalt Paving, Inc., had been in the asphalt paving business for some time doing small local jobs. In the winter of 1979-1980, Peake secured a state highway job and decided he needed to crush his own rock to supply the necessary aggregate for the job. He saw an ad in a trade magazine for the rental of a rock crusher in Phoenix, Arizona, and contacted the owner, Rosario Brabant. Peake eventually traveled to Phoenix to discuss the possibility of renting the equipment. He entered into a lease which included the crusher as well as several very large pieces of machinery. Peake made a $9,000 deposit with an understanding that the money spent on any crusher repair would be applied to the rental. *297 There was no agreement by the parties for the purchase of the equipment.
The crusher components arrived in Michigan in March of 1980, and the crusher was assembled and put into operation. From that time forward Peake had difficulty getting the crusher to operate due to missing parts as well as items on the crusher needing repairs. At times Peake had to purchase aggregate from other sources to fulfill the road paving contract. In May of 1980, Brabant informed Peake that he was farming out the rental agreement to a friend, Gary Hayward. Subsequently, Hayward, then vice-president and branch manager of the Phoenix Arizona Commercial Equipment Regional Office of plaintiff Northwest Acceptance Corporation, met with Peake. Although Peake claims he was confused, a new lease agreement was filled out. At trial, Peake claimed he had not seen the agreement, which had been prepared by the plaintiff, prior to the meeting. At the conclusion of the forty-five-minute meeting, Peake signed the agreement. Peake asserts that he told Hayward of the problems he was having with the equipment and Hayward promised to contact Brabant to insure prompt repair of the equipment. Peake further asserts that he was not informed that Northwest Acceptance was not a guarantor with respect to performance of the equipment and that the damage formula provided for in the lease agreement was not explained to him. Peake indicated that the first time that a purchase price had been mentioned to him was during the meeting with Hayward. Peake had not indicated an interest in buying the equipment.
At the meeting, Hayward informed Peake that plaintiff Northwest Acceptance had purchased the crusher for $330,000 although neither Hayward nor any employees of Northwest Acceptance had *298 inventoried, appraised, or seen the equipment. Subsequent to signing the documents, Peake continued to have trouble with the crusher; however, he continued to make payments to Northwest. In the winter of 1982, Brabant returned the jaw of the crusher to Peake, supposedly after it had been properly repaired. Upon installation, the crusher operated for less than one day before breaking down. Peake then decided to call in a Michigan machinery repair company to properly repair the machinery. Peake testified that, through June of 1982, approximately $100,000 had been spent by National Asphalt in equipment repairs. In 1982 Peake advised Hayward that he could no longer make the monthly payments due to the repair costs. In response Peake was told to contact the Northwest Acceptance office in Detroit to renegotiate the deal. An appointment was made and Peake was informed to have his wife present. Peake claimed that he did not read the second documents which were signed and was merely told that he and his wife must sign them. The second documents involved a guarantee as to payment.
In the fall of 1984, the machine was returned to Northwest Acceptance, who sold it for $175,000. At that point, National Asphalt had paid $196,750.32 on the crusher and had paid $190,480.18 for repairs and rebuilding. Northwest Acceptance also had a claim on a certain Massey-Ferguson loader and a Freightliner tractor which were cross-collateralized with the crusher.
The trial judge found that the leases in question were unconscionable at the times of their execution. The trial judge stated in his opinion and order that plaintiff brought prepared legal documents to the forty-five-minute meeting which took place in a restaurant and did not give defendant Peake, who represented National Asphalt, any *299 opportunity to read, study or consult in regards to the deal. Further, the trial judge concluded that the deal speaks for itself as to the benefits plaintiff was to receive. Peake was required to execute the documents immediately or have the equipment taken from him. In addition, plaintiff Northwest Acceptance claimed to be the owner of old and some new equipment without ever having viewed the same. The trial court further noted that defendants did not receive the machinery contracted for and the equipment forwarded to them was in a poor state of operation. The trial court stated that the second lease was even more favorable to the plaintiff and less favorable to the defendants, in both transactions there was an absence of meaningful choice on the part of the defendants, and the contract terms were unreasonably favorable to plaintiff. The trial court found no cause of action on the lease agreement, but required defendants to pay $7,400 for the Massey-Ferguson loader and $31,000 for the Freightliner tractor. A motion for costs was made subsequent to the trial court's opinion. The trial court, consistent with MCR 2.405(E), awarded the attorney for defendants Almont Gravel and National Asphalt $12,740, and the attorney for the Peakes $4,290, allowing both to collect fees at $65 per hour.
Plaintiff on appeal argues that the trial court improperly relied upon the earlier lease in making its decision and should have disregarded that lease because it merged into the subsequent lease on which the suit was brought. Plaintiff also argues that the trial court did not have facts before it to establish procedural unconscionability and that the trial court made no finding whatsoever that the second lease or any of its terms were substantively unconscionable and thus, the trial court erred as a matter of law by declaring the lease *300 void and unenforceable. Plaintiff also notes that the second lease was a standard financing lease commonly used and commercially accepted as a method of financing and that the court's decision jeopardizes the viability of standard financing leases which play a significant role in national commerce.
The trial court found that MCL 440.2302; MSA 19.2302 was the proper law to apply, that being the portion of the Uniform Commercial Code dealing with unconscionability. The trial court cited Reed v Kaydon Engineering Corp, 38 Mich. App. 353, 356; 196 NW2d 487 (1972):
The concept that substantively unreasonable contractual provisions will not be enforced is part of our jurisprudence independently of the Uniform Commercial Code.
The commercial setting, purpose, and effect of the contractual provision determines whether that provision is substantively unreasonable or unconscionable. Id.
In the practice commentary by Professor Roy L. Steinheimer, Jr., to MCLA 440.2302, he states:
Under this section, unconscionability is a question of law for the court to decide. The court should determine the issue of unconscionability as of the time of the making of the contract, not as of the time of suit. Unconscionable contracts can be declared unenforceable either in whole or in part at the discretion of the court. The issue can be raised by either party or by the court on its own motion. The parties can, as a matter of right, introduce evidence relevant to any claim of unconscionability and thus lay grounds for review.
The theory that unconscionable contracts will not be enforced by our courts is not entirely new to Michigan law. In the early case of [Eames v *301 Eames, 16 Mich. 348 (1868)], a court of equity, exercising its traditional power to refuse extraordinary relief, dismissed a bill for specific performance of a contract for the sale of a patent right which would have given the buyer unconscionable advantage over the seller and his creditors. In [Briggs v Withey, 24 Mich. 136 (1871)], equity granted affirmative relief against an unconscionable settlement by holding promissory notes invalid as to one-half of the amount of the settlement. For other cases in which the court has given either negative or affirmative equitable relief against unconscionable arrangements, see [Myer v Hart, 40 Mich. 517 (1879)] (debtor-creditor relationship); [Kukielka v Ranyak, 229 Mich. 13; 200 N.W. 964 (1924)] (overtones of fraud and an exchange of mixed realty and personalty); [Johnston Realty & Investment Co v Grosvenor, 241 Mich. 321; 217 N.W. 20 (1928)] (exchange of realty); [In re Detroit Macaroni Co, 46 F Supp 284 (D Mich, 1942)] (bankruptcy situation).
In Johnson v Mobil Oil Corp, 415 F Supp 264 (ED Mich, 1976), Federal District Judge Feikens relied on Allen v Michigan Bell Telephone Co, 18 Mich. App. 632; 171 NW2d 689 (1969), lv den 383 Mich. 804 (1970), in dealing with the issue of unconscionability. Judge Feikens found unconscionability, noting that other courts have also found unconscionability in a variety of commercial settings, referring to Fairfield Lease Corp v Umberto, 7 UCC Rep Ser 1181 (NY Civ, 1970).
In Anno: "Unconscionability" as ground for refusing enforcement of contract for sale of goods or agreement collateral thereto, 18 ALR3d 1305, 1307, the author notes that courts have seldom explicitly defined the term "unconscionability" or "unconscionable contract" but frequently use the vague definition found in the early English case of Earl of Chesterfield v Janssen, 2 Ves Sen 125, 155; *302 28 Eng Rep 82 (1750), quoted in Hume v United States, 132 U.S. 406, 411; 10 S. Ct. 134; 33 L. Ed. 393 (1889), in which it is said that an unconscionable bargain is one "such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other." The annotation contains a number of cases where, in both a lease and purchase setting, unconscionability has been found. Many of the cases reported involve an uninformed person not involved in commerce dealing with a commercial entrepreneur who is shown to have overreached. It is noted that with the advent of the Uniform Commercial Code the doctrine has gained greater acceptance and the law is still in a state of development.
As noted above, plaintiff has raised a question as to whether both substantive and procedural unconscionability was shown sufficient to justify the trial court's findings. This Court has suggested that in order for a finding of unconscionability to be made both substantive and procedural unconscionability must be present. In Allen, supra, pp 637-638, this Court refused to enforce a contract clause which limited the telephone company's liability for damages when it failed to publish plaintiff's advertisement in the yellow pages as it had contracted to do, stating:
There are then two inquiries in a case such as this: (1) What is the relative bargaining power of the parties, their relative economic strength, the alternative sources of supply, in a word, what are their options?; (2) Is the challenged term substantively reasonable?
"Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable *303 to the other party." [Williams v Walker-Thomas Furniture Co, 121 US App DC 315, 319; 350 F2d 445, 449; 18 ALR3d 1297 (1965)].
Thus, merely because the parties have different options or bargaining power, unequal or wholly out of proportion to each other, does not mean that the agreement of one of the parties to a term of a contract will not be enforced against him; if the term is substantively reasonable it will be enforced. By like token, if the provision is substantively unreasonable, it may not be enforced without regard to the relative bargaining power of the contracting parties.
The trial court in this case found that the leases were unconscionable at the time of their execution. The trial court did not find that the plaintiff had conducted any active or deliberate fraud or misrepresentation upon the defendant, but the elements were not necessary where the deceptive influence was in fact effective and unconscionable. The trial court further noted that there was an absence of meaningful choice on the part of the defendant and the contract terms were unreasonably favorable to the plaintiff.
Though plaintiff has argued that the trial court should not have considered the first lease as noted above, the trial court found that the two leases were interrelated. This Court also believes that the two leases must be analyzed as a single transaction. The circumstances relating to the execution of the first lease cannot be divorced from the circumstances surrounding the execution of the second lease. The trial court specifically found that the defendant was not given any opportunity to read, study, or consult in regards to the deal both as to the first lease and as to the second lease. As defendant Peake testified, he was at a point where he had to have the equipment to continue performing *304 the road work under the contract and felt that he had a "gun to his head."
With respect to procedural unconscionability and any resulting substantively unreasonable terms, this Court in Allen, supra, p 637, stated:
Implicit in the principle of freedom of contract is the concept that at the time of contracting each party has a realistic alternative to acceptance of the terms offered. Where goods and services can only be obtained from one source (or general sources on noncompetitive terms) the choices of one who desires to purchase are limited to acceptance of the terms offered or doing without. Depending on the nature of the goods or services and the purchaser's needs, doing without may or may not be a realistic alternative. Where it is not, one who successfully exacts agreement to an unreasonable term cannot insist on the court's enforcing it on the ground that it was `freely' entered into, when it was not. He cannot in the name of freedom of contract be heard to insist on enforcement of an unreasonable contract term against one who on any fair appraisal was not free to accept or reject that term.
While this is admittedly a close case, this Court may not set aside the findings of fact by a trial court unless they are clearly erroneous. A finding of fact by a trial court is clearly erroneous when the reviewing court, after reviewing the entire record, is left with a definite and firm conviction that a mistake has been committed. Precopio v Detroit, 415 Mich. 457; 330 NW2d 802 (1982).
We are satisfied from a review of the evidence presented that the trial court could find that defendants were not faced with a realistic alternative to acceptance of the terms of the first and second lease agreements. Therefore, the trial court did not err in finding procedural unconscionability. *305 The trial court also found substantive unconscionability by finding that there was an absence of meaningful choice on the part of the defendants and that the contract terms were unreasonably favorable to the plaintiff. One area where unconscionability could be found related to the disclaimer provision in both leases prepared by plaintiff particularly in view of the necessity of defendants' spending $100,000 in extensive repairs in order to make the equipment operational. In view of the provision in the leases that there was an option to purchase, we believe that MCL 440.2302; MSA 19.2302 applies and that the trial court did not err in finding both procedural and substantive unconscionability.
Plaintiff raises other questions relating to the trial court's findings, one involving the admission of a summary of repairs by defendants without granting plaintiff an opportunity to review the underlying documents or conduct a hearing on the accuracy of the summary. MRE 1006 provides:
The contents of voluminous writings, recordings, or photographs which cannot conveniently be examined in court may be presented in the form of a chart, summary, or calculation. The originals, or duplicates, shall be made available for examination or copying, or both, by other parties at reasonable time and place. The court may order that they be produced in court.
Upon defendants' tender of the summary the court, in order to keep the trial going, admitted the summary and allowed plaintiff to review, during lunch or overnight, the limited number of documents that were made available in court. The trial court told the plaintiff that it had a right to review the originals and that the court would require the original documents to be produced if *306 plaintiff so desired. Subsequent to the cross-examination of John Robson, a CPA and officer of defendant National Asphalt, plaintiff renewed its objection to the summary of repairs. Plaintiff requested an opportunity to review the originals prior to final judgment by the court, if the individual items listed in the summary were pertinent to the court's final decision and the trial court agreed.
On appeal, plaintiff argues that the trial court relied heavily on the summary of repairs in its findings concerning repair costs. Plaintiff says that the amount of repairs allegedly made to the stone crusher became a substantive issue in the trial and the trial court did not allow plaintiff an opportunity to review the documents and conduct full cross-examination regarding the summary before the court took the case under advisement. Defendant National Asphalt argues that, even if the summary was erroneously admitted, the error was harmless since there was sufficient additional testimony from which the trial court could make its determination that defendant National Asphalt had expended substantial amounts of money in repairing the equipment. Defendants further argue that a reading of the trial court's opinion indicates that the exact amount of the repairs was not essential to the trial court's decision. The fact that a substantial amount had to be spent to repair the machinery was merely the basis for a part of the court's decision. MRE 1006, as noted above, makes the requirement discretionary as opposed to mandatory. In this instance, the trial court gave plaintiff an adequate opportunity to examine the underlying documents. While we do not find error on the part of the trial court, we do believe that any possible error would be harmless.
Plaintiff lastly argues that the trial court erred in refusing to award plaintiff attorney fees and *307 costs in enforcing its rights under the contracts relating to the Massey-Ferguson and Freightliner agreements. Plaintiff further objects to the trial court's awarding defendants attorney fees and costs. We find that under MCR 2.625 the plaintiff was not the prevailing party as required by the rule in granting fees and costs. We further find that the trial judge was correct in determining that costs and attorney fees should be assessed on the basis of MCR 2.403(O) rather than on an offer of judgment made by defendants. The record indicates that the plaintiff rejected the mediation award of $175,000 which was in settlement of all claims against all defendants. MCR 2.405(E) states:
In an action in which there has been both the rejection of a mediation award pursuant to MCR 2.403 and a rejection of an offer under this rule, the cost provisions of the rule under which the later rejection occurred control.
Clearly, the mediation came after the offer of judgment and the trial court properly ruled relative to attorney fees and costs under the mediation provisions.
Affirmed.
NOTES
[*] Circuit judge, sitting on the Court of Appeals by assignment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1404505/ | 242 S.W.3d 849 (2007)
In re WEEKS MARINE, INC., Relator.
No. 14-07-00501-CV.
Court of Appeals of Texas, Houston (14th Dist.).
December 20, 2007.
*852 Kenneth G. Engerrand, Houston, TX, for appellants.
Jeffrey L. Raizner and Michael P. Doyle, Houston, TX, for appellees.
Panel consists of Justices YATES, FROST, and SEYMORE.
OPINION
CHARLES W. SEYMORE, Justice.
In this original proceeding, relator Weeks Marine, Inc. ("Weeks Marine") seeks a writ of mandamus directing the respondent, Levi Benton, presiding judge of the 215th District Court of Harris County, (1) to vacate (a) his October 31, 2006 order denying Weeks Marine's motion to compel arbitration and (b) his May 3, 2007 order denying Weeks Marine's motion for reconsideration of the October 31 order, and (2) to stay court proceedings and compel the parties to arbitration of their dispute(s). We grant the petition in part and deny in part.
UNDERLYING FACTS AND PROCEDURAL HISTORY
Jose Jimenez was injured in April, 2006, on a deck barge in a shipyard during the course and scope of his employment with Weeks Marine. Several days after the injury, Jimenez executed a Claim Arbitration Agreement ("the Agreement") in which he agreed to arbitrate any claims arising from his injury in exchange for Weeks Marine's agreeing to advance certain sums to Jimenez. Under the Agreement, the advances were to be credited against any recovery Jimenez may ultimately have against Weeks Marine, whether by settlement or award, arising from the injury. The Agreement called for the advances to be paid from the date Jimenez was injured until the earlier of (1) his being declared fit for duty; (2) his, reaching maximum medical improvement; or (3) six months of payments.
Two months after the incident giving rise to his injury, Jimenez brought suit against Weeks Marine under the Jones Act and general maritime law, asserting that Weeks Marine's negligence and the unseaworthiness of its vessel caused his injury. Jimenez refused Weeks Marine's demand to submit the claims to arbitration, although he continued to accept payment of advances under the Agreement. Weeks Marine paid the advances for six months, with a total of $20,602.50 paid to Jimenez.
Weeks Marine filed a motion to compel arbitration in the trial court, which denied the motion after briefing and a hearing. Approximately three months later, Weeks Marine filed a motion for reconsideration of its motion to compel arbitration. Weeks Marine's motion for reconsideration was based on a then-new decision of the United States Court of Appeals for the Fifth Circuit, in which that court affirmed an order requiring an injured employee to arbitrate claims under a post-injury agreement similar to the Agreement at issue in this case. After additional briefing and another hearing, the trial court denied the motion for reconsideration and refused to alter its order denying Weeks Marine's motion to compel arbitration. Weeks Marine then filed this mandamus proceeding, seeking relief from the orders denying its motion to compel arbitration and its motion for reconsideration.
STANDARD OF REVIEW
Mandamus is an extraordinary remedy that will issue only to correct a clear abuse of discretion when the abuse cannot be remedied by appeal. Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992) *853 (orig.proceeding). Whether Weeks. Marine has an adequate remedy by appeal depends on whether the Agreement is subject, to, or excepted from, the Federal Arbitration Act ("FAA").[1] A party has no remedy by appeal in state court for the wrongful denial of its right to arbitrate under an agreement subject to the. FAA. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 272 (Tex.1992) (orig.proceeding); In re FirstMerit Bank, N.A., 52 S.W.3d 749, 753 (Tex.2001) (orig.proceeding).[2] Jimenez argues the Agreement in this case is excepted from the FAA. If so, Weeks Marine has a remedy by interlocutory appeal under the Texas General Arbitration Act ("TAA")[3] and mandamus relief is not appropriate.
If the Agreement is not excepted from FAA coverage, so that mandamus relief is at least theoretically available, Weeks Marine's right to such relief depends on whether the trial court abused its discretion by refusing to compel arbitration. On mandamus review of factual issues, a trial court will be held to have abused its discretion only if the party requesting mandamus relief establishes that the trial court could have reached but one decision (and not the decision it made). Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1985) (orig.proceeding); Walker, 827 S.W.2d at 839-40. Mandamus review of issues of law is less deferential. A trial court abuses its discretion if it clearly fails to analyze the law correctly or apply the law to the facts. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex.2005) (orig.proceeding).
ISSUES PRESENTED
Jimenez contends that the Agreement is excluded from the FAA by virtue of Section 1 of the statute. Section 1 states, in pertinent part, "nothing herein contained shall apply to contracts of employment of seamen." See 9 U.S.C.A. § 1 (1999). As explained below, we conclude that (1) the Agreement is not a contract of employment of a seaman, (2) the Agreement is subject to the FAA, and therefore (3) mandamus is a proper procedure by which Weeks Marine may obtain relief from the trial court's refusal to compel arbitration of Jimenez's claims.
Having thus determined that Weeks Marine is properly before this court by original proceeding for writ of mandamus, we next address whether the trial court abused its discretion in denying the motion to compel arbitration. In the trial court, in opposition to Weeks Marine's motion to compel arbitration, Jimenez contended that the Agreement is not enforceable under the FAA because:
post-injury agreements between a seaman and his employer are invalid under Section 5 of the Federal Employers' Liability Act;
*854 the Agreement does not meet the stringent standards applied by the United States Supreme Court to agreements that diminish a seaman's substantive rights; and
under Texas law, the Agreement is procedurally and substantively unconscionable.
The trial court addressed only the first of these contentions in its order denying arbitration, but the order provides that arbitration is denied "[f]or reasons not expressly limited hereto." An order denying arbitration must be upheld if it is proper on any basis considered by the trial court. In re H.E. Butt Grocery. Company, 17 S.W.3d 360, 367 (Tex.App.-Houston [14th Dist.] 2000, orig. proceeding); In re R & R Personnel Specialists of Tyler, Inc., 146 S.W.3d 699, 703 (Tex.App.-Tyler 2004, orig. proceeding). Accordingly, we review all arguments presented.
ANALYSIS
A. Is the Agreement a contract of employment of a seaman and, therefore, unenforceable under the FAA?[4]
As a preliminary matter, Weeks Marine asserts that the trial court improperly placed the burden on Weeks Marine to prove that the Agreement was not subject to exclusion under the FAA. The order denying arbitration states:
Weeks offers no evidence to establish what is within and without "plaintiff s employment contract.' While this Court does not find the [Agreement] Weeks seeks to enforce here to be within any such contract, it was Weeks [sic] burden to establish that it was not. They failed to do so.
Weeks Marine disputes the trial court's allocation of the burden of proof and contends that a party seeking to avoid arbitration under the FAA bears the burden of establishing applicability of the Section 1 exclusion, because federal law favors arbitration.[5] According to Weeks Marine, in this case, Jimenez properly bears the burden of establishing that the Agreement is a contract of employment.
Whether the burden was on Weeks Marine to prove the Agreement is not a contract of employment or on Jimenez to prove that it is (and we do not decide this issue), the Agreement, as a matter of law and on its face, is not a contract of employment. In describing the purpose of the Agreement, the parties refer to employment only in the past tense: "I was employed by You"; "You were the owner and/or operator of the vessel and/or I was your employee." The Agreement does not address or define any terms of employment, nor does it establish or modify an employment relationship.
Jimenez insists the Agreement constitutes at least a modification of his employment *855 contract. The amount of advances due under the Agreement is "fifty percent (50%) of the gross wages (regular and overtime) I would have otherwise earned based upon my earnings history immediately prior to my accident of April 29, 2006." Jimenez contends Weeks Marine effectually continued to pay him under his employment contract by tying the amount of advances under the Agreement to his wages. Jimenez further argues the Agreement is "employment related" because Weeks Marine stated in the cover letter transmitting the Agreement to Jimenez that advances would be "in addition to the obligatory $20 daily maintenance"; "retroactive to the date of your last work day"; and "against . . . claims for wages or other compensation due."
To determine whether the Agreement is a "contract of employment," Jimenez asks us to focus solely on the presence of employment-related words in the Agreement and in a transmittal letter"work day," "wages," "maintenance and cure"instead of on the purpose and meaning of the Agreement itself. Jimenez offers, and we find, no support in the law for such an approach, and we decline to adopt it. Read in its entirety, with effect given to the meaning of all provisions, we conclude the parties intended the Agreement to be an agreement to arbitrate claims in exchange for voluntary payment of a portion of the potential value of those claims. The advances contemplated by the Agreement (and actually received by Jimenez) do not constitute wages, because, as Jimenez concedes, he performed no work for Weeks Marine after his injury. The Agreement is not somehow transformed into a contract of employment merely because it provides for advances, to be calculated from Jimenez's historical wages or credited against any eventual recovery for lost wages under the Jones Act. Likewise, the Agreement is not transformed into a contract of employment by virtue of Weeks Marine's choosing to assure Jimenez, in a letter, that any advances under the Agreement would be in addition to the maintenance and cure to which he was already fully entitled.[6]
As a matter of law, the Agreement is not a contract of employment and thus not excluded from the FAA.[7] We now consider *856 whether the trial court's refusal to compel arbitration constitutes an abuse of discretion.
B. Did the trial court abuse its discretion by refusing to compel arbitration of Jimenez's claims against Weeks Marine?
A party seeking to compel arbitration must first establish the existence of a valid arbitration agreement and that the claims asserted are within the scope of the agreement. FirstMerit Bank, 52 S.W.3d at 753; see also In re D. Wilson Construction Co., 196 S.W.3d 774, 781 (Tex.2006) (orig.proceeding). If the movant proves these two elements, the burden shifts to the party opposing arbitration to present a valid defense to the agreement. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 227-28 (Tex.2003). If the responding party does not present a valid defense, the trial court has no discretion and must compel arbitration and stay its own proceedings. In re Autotainment Partners Limited Partnership, 183 S.W.3d 532, 534-35 (Tex.App.-Houston [14th Dist.] 2006, orig. proceeding) (citing In re J.D. Edwards World Solutions Co., 87 S.W.3d 546, 549 (Tex.2002) (orig.proceeding)).
Jimenez does not dispute that he signed the Agreement and that, if enforceable, it covers the claims he asserts in the underlying lawsuit. In opposition to Weeks Marine's motion to compel arbitration, however, Jimenez asserts a number of defenses to enforceability. We will address each of his defenses in turn.
1. Is the Agreement invalid under Section 5 of the Federal Employers' Liability Act?
Jimenez cites two United States Supreme Court cases for the proposition that "post-injury agreements have been determined to be invalid under Section 5 of the Federal Employers' Liability Act [`FELA']." See Boyd v. Grand Trunk Western Railroad Co., 338 U.S. 263, 70 S. Ct. 26, 94 L. Ed. 55 (1949); Duncan v. Thompson, 315 U.S. 1, 62 S. Ct. 422, 86 L. Ed. 575 (1942). FELA Section 5 invalidates any contract that enables a common carrier to exempt itself from "any liability created by this [FELA] chapter." 45 U.S.C.A. § 55 (1986).
In Duncan, an employer paid $600 to an injured employee in exchange for the employee's agreement to try to resolve any attendant disputes without litigation and to return the money before he filed a lawsuit. The Court held that the agreement was invalid under FELA Section 5 because requiring the destitute employee to return the $600 before filing suit had the effect of exempting the employer from liability. 315 U.S. at 7, 62 S. Ct. 422.
The later case of Boyd involved a post-injury agreement under which the employee received cash advances against future recovery in exchange for his agreeing to *857 bring any suit against the employer only in certain named venues in Michigan. The employee eventually filed suit in Illinois state court. The employer filed suit against the employee in Michigan, seeking to enforce the agreement and to enjoin prosecution of the Illinois action. Concluding the agreement purported to exempt the employer from (the liability of) suit in FELA-designated venues, the Court held on certiorari that Section 5 precluded enforcement of the agreement against the employee. 338 U.S. at 265-66, 70 S. Ct. 26.
Jimenez argues that the reasoning of Boyd and Duncan is applicable to preclude enforcement of the Agreement because the Jones Act extends FELA rights to seamen.[8] The trial court agreed, stating in its order denying arbitration, "Even if Weeks did establish that [the Agreement] was outside of any employment contract [and thus subject to the FAA], this Court would still deny the motion based on the reasoning set out in the cases relied on by plaintiff, [Boyd and Duncan]." Several weeks later, Weeks Marine asked the trial court to reconsider its order on the basis of the just-issued Terrebonne decision, in which the Fifth Circuit held that FELA Section 5 does not invalidate a seaman's agreement to arbitrate personal injury claims. Terrebonne v. K-Sea Transportation Corp., 477 F.3d 271 (5th Cir.2007). Terrebonne did not persuade the trial court to alter its order and to compel arbitration, but we are persuaded that it was an abuse of discretion for the trial court to deny arbitration based on Boyd and Duncan.
The Fifth Circuit read Boyd to hold that the venue provisions of FELA are protected under FELA Section 5 because such venue is a "liability created by this [FELA] chapter." The court concluded that neither Boyd nor FELA Section 5 precluded enforcement of the agreement in Terrebonne because the agreement required the employee to give up nothing that had been "created by [FELA]." Terrebonne, 477 F.3d at 280-83 (following earlier decision in Pure Oil Co. v. Suarez, 346 F.2d 890 (5th Cir.1965) (holding that FELA venue provisions do not apply in Jones Act cases), aff'd other grounds, 384 U.S. 202, 86 S. Ct. 1394, 16 L. Ed. 2d 474 (1966)). See also Terrebonne at 284 ("Under the arbitration agreement, Terrebonne does not forgo the substantive rights afforded by the Jones Act (and the general maritime law), he only submits to their resolution in an arbitral, rather than a judicial, forum.") (internal quotation marks omitted); Great Lakes Dredge & Dock Company, LLC v. Larrisquitu, 2007 WL 2330187 (S.D.Tex. Aug.15, 2007) (holding that Boyd does not preclude enforcement of forum selection clause in Jones Act case).
In addition, the court distinguished Boyd because it did not involve a federal statute that authorized and provided for enforcement of the agreement at issue. The agreement in Terrebonne was governed by the FAA and "thus the issues `must be addressed with a healthy regard for the federal policy favoring arbitration.'" Terrebonne, 477 F.3d at 283 (quoting Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (1991)) (omitted).
We conclude the Agreement requires Jimenez to give up nothing that was "created by [FELA]." FELA Section 5, therefore, does not apply to invalidate the *858 Agreement even under the reasoning of Boyd and Duncan We further question the applicability of such reasoning to this case, in which the issues must be considered with a healthy regard tor the federal policy favoring arbitration Accordingly, we hold the trial court misapplied FE LA Section 5, Boyd, and Duncan to deny Weeks Marine's motions to compel arbitration and for reconsideration, thereby abusing its discretion.
2. Is the Agreement invalid because it improperly diminishes a seaman's substantive rights?
Jimenez contended below, and argues here, that the Agreement is not enforceable because it does not meet "the stringent standard applied to seaman's agreements that diminish the seaman's substantive rights."[9] For this proposition, Jimenez cites Garrett v. Moore-McCormack Co., 317 U.S. 239, 246-47, 63 S. Ct. 246, 87 L. Ed. 239 (1942). Garrett involved a release of liability executed by an injured seaman in favor of his employer. The Supreme Court addressed whether, in the seaman's subsequent state court lawsuit under the Jones Act and general maritime law, the burden was on the seaman to invalidate the release (pursuant to the state's procedural rule regarding releases) or on the employer to sustain the release (pursuant to the general admiralty rule). Id. at 242-43, 63 S. Ct. 246. Rejecting application of the state rule, the court discussed the historic national policy in favor of safeguarding seamen's rights. In that discussion, the court stated: "[O]n every occasion the court expects to be satisfied, that the compensation for every material alteration is entirely adequate to the diminution of right or privilege on the part of the seaman." 317 U.S. at 246-47, 63 S. Ct. 246 (citation omitted).
Weeks Marine claims that Garrett is applicable only to release agreements, but the court's reasoning is not so limited and in fact appears applicable to all agreements between seamen and employers. Nonetheless, there are two factors that weigh against subjecting the Agreement in this case (or any seaman's arbitration agreement) to the scrutiny espoused in Garrett. First, there is a strong federal policy in favor of arbitration agreements, even in the maritime context (except in the employment contracts of seamen),[10] whereas there was no such policy favoring release agreements under consideration in Garrett. On that basis, the reasoning used is not fully applicable to the context at hand. Second, subjecting seamen's arbitration agreements to Garrett scrutiny runs afoul of the rule that FAA-governed arbitration agreements may be invalidated only on grounds that apply to any contract.[11]
Finally, even if we accept Jimenez's contention that Weeks Marine must prove, under Garrett, that the Agreement is fair *859 to Jimenez, the details of the exchange are in the record. Jimenez is incorrect in his conclusion that the exchange was "grossly unbalanced." Jimenez claims that "[a]n advance on money owed is by "no means adequate consideration in exchange for giving up [the right to a jury trial and appellate review], much less the `extraordinary benefits' owed for those sacrifices under Garrett." However, until the, claims are adjudicated in Jimenez's favor, the money is not "owed." Considering the strong federal policy favoring arbitration, the Agreement would not fall shy of the "stringent standard" espoused in Garrett, were such standard applicable.
The order denying arbitration cannot be sustained on the basis that the Agreement fails to withstand Garrett scrutiny, because (1) Garrett does not apply and (2) if Garrett did apply, the record does not support a conclusion that Jimenez received inadequate consideration for entering into the Agreement.
3. Is the Agreement substantively unconscionable under Texas law and thus unenforceable against Jimenez?
Jimenez argues that denial of Weeks Marine's motion to compel arbitration was proper under the FAA because the Agreement is unconscionable under Texas law. There are two types of unconscionability: procedural (fairness of the circumstances surrounding adoption of the arbitration provision) and substantive (fairness of the arbitration provision itself). See, e.g., In re Luna, 175 S.W.3d 315, 319 (Tex.App.-Houston [1st Dist.] 2004, orig. proceeding). Both procedural and substantive unconscionability may be considered by a court in determining whether an arbitration clause is valid and enforceable. In re Halliburton Co., 80 S.W.3d 566, 572 (Tex.2002) (orig.proceeding) ("courts may consider both procedural and substantive unconscionability of an arbitration clause in evaluating the validity of an arbitration provision").
The test for substantive unconscionability is whether, "given the parties' general commercial background and the commercial needs of the particular trade or case, the clause involved is so one-sided that it is unconscionable under the circumstances existing when the parties made the contract." In re FirstMerit Bank, N.A., 52 S.W.3d 749, 757 (Tex.2001) (orig.proceeding) (quoted in In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 678 (Tex. 2006) (orig.proceeding)). To show substantive unconscionability in the trial court, Jimenez presented his and his wife's affidavits stating, respectively, "I do not have the financial ability to pay for an arbitration," and "We do not have the financial ability to pay for an arbitration." Jimenez presented no evidence below of the potential cost of an arbitration under the terms of the Agreement. In this court, Jimenez cites a report on the internet as evidence that the average cost of an AAA arbitration in 2002 can be as much as $6,650 for a small consumer claim. Jimenez contends in his briefing, "For a larger personal injury claim, such as this one, the costs could be significantly higher."
Assuming, without deciding, that this evidence is competent to show the likely cost of arbitration for this dispute, Jimenez must still show the likelihood of incurring such costs. Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79, 92, 121 S. Ct. 513, 148 L. Ed. 2d 373 (2000) ("where, as here, a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs"); see also FirstMerit, 52 S.W.3d at 756-57. Under the Agreement, Weeks Marine is required to pay the filing *860 fee and any deposit for compensation of the arbitrator(s), with subsequent allocation of fees between the parties. An agreement that is silent as to cost is not per se unconscionable, FirstMerit, 52 S.W.3d at 756-57, and an agreement that provides for fee-splitting is not, by itself, unconscionable. Pony Express Courier Corp. v. Morris, 921 S.W.2d 817, 822 (Tex. App.-San Antonio 1996, no pet.). It follows that an agreement providing for "subsequent allocation" of cost is not necessarily unconscionable. Moreover, Weeks Marine averred in the trial court, and avers here, that it will bear the entire cost of the arbitration.
For the reasons stated above, we hold the order denying arbitration cannot be sustained on the basis that the Agreement is substantively unconscionable.
4. Is the Agreement procedurally unconscionable under Texas law and thus unenforceable against Jimenez?
One of Jimenez's defensive contentions is that the Agreement is procedurally unconscionable, because "it was procured under improper circumstances and by strong-arm means." Specifically, Jimenez asserts that (1) he did not understand the Agreement, (2) he would not have signed if he, had been told that he was giving up his right to a jury trial, (3) Weeks Marine's representative told him he would receive no benefits unless he signed the document (which he says she described as "paperwork"), and (4) Weeks Marine pushed the Agreement on Jimenez when he was still recuperating and under stress from his injury. Weeks Marine disputes these assertions but further argues that a claim of procedural unconscionability will not preclude arbitration, because procedural unconscionability is properly a question for the arbitrator, not the court. In this regard, Weeks Marine relies on Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 87 S. Ct. 1801, 18 L. Ed. 2d 1270 (1967) and Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S. Ct. 1204, 163 L. Ed. 2d 1038 (2006).
In Prima Paint, a party resisted arbitration on the basis that it had been fraudulently induced to sign the contract containing the arbitration provision. Settling a conflict among the circuit courts of appeal, the United States Supreme Court held that in addressing a motion to compel arbitration and any opposition thereto, "a federal court may consider only issues relating to the making and performance of the agreement to arbitrate." 388 U.S. at 404, 87 S. Ct. 1801.[12] In the more recent case, Buckeye Check Cashing, the Court declared that this rule also applies to FAA cases pending in state courts, as a matter of substantive federal arbitration law. 546 U.S. at 449, 126 S. Ct. 1204. See also FirstMerit, 52 S.W.3d at 756 ("defenses must specifically relate to the Arbitration Addendum itself, not the contract as a whole, if they are to defeat arbitration").
The parties take opposing positions on whether Jimenez's procedural unconscionability claim relates to the "contract as a whole" or to the "arbitration provision." Weeks Marine suggests that the Agreement is a "larger" contract, calling for the payment of advances to Jimenez, into *861 which was inserted an arbitration clause. This characterization is belied first by the title, of the Agreement, which is "Claim Arbitration Agreement." Plus, Weeks Marine ignores that its offer to pay advances on Jimenez's claims constitutes the consideration for Jimenez's agreeing to arbitrate those claims, which is the primary, if not exclusive, reason for the Agreement. Cf. In re H.E. Butt Grocery Company, 17 S.W.3d 360, 368 (Tex.App.-Houston [14th Dist.] 2000, orig. proceeding) (determining that where sole purpose of document was to give employee the option of electing comprehensive benefits and arbitration over basic benefits and the right to sue, defense to arbitration was properly construed as attack on arbitration provision). We conclude that Jimenez's procedural unconscionability attack is directed at the agreement to arbitrate.[13] Under Prima Paint and its progeny, such an attack presents a question for disposition by the trial court, rather than the arbitrator.
Our holding that the procedural unconscionability issue in this case is for the trial court to decide does not rest exclusively on our conclusion that the issue is directed at the agreement to arbitrate rather than at the "larger" agreement. In the cases establishing and following the "rule" that defenses aimed at the contract as a whole are to be determined by the arbitrator, not the court, the contract at issue contained a broad arbitration provision. In Prima Paint, for example, the provision at issue called for arbitration of "[a]ny controversy or claim arising out of or relating to this Agreement, or the breach thereof." 388 U.S. at 398, 87 S. Ct. 1801 (emphasis added).[14] Indeed, in establishing its seminal holding, the Court in Prima Paint stated, "In the present case no claim has been advanced by Prima Paint that F & C fraudulently induced it to enter into the agreement to arbitrate `(a)ny controversy or claim arising out of or relating to this Agreement, or the breach thereof.' This contractual language is easily broad enough to encompass Prima Paint's claim that [the agreement] itself [was] procured by fraud." 388 U.S. at 406, 87 S. Ct. 1801 (emphasis added). The scope of the arbitration provision encompassed the defenses raised to the agreement as a whole, so those defenses were held subject to arbitration. See also Buckeye Check Cashing, 546 U.S. at 446, 126 S. Ct. 1204 ("because respondents challenge the Agreement, but not specifically its arbitration provisions, *862 those provisions are enforceable") (emphasis added).
In this case, the arbitration clause provides:
[Weeks Marine is] prepared to make voluntary advances against settlement of any claim that could arise out of the personal injury/illness claim I have made including, but not limited to, claims for wages or other compensation due; claims for breach of any contract or covenant; tort claims; Jones Act claims, general maritime claims, claims for discrimination or harassment on bases which include but are not limited to race, sex, sexual orientation, religion, national original, age, marital status, disability or mental condition; claims for benefits and claims for violation of any federal, states [sic] or other governmental statute, ordinance, regulations or public policy, under the doctrine of unseaworthiness, Jones Act, or any other applicable law, provided [that Jimenez] agree[s] to arbitrate any such claim. . . .
Jimenez did not, by this provision, agree to arbitrate any claims that may arise as a result of entering into the Agreement; he agreed only to arbitrate claims arising out of the injury he suffered during his employment with Weeks Marine. Jimenez's defensive claimthat he was induced to sign the Agreement by unconscionable means on the part of Weeks Marinethus does not fall within the scope of the arbitration agreement between the parties. Consequently, under Prima Paint and its progeny, even if the procedural unconscionability claim were directed at the contract as a whole (as Weeks Marine argues), the issue is not one for the arbitrator because the arbitration provision does not cover that issue. Cf. Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S. Ct. 588, 154 L. Ed. 2d 491 (2002) (because arbitration is a matter of contract, party cannot be required to submit to arbitration any dispute which he has not agreed so to submit); 9 U.S.C.A. § 4 (1999) (where "the making of the agreement for arbitration . . . is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement") (emphasis added).
Finally, Jimenez suggests that in denying arbitration and reconsideration, the trial court implicitly found that Weeks Marine used improper means to procure the Agreement, which was thus procedurally unconscionable. Any such finding would necessarily have been based on the court's accepting the Jimenezes' affidavit testimony and disregarding the affidavit testimony of Teresa Olivo, Weeks Marine's representative.[15] When faced with conflicting affidavits, however, a trial court may not adjudicate defenses to enforceability of an arbitration agreement without an evidentiary hearing. Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 269 (Tex.1992) (orig.proceeding) ("if the material facts necessary to determine [a motion to compel arbitration] are controverted, by an opposing affidavit or otherwise admissible *863 evidence, the trial court must conduct an evidentiary hearing to determine the disputed material facts").[16] The parties confirmed at oral argument that the trial court did not conduct an evidentiary hearing on Weeks Marine's motion to compel arbitration or its motion for reconsideration.
The order denying arbitration cannot be sustained on the basis that the Agreement is procedurally unconscionable, although that issue is properly to be resolved by the court. If, as Jimenez contends, the trial court implicitly found that the Agreement is procedurally unconscionable, it was an abuse of discretion for such finding to be made without an evidentiary hearing.
CONCLUSION
The order denying arbitration cannot be sustained on any ground considered by the trial court. Accordingly, we conditionally grant Weeks Marine's petition insofar as it requests us to instruct the trial court to vacate the order. We are confident the trial court will vacate its October 31, 2006 order denying Weeks Marine's motion to compel arbitration and its May 3, 2007 order denying Weeks Marine's motion for reconsideration. The writ of mandamus will issue only if the trial court fails to comply.
The procedural unconscionability issue is not, as. Weeks Marine contends, for the arbitrator to decide. The issue is for the trial court to decide,[17] but the trial court has either not made a decision or made a decision on disputed affidavit testimony without the requisite evidentiary hearing. In either event, we are unable to direct entry of an order compelling arbitration while disputed issues of fact remain unresolved. Accordingly, we deny the petition insofar as Weeks Marine requests us to instruct the trial court to compel arbitration.
NOTES
[1] 9 U.S.C. § 1 et seq.
[2] But see In re D. Wilson. Constr. Co., 196 S.W.3d 774 (Tex.2006). In In re D. Wilson, the Texas Supreme Court concluded the court of appeals had wrongly dismissed, for want of jurisdiction, a party's TAA-based interlocutory appeal from the trial court's denial of the party's arbitration rights under an FAA-governed agreement. Id. at 778-80. Given this conclusion, one might postulate that such party is not entitled to mandamus relief because the interlocutory appeal is an adequate remedy. However, in In re D. Wilson itself, the Texas Supreme Court granted mandamus relief to the party whose rights had been wrongfully denied under the FAA-governed arbitration agreement. Id. at 780-81. Because the Court granted mandamus relief in that case and has not overruled Jack B. Anglin, we conclude mandamus review remains available for wrongful denial of arbitration rights under an agreement subject to the FAA.
[3] Tex. Civ. Prac. & Rem.Code § 171.098(a)(1).
[4] Weeks Marine does not dispute that Jimenez is a seaman for purposes of FAA Section 1. Thus, our analysis concerns only whether the Agreement constitutes a contract of employment.
[5] In this regard, Weeks Marine cites Green Tree Financial Corp.-Ala. v. Randolph, 531 U.S. 79, 92, 121 S. Ct. 513, 148 L. Ed. 2d 373 (2000) (party seeking to avoid arbitration bears burden of showing that prohibitive cost of arbitration renders agreement substantively unconscionable); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (1991) (party seeking to avoid arbitration agreement bears burden of proving that Congress intended to preclude waiver of judicial forum for the particular statutory claims at issue); Carter v. Countrywide Credit Industries, Inc., 362 F.3d 294, 297 (5th Cir. 2004) ("party seeking to invalidate an arbitration agreement bears the burden of establishing its invalidity"); and FirstMerit Bank, 52 S.W.3d at 756 (same).
[6] Further, even if the Agreement can be characterized as "employment related," as Jimenez argues, only "contracts of employment of seamen" are excluded from the FAA. 9 U.S.C.A. § 1 (1999) (emphasis added). See Terrebonne v. K-Sea Transportation Corp., 477 F.3d 271 (5th Cir.2007). In Terrebonne, the Fifth Circuit was asked to hold that a post-injury arbitration agreement was a contract of employment because part of the consideration for the employee's promise to arbitrate was the employer's payment of past-due maintenance and cure. The employee argued that because the maintenance and cure obligation is inseparable from a seaman's employment contract, the post-injury arbitration agreement at issue was therefore subsumed into his employment contract and excluded from enforcement under the FAA. Conceding that the maintenance and cure obligation is an intrinsic part of the employment relationship between, seaman and employer but noting that the agreement did not purport to change that obligation or any aspect of the worker's actual employment, the Fifth Circuit held "the agreement is not subsumed into [the employee]'s employment contract, and does not fall under section one's exception to the FAA's coverage." 477 F.3d at 280 (omitted).
[7] In opposition to Weeks Marine's motion to compel arbitration and pending petition for writ of mandamus, Jimenez cites Brown v. Nabors Offshore Corp., 339 F.3d 391 (5th Cir. 2003) and Buckley v. Nabors Drilling USA, Inc., 190 F. Supp. 2d 958 (S.D.Tex.2002). These decisions do not inform our inquiry whether the Agreement is contained or subsumed in a contract of employment. In Brown, the employer conceded the arbitration agreement was contained in the seaman's employment contract. The issue presented was whether the employee/seaman must prove that he was actually "involved in the transportation of goods in commerce" for the FAA § 1 exclusion to apply. See 9 U.S.C. § 1 (exempting from the FAA "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce"). The Fifth Circuit, upholding the trial court's denial, of the employer's motion to compel arbitration, found that Congress intended to exclude seamen's contracts of employment from the arbitration act even where a particular seaman was not actually "engaged in . . . commerce." Brown, 339 F.3d at 394 (citing Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 121 S. Ct. 1302, 149 L. Ed. 2d 234 (2001)). Buckley is similarly distinguishable and unhelpful here. Buckley, 190 F.Supp.2d at 961-62 (concluding arbitration agreement contained in contract that employer conceded was "of employment of a seaman" was excluded from FAA coverage without employee/seaman's having to demonstrate actual involvement in interstate commerce).
[8] Cox v. Roth, 348 U.S. 207, 208, 75 S. Ct. 242, 99 L. Ed. 260 (1955) ("Congress, in passing the Jones Act, did not specifically enumerate the rights of seamen, but merely extended to them the same rights granted to railway employees by [FELA]"); 46 U.S.C.A. [Revised] § 30104(a) (Supp.2007).
[9] But see Terrebonne, 477 F.3d at 284 (holding that by agreeing to submit Jones Act claim to arbitral rather than judicial forum, seaman does not forgo substantive rights); Larrisquitu, 2007 WL 2330187, at *20 ("Terrebonne demonstrates that the protected status of domestic seamen does not exempt seamen from being bound by contracts that limit the tribunals for resolving claims, including claims under the Jones Act.").
[10] Terrebonne, 477 F.3d at 285.
[11] 9 U.S.C.A. § 2 (1999) (providing that written arbitration provision in maritime or other transaction involving commerce "shall be valid, irrevocable, and enforceable, save upon any such grounds as exist at law or in equity for the revocation of any contract"). See also Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S. Ct. 1652, 134 L. Ed. 2d 902 (1996) ("Courts may not . . . invalidate arbitration agreements under state laws applicable only to arbitration provisions.").
[12] The Court's holding was based on Section 4 of the FAA, which states, in pertinent part: "[On request to compel arbitration, t]he court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration . . . is not in issue, the court shall make an order directing `the parties to proceed to arbitration in accordance with the terms of the agreement. . . . If the making of the arbitration agreement . . . be in issue, the court shall proceed summarily to the trial thereof." 9 U.S.C.A. § 4 (1999); see Prima Paint, 388 U.S. at n. 11.
[13] Weeks Marine cites In re Halliburton Co., 80 S.W.3d 566 (Tex.2002) (orig.proceeding) for the proposition that only an agreement providing for "one-sided arbitration" can constitute a "stand-alone arbitration agreement." We find nothing in the In re Halliburton decision to support (or decipher) the stated proposition or to inform this court's consideration of whether Jimenez's procedural unconscionability attack pertains to the agreement to arbitrate or the agreement "as a whole." Above all, we resist the temptation to apply a particular label to our conclusion.
[14] See also, e.g., Buckeye Check Cashing, 546 U.S, at 442, 126 S. Ct. 1204 (addressing contract requiring arbitration of "[a]ny claim, dispute, or controversy . . . arising from or relating to this Agreement . . . or the validity, enforceability, or scope of this Arbitration Provision or the entire Agreement"); First-Merit, 52 S.W.3d at 752 (addressing contract providing for arbitration of "all disputes, claims, or other matters in question arising out of or relating to this Loan, its interpretation, validity, performance or the breach thereon; American Medical Technologies, Inc. v. Miller, 149 S.W.3d 265, 268 (Tex.App.-Houston [14th Dist.] 2004, orig. proceeding) ("any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration"); Dewey v. Wegner, 138 S.W.3d 591, 594 (Tex.App.-Houston [14th Dist.] 2004, no pet.) ("[a]ny controversy or claim arising out of or relating to this [agreement] or any claim or dispute between the parties to this [agreement] . . . shall be settled by arbitration").
[15] Jimenez testified that "[Ms. Olivo] very clearly told me that Weeks would not pay for anything unless I signed the paperwork and `got all the paperwork in.' . . . I was very worried and concerned that I would lose not only my income but my medical benefits. That is the only reason I signed the paperwork Ms. Olivo sent me. I did not understand that I would be giving up a right to a jury trial, and I would not have signed the paperwork if I had been told this." Olivo testified, "At no time did anyone represent that [Jimenez's] maintenance and cure was contingent upon his agreement to arbitrate. On the contrary, Mr. Jimenez understood that by agreeing to arbitrate, he would receive additional payments as an advance against a possible award. His only concern was how soon it would be before he received the additional payments."
[16] See also In re Washington Mutual Finance, L.P., 173 S.W.3d 189, 192-93 (Tex.App.-Corpus Christi 2005, orig. proceeding) (issuing writ of mandamus where trial court sustained plaintiff's defense to arbitration without providing both sides a fair opportunity to present evidence); In re Jebbia, 26 S.W.3d 753, 757 (Tex.App.-Houston [14th Dist.] 2000, orig. proceeding) (holding that evidentiary hearing must be held on material issue of fact regarding whether enforceable agreement to arbitrate exists). [CHECK FONT SIZE]
[17] This court is forbidden, of course, to decide disputed areas of fact. Brady v. Fourteenth Court of Appeals, 795 S.W.2d 712, 714 (Tex.1990). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1307312/ | 574 S.E.2d 607 (2002)
258 Ga. App. 498
CROWTHER
v.
ESTATE OF CROWTHER.
No. A02A2291.
Court of Appeals of Georgia.
November 20, 2002.
*608 Gannam & Gnann, J. Hamrick Gnann, Jr., Savannah, for appellant.
Brannen, Searcy & Smith, Kimberly C. Harris, Macon, Barr, Warner, Lloyd & Henifin, Karen D. Barr, Savannah, Robert R. Cook, for appellee.
PHIPPS, Judge.
Christina Crowther (Crowther) petitioned the probate court for an award of year's support for herself and for her minor child, Michael Joseph Crowther, from the estate of Joseph Henry Crowther (decedent). Carrie Powell, administrator of decedent's estate, filed a caveat to the year's support application. The probate court awarded summary judgment to Powell, and Crowther appeals. The issues presented are whether the trial court abused its discretion in refusing to allow Crowther to withdraw her admissions to certain questions propounded by Powell during discovery and whether requirements set forth in Georgia's paternity statutes apply to a genetic test of Michael Joseph Crowther requested by Powell. Resolving these issues in Powell's favor, we affirm the grant of summary judgment to her.
Crowther married the decedent on or about June 17, 2000. He died the following September 10. Crowther later filed a petition for year's support, naming herself as decedent's surviving spouse and Michael Joseph Crowther as his minor child. The petition showed that the child was born on November 8, 2000, approximately two months after decedent's death.
Powell, as administrator of decedent's estate, filed a caveat to the year's support petition. The caveat alleged that Crowther's minor child is not the decedent's biological child. It further alleged that Crowther induced the decedent to marry her by falsely claiming that she was pregnant with his child, that the marriage was not ratified by subsequent acts, and that as a result Crowther is not the decedent's lawful widow. Powell, as caveator, filed a motion for genetic testing of the child. On May 9, 2001, she served various discovery requests, including a request for admissions, on Crowther through service on Crowther's attorney Cullum. Among other things, Powell requested Crowther to admit that she was married to Basilio Rufino Maradiaga Ordonez when she married decedent and that she remained married to Ordonez.
Crowther failed to attend a scheduled deposition on June 6 and did not respond to Powell's discovery requests by the required date of June 11. Powell, therefore, filed a motion for sanctions, including dismissal of the petition for year's support. Cullum responded to the motion for sanctions and then moved to withdraw from his representation of Crowther. Attached to his motion to withdraw was a letter Cullum had sent to Crowther on July 2. In the letter, Cullum stated that he had explained to Crowther that the discovery requests, including the request for admissions, had to be answered by June 11, and that he had discussed the motion for genetic testing with her. The court allowed counsel to withdraw and granted the motion for genetic testing.
On July 31, Crowther through new counsel filed a motion to withdraw her judicial admissions, stating that she had failed to respond to the request for admissions because she received the request for admissions from *609 counsel approximately two weeks after the service date, and that she did not understand either the English language or the American judicial process. Crowther also filed an untimely answer to Powell's request for admissions. Although she denied that she was then married to Ordonez, she admitted that she had been married to him when she married decedent and that she had not divorced Ordonez.
On September 4, Powell moved for summary judgment, stating as undisputed material facts (1) that Michael Joseph Crowther was not the minor child of the decedent (as shown by the results of the genetic testing), (2) that Crowther was married to Ordonez when she married decedent (as shown by Crowther's response to Powell's request for admissions), and (3) that Crowther never divorced Ordonez (also as shown by Crowther's response to Powell's request for admissions).
On September 18, Crowther filed an amendment to her answers to Powell's request for admissions, denying that she had ever been married to Ordonez and stating that any admission to the contrary had been in error. Crowther, however, failed to file a motion to amend her earlier, contradictory admission. In support of her claim that she was never married to Ordonez, Crowther submitted a 1996 passport application in which she had identified herself as single. Crowther also filed a response to Powell's motion for summary judgment, supported by an affidavit in which she testified that she had never been married to Ordonez.
In granting Powell's motion for summary judgment, the court ruled that because the results of genetic testing conclusively show that the minor child is not the biological child of the decedent, and because the evidence further shows that the child was not conceived or born within the marriage, there is no right to year's support on behalf of the minor child. The court recognized that a valid marriage is essential to Crowther's right to claim year's support as decedent's surviving spouse, and that where a caveat is filed on the ground that the marriage is invalid or void, the burden is on the petitioning spouse to prove that she is the legal spouse of the decedent. The court ruled that Crowther was married to Ordonez at the time she married the decedent and refused to allow Crowther to withdraw her judicial admission of this fact. Accordingly, summary judgment was granted to Powell as to Crowther's claim for year's support.
1. Crowther charges the trial court with error in refusing to allow her to withdraw her admissions concerning her marriage to Ordonez.
Under OCGA § 9-11-36(b), as interpreted in Cielock v. Munn[1] and Whitemarsh Contractors v. Wells,[2]
A court may grant a motion to withdraw (1) when the presentation of the merits will be subserved thereby and (2) the party obtaining the admission fails to satisfy the court that the withdrawal will prejudice maintaining his action or defense on the merits. The burden as to the first prong is on the party moving to withdraw and the burden as to the second prong is on the respondent. The first prong of the test is not perfunctorily satisfied. The burden on the movant is to show the presentation of the merits will be subserved thereby, and the desire to have a trial, standing alone, is not sufficient to satisfy the test. The first inquiry is who will have the burden of proof at trial on the subject matter of the request for admission. If the burden of proof on subject matter of the request will be on the movant, the movant is required to show that the proffered denial of the request can be proved by admissible evidence having a modicum of credibility, and the denial is not offered solely for purposes of delay.[3]
As recognized by the trial court, at trial the burden would be on Crowther to show that she was the legal spouse of the *610 decedent.[4] To withdraw her admissions, she was therefore required to show that the validity of her marriage to the decedent could be proved by admissible evidence having a modicum of credibility. The trial court impliedly ruled that the probative value of the evidence submitted by Crowther in support of her claim that she had not married Ordonez was such that Crowther had not made the requisite showing. Under the totality of the evidence of record, we are unable to find that in making this determination the trial court abused its discretion.[5]
"[U]nlike an `evidentiary admission,' which may be contradicted, facts admitted via requests for admission are `judicial admissions,' which are conclusive unless withdrawal is permitted by the trial court."[6] Because the trial court did not permit Crowther to withdraw her admission that she was married to Ordonez when she married the decedent, Powell was entitled to summary judgment on Crowther's year's support claim.[7]
2. Crowther contends that the probate court erred in relying on the genetic test report in support of its ruling that the minor child is not the biological child of the decedent. We disagree.
Among other things, Crowther argues that under OCGA § 19-7-43 Powell does not have standing to bring a petition to establish paternity, and that it does not appear that the genetic test was conducted in accordance with requirements set forth in OCGA § 19-7-45. The Code sections on which Crowther relies are part of what has been referred to as Georgia's paternity statutes.[8] They were enacted to address the problem of fathers who do not support their illegitimate children.[9] The superior and state courts have concurrent jurisdiction in all proceedings under the paternity statutes.[10] These statutes are not applicable to probate court proceedings such as this, involving estate descent and distribution issues.[11]
Judgment affirmed.
ANDREWS, P.J., and MIKELL, J., concur.
NOTES
[1] 244 Ga. 810, 262 S.E.2d 114 (1979) (Hill, J., concurring specially).
[2] 249 Ga. 194, 288 S.E.2d 198 (1982).
[3] Intersouth Properties v. Contractor Exchange, 199 Ga.App. 726, 727-728(1), 405 S.E.2d 764 (1991).
[4] Wilson v. Allen, 108 Ga. 275, 277(1), 33 S.E. 975 (1899).
[5] See generally Rowland v. Tsay, 213 Ga.App. 679(1), 445 S.E.2d 822 (1994); compare Bailey v. Chase &c. Leasing Co., 211 Ga.App. 60, 61(1), 438 S.E.2d 172 (1993).
[6] Batchelor v. State Farm &c. Ins. Co., 240 Ga. App. 366, 367, 526 S.E.2d 68 (1999).
[7] See Evans v. Southern Gen. Ins. Co., 204 Ga. App. 430, 419 S.E.2d 526 (1992).
[8] Palmer v. Bertrand, 273 Ga. 475, 541 S.E.2d 360 (2001); Rodriguez v. Nunez, 252 Ga.App. 56, 60(4), 555 S.E.2d 514 (2001).
[9] Palmer, supra.
[10] OCGA § 19-7-40(a).
[11] See Rodriguez, supra. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1687105/ | 682 So. 2d 85 (1996)
John Earl BUSH, Appellant,
v.
STATE of Florida, Appellee.
No. 89118.
Supreme Court of Florida.
October 16, 1996.
*86 Stephen M. Kissinger, Chief Assistant CCR, Office of the Capital Collateral Representative, Tallahassee, for Appellant.
Robert A. Butterworth, Attorney General; Richard B. Martell, Chief, Capital Appeals, Tallahassee; and Celia A. Terenzio, Assistant Attorney General, West Palm Beach, for Appellee.
PER CURIAM.
John Earl Bush appeals an order entered by the trial court below pursuant to Florida Rule of Criminal Procedure 3.850. He also files an emergency application for extraordinary relief, motion for stay of execution, petition for writ of mandamus, and petition for prohibition. We have jurisdiction. Art. V, § 3(b)(1), (7), (8), Fla. Const.
Bush was charged with the 1982 first-degree murder, armed robbery, and kidnapping of Frances Slater. When Bush committed the crimes, he was accompanied by J.B. Parker, Alphonso Cave, and Terry Wayne Johnson. The four of them drove in Bush's car to a convenience store in Stuart, Florida, where they robbed the store and abducted the sales clerk. After she was taken a distance of thirteen miles, the clerk was ordered out of the car. Bush then stabbed her, and, according to Bush, Parker shot her with Bush's gun. The cause of death was the gunshot wound. Bush disposed of the gun the next day.
Bush was convicted of all charges. The sentencing jury recommended the death penalty. The trial court found three aggravating circumstances[1] and no mitigating circumstances and imposed the sentence of death. Bush's conviction and sentence of death were affirmed. Bush v. State, 461 So. 2d 936 (Fla. 1984), cert. denied, 475 U.S. 1031, 106 S. Ct. 1237, 89 L. Ed. 2d 345 (1986).
A warrant for Bush's execution was signed by the Governor in March of 1986, with execution scheduled for April 22, 1986. This Court granted a stay of execution to allow Bush to file a rule 3.850 motion for postconviction relief. The trial court denied Bush's postconviction motion, and this Court affirmed the trial court's denial and also denied *87 Bush's petition for writ of habeas corpus. Bush v. Wainwright, 505 So. 2d 409 (Fla.), cert. denied, 484 U.S. 873, 108 S. Ct. 209, 98 L. Ed. 2d 160 (1987).
Bush's second death warrant was signed in January of 1988, with execution scheduled for February 3, 1988. Bush filed a petition for writ of habeas corpus with the United States District Court for the Northern District of Florida, and the federal district court granted a stay of execution. The federal district court subsequently denied Bush's petition and issued a certificate of probable cause to appeal. The United States Court of Appeals for the Eleventh Circuit held Bush's federal proceedings in abeyance to allow Bush to pursue state habeas proceedings in this Court. We denied Bush's petition for habeas relief. Bush v. Dugger, 579 So. 2d 725 (Fla. 1991). The Eleventh Circuit Court of Appeals then heard and affirmed the federal district court's denial of Bush's petition for federal habeas relief. Bush v. Singletary, 988 F.2d 1082 (11th Cir.1993), cert. denied, 510 U.S. 1065, 114 S. Ct. 705, 126 L. Ed. 2d 704 (1994).
The Governor signed Bush's third death warrant on September 16, 1996, and execution is scheduled for Thursday, October 17, 1996, at 7 a.m. Bush filed a petition for writ of habeas corpus and emergency application for extraordinary relief and stay of execution with the Fourth District Court of Appeal, which were summarily denied. Bush v. Singletary, No. 96-03199 (Fla. 4th DCA Sept. 30, 1996). Bush then filed a petition for all writs jurisdiction and an emergency application for extraordinary relief, stay of execution, petition for writ of mandamus and petition for writ of prohibition with this Court, which were summarily denied on October 2, 1996. Bush v. State, 682 So. 2d 1099 (Fla. 1996).
On October 11, 1996, Bush filed a rule 3.850 motion for postconviction relief with the trial court. The trial court held a hearing on October 14, 1996, and denied Bush's motion.
In this appeal, Bush points out that Parker and Cave were also sentenced to death for the murder while Johnson received a life sentence. However, Cave's sentence has been set aside, and he is scheduled for resentencing proceedings on November 15, 1996. Bush argues that should Cave receive a life sentence when there is some evidence that Cave admitted that he rather than Parker shot the victim, Bush's sentence would become disproportional. See Scott v. Dugger, 604 So. 2d 465, 469 (Fla.1992) ("[I]n a death case involving equally culpable defendants, the death sentence of one codefendant is subject to collateral review under rule 3.850 when another codefendant subsequently receives a life sentence.").
We reject Bush's contention. At the outset, we know of no legal basis for staying Bush's third death warrant pending a subsequent penalty hearing for a codefendant. More importantly, however, is the fact that Bush played a predominant role in this crime. The four assailants drove in Bush's car, and Bush admitted that they intended to rob the store. While Bush's stab wound was not fatal, he nevertheless inflicted a two-inch wound in the victim's stomach. Bush himself said it was Parker, not Cave, who administered the fatal shot. Moreover, Bush had committed a prior violent felony at the time of the murder, whereas Cave had not done so. See Cave v. State, 476 So. 2d 180 (Fla. 1985), cert. denied, 476 U.S. 1178, 106 S. Ct. 2907, 90 L. Ed. 2d 993 (1986). Therefore, even if Cave were to receive a life sentence, it could not be said that Bush's death sentence would be disproportional.
Bush also argues that his death sentence must be reversed because it was based on unconstitutionally obtained prior convictions for robbery and sexual battery, which were relied upon to establish the prior violent felony aggravator. See Johnson v. Mississippi, 486 U.S. 578, 108 S. Ct. 1981, 100 L. Ed. 2d 575 (1988). He contends that because both Bush and a codefendant were represented by the same attorney in his robbery and sexual battery trial, a conflict of interest existed. He seeks to point out how he was prejudiced by the dual representation which continued to exist during his appeal.[2]
*88 After the current death warrant was signed, Bush filed a petition for writ of habeas corpus in the Fourth District Court of Appeal seeking to set aside his prior robbery and sexual battery convictions on the grounds of conflict of interest. That court denied the petition without opinion. Thereafter, Bush filed petitions in this Court seeking to set aside the prior convictions of robbery and sexual battery. Bush's petitions were subsequently denied by order of this Court. We decline to revisit this issue. This Court has no jurisdiction to set aside the robbery and sexual battery convictions that were affirmed by the Fourth District Court of Appeal.
In addition, Bush argues that he is entitled to relief because his sentencing jury was instructed with the then-standard jury instruction on the cold, calculated, and premeditated aggravating factor which this Court later held to be unconstitutionally vague in Jackson v. State, 648 So. 2d 85 (Fla. 1994). In Jackson, we rejected a challenge to the aggravating factor itself but reasoned that the jury should receive a more expansive instruction in order to give content to this aggravating factor. It is clear, however, that this issue was not preserved in Bush's trial and not raised on direct appeal. Bush did file a pretrial motion to declare the aggravating factor of cold, calculated, and premeditated unconstitutionally vague. At trial Bush only argued that the standard jury instruction should not be given because the facts did not support the finding that the murder was cold, calculated, and premeditated. He never contended that the wording of the instruction was unconstitutionally vague and did not submit an alternate instruction. On appeal, he only argued that "[t]he aggravating circumstances in the Florida capital sentencing statute have been applied in a vague and inconsistent manner" and that the facts did not support a finding of this aggravating circumstance in his case. Therefore, his current argument is procedurally barred. As this Court explained in Crump v. State, 654 So. 2d 545, 548 (Fla.1995):
Although the trial court gave the jury in 1989 the CCP instruction that has since been found unconstitutionally vague, see Jackson v. State, 648 So. 2d 85 (Fla.1994), this claim is procedurally barred. Claims that the CCP instruction is unconstitutionally vague are procedurally barred unless a specific objection is made at trial and pursued on appeal. The objection at trial must attack the instruction itself, either by submitting a limiting instruction or by making an objection to the instruction as worded. See Walls v. State, 641 So. 2d 381, 387 (Fla.1994), cert. denied, ___ U.S. ___, 115 S. Ct. 943, 130 L. Ed. 2d 887 (1995).
Crump's objection at his 1989 trial to the CCP issue concerned the constitutionality of this aggravating factor and whether CCP applied to Crump's case. Although Crump argued on direct appeal that the instruction was unconstitutionally vague, the issue is procedurally barred because Crump did not submit a limiting instruction or object to the instruction as worded at trial.
See also Archer v. State, 673 So. 2d 17, 19 (Fla.1996) ("Claims that the instruction on the cold, calculated, and premeditated aggravator is unconstitutionally vague are procedurally barred unless the defendant both makes a specific objection or proposes an alternative instruction at trial and raises the issue on appeal."), cert. denied, ___ U.S. ___, 117 S. Ct. 197, 136 L. Ed. 2d 134 (1996). In any event, even if there were no procedural bar, the trial record demonstrates that the failure to give a more comprehensive instruction on the cold, calculated, and premeditated aggravator would have been harmless error. See Larzelere v. State, 676 So. 2d 394 (Fla. 1996).
In his last argument, Bush contends that the Martin County Sheriff's Office and the Martin County State Attorney's Office have failed to fully respond to his public records request. However, at an earlier hearing, the trial judge had ruled that these offices had made proper disclosure and he reaffirmed that ruling at the hearing on the motion for postconviction relief. Bush has failed to show that such rulings were in error.
*89 We affirm the denial of Bush's motion for postconviction relief and deny his emergency application for extraordinary relief, petition for writ of mandamus, and petition for prohibition. By separate order, we have stayed Bush's execution to and including 7 a.m., Monday, October 21, 1996.
It is so ordered.
KOGAN, C.J., and OVERTON, SHAW, GRIMES, HARDING and WELLS, JJ., concur.
ANSTEAD, J., concurs specially with an opinion.
NO MOTION FOR REHEARING WILL BE ALLOWED.
ANSTEAD, Justice, specially concurring.
I write separately only to comment on the claim made by the appellant under Jackson v. State, 648 So. 2d 85 (Fla.1994). As the majority notes, we have imposed some stringent requirements for preserving a Jackson claim, including the requirement of a specific objection at trial to the instruction on the cold, calculated and premeditated aggravator, and the subsequent preservation of that claim on appeal. See Crump v. State, 654 So. 2d 545, 548 (Fla.1995). Appellant did not raise the issue at trial or on appeal. Rather, appellant's claim was raised and rejected in a written pretrial motion:
The wording of subsection (i) [the cold, calculated and premeditated aggravator] is so vague, ambiguous and indefinite as to deprive the Defendant of his rights under the Fifth, Sixth and Fourteenth Amendments to the United States Constitution, and Article I, Sections 9 and 16, of the Florida Constitution. There are no definitions for the terms of the Sections. Neither are there any Florida cases which define what the Section means. Aggravating circumstances must be established beyond a reasonable doubt before they may be considered by the jury in arriving at a decision.
While this motion and the subsequent argument thereon arguably present the same issue addressed in Jackson, it is apparent that the appellant has failed to clear the preservation and procedural hurdles established in Crump and our other decisions applying Jackson. In addition, the appellant did not specifically raise the denial of the pretrial motion discussed above in his subsequent appeal. Hence, appellant has not preserved this issue in accordance with this Court's decisions.
NOTES
[1] The aggravating circumstances were: (1) previous conviction of a felony involving the use of threat of violence to the person; (2) murder committed while engaged in robbery and kidnapping; and (3) murder committed in a cold, calculated, and premeditated manner without any pretense of moral or legal justification.
[2] Bush was convicted of robbery and sexual battery in 1974. His convictions and sentences were affirmed by the Fourth District Court of Appeal the following year. Bush v. State, 320 So. 2d 504 (Fla. 4th DCA 1975), appeal dismissed, 330 So. 2d 725 (Fla.1976). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/4561176/ | United States Court of Appeals
For the Eighth Circuit
___________________________
No. 19-2738
___________________________
Francisco Kimeu
lllllllllllllllllllllPetitioner
v.
William P. Barr
lllllllllllllllllllllRespondent
____________
Petition for Review of an Order of the
Board of Immigration Appeals
____________
Submitted: August 4, 2020
Filed: August 28, 2020
[Unpublished]
____________
Before KELLY, ERICKSON, and STRAS, Circuit Judges.
____________
PER CURIAM.
Francisco Kimeu, a citizen of Kenya, petitions for review of an order of the
Board of Immigration Appeals (BIA), which upheld an immigration judge’s (IJ’s)
denial of his application for cancellation of removal and denied his request to remand
to the IJ based on ineffective assistance of counsel. Kimeu challenges only the denial
of his request to remand, which we review for abuse of discretion, but because Kimeu
sought discretionary relief in the form of cancellation of removal, our review is
limited to constitutional claims and questions of law, which we review de novo. See
Sharif v. Barr, 965 F.3d 612, 618-20 (8th Cir. 2020); Zeah v. Holder, 744 F.3d 577,
580-81 (8th Cir. 2014).
We conclude that Kimeu, who asserts he did not receive a fair hearing before
the IJ, cannot pursue a constitutional claim for ineffective assistance of counsel
because he has no protected property or liberty interest in the discretionary relief of
cancellation of removal. See Etchu-Njang v. Gonzales, 403 F.3d 577, 585 (8th Cir.
2005) (concluding that even if counsel was ineffective, there was no due process
violation because applicant has no constitutionally protected liberty interest in
cancellation-of-removal relief); see also Obleshchenko v. Ashcroft, 392 F.3d 970, 971
(8th Cir. 2004) (concluding that because applicants had no protected liberty or
property interest in the discretionary statutory relief they sought, they had no right to
effective assistance of counsel).
To the extent Kimeu asked the BIA to exercise its discretionary authority to
remand the proceedings based on ineffective assistance of counsel, we conclude that
the BIA did not abuse its discretion in denying remand. See Singh v. Lynch, 803
F.3d 988, 993-94 (8th Cir. 2015) (concluding that although there is no constitutional
right to effective assistance of counsel in a removal proceeding, BIA may exercise
discretion to remand based on counsel’s ineffectiveness, and this court may review
that discretionary decision; to prevail, applicant was required to show (1) counsel’s
performance was so ineffective it rendered proceeding fundamentally unfair, and (2)
he was prejudiced by counsel’s performance). Although Kimeu urges this court to
adopt a per se presumption of prejudice, this court has not recognized such a
presumption in immigration proceedings. See Paz v. Ashcroft, 113 F. App’x 736, 736
(8th Cir. 2004) (unpublished per curiam); cf. Caballero-Martinez, 920 F.3d 543, 548
(8th Cir. 2019) (rejecting petitioner’s argument that In re L-O-G-, 21 I. & N. Dec. 413
(BIA 1996), established a lower standard requiring remand when presented with
-2-
“potentially worthwhile new evidence”; BIA applied correct legal standard requiring
applicant to demonstrate new evidence “would likely change” the result).
Even assuming counsel’s performance was deficient, we conclude the BIA
acted within its discretion by applying the correct standards and rationally concluding
that Kimeu did not demonstrate the requisite prejudice. See Ortiz-Puentes v. Holder,
662 F.3d 481, 485 n.2 (8th Cir. 2011) (applicant must show reasonable probability
that, but for counsel’s alleged errors, the result would have been different);
Obleshchenko, 392 F.3d at 972 (applicant must show counsel’s performance was so
inadequate it “may well have resulted in a deportation that would not otherwise have
occurred,” akin to a “reasonable probability” standard) (internal quotations and
citations omitted). Notably, the IJ had an independent basis—that Kimeu submitted
a fraudulent divorce decree to procure an immigration benefit—to conclude that
Kimeu lacked good moral character and to exercise his discretion to deny
cancellation-of-removal relief. Kimeu did not challenge that ruling before the BIA
and cannot belatedly do so here. See Chak Yiu Lui v. Holder, 600 F.3d 980, 984 (8th
Cir. 2010) (“This court is either without jurisdiction to review, or simply precluded
from reviewing, an issue not raised before the BIA.”).
Accordingly, we deny the petition for review.
______________________________
-3- | 01-03-2023 | 08-28-2020 |
https://www.courtlistener.com/api/rest/v3/opinions/1155974/ | 670 S.E.2d 828 (2008)
WILLIAMS
v.
The STATE.
No. A08A2425.
Court of Appeals of Georgia.
November 26, 2008.
*829 Patricia F. Angeli, for appellant.
Jewel C. Scott, District Attorney, for appellee.
*830 ELLINGTON, Judge.
A Clayton County jury found Christopher Eugene Williams guilty of burglary, OCGA § 16-7-1(a); kidnapping, OCGA § 16-5-40(a); armed robbery, OCGA § 16-8-41(a); rape, OCGA § 16-6-1; possession of a weapon during the commission of a crime, OCGA § 16-11-106(b)(1); two counts of aggravated assault, OCGA § 16-5-21(a); and false imprisonment, OCGA § 16-5-41(a). Williams appeals from the judgment of conviction, raising the general grounds and contending the court erred in failing to merge several of his convictions. Finding no error, we affirm.
1. Williams challenges the sufficiency of the evidence in two respects. First, he contends that the evidence adduced is insufficient to convict him of any of the crimes charged because the identification testimony of his accomplice, Damon Heyward, was not sufficiently corroborated. Second, he contends the evidence adduced on the armed robbery charge was insufficient to support his convictions beyond a reasonable doubt.
When a criminal defendant challenges the sufficiency of the evidence supporting his or her conviction, "the relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." (Citation omitted; emphasis in original). Jackson v. Virginia, 443 U.S. 307, 318-319(III)(B), 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979). The jury, not this Court, resolves conflicts in the testimony, weighs the evidence, and draws reasonable inferences from basic facts to ultimate facts. Id. "As long as there is some competent evidence, even though contradicted, to support each fact necessary to make out the State's case, the jury's verdict will be upheld." (Citation and punctuation omitted.) Miller v. State, 273 Ga. 831, 832, 546 S.E.2d 524 (2001). Viewed in this light, the record reveals the following facts.
During the early afternoon of November 28, 2006, Damon Heyward and the defendant, Christopher Williams, broke into a neighbor's home through the kitchen window. The home, located on Channing Street in Jonesboro, belonged to Somphone Vongvilay, who was away at work when the burglary occurred. As the defendants were breaking in, the Vongvilays' 18-year-old female house guest was descending the stairs from her bedroom and walking toward the kitchen with her puppy. The victim testified that she encountered Heyward and Williams, who appeared to be "high school guys" at the bottom of the steps. She froze in fear when she saw them. Williams, who was wearing a blue bandana as a face mask, told the victim not to move, and then he hit her on the head with a handgun. After he struck the victim, Williams grabbed her and forced her upstairs and into a bedroom on the right side of the second floor hallway.
Once in that room, Williams held the victim at gunpoint and demanded money and guns while Heyward stole things from the room and stuffed them in his backpack. Heyward, who testified against Williams at trial, admitted breaking into the house with Williams and taking items from the house, including a rifle, cell phones, electronics, liquor, jewelry, and a suitcase that he used to carry away many of the stolen items. He also testified that Williams, who had the handgun, moved the victim from room to room in the house.
After taking items from the first room, Williams forced the victim into the hallway, where he began touching her and fondling her. The victim asked Williams to stop, but he continued and threatened to kill her. At this point, Heyward threatened to kill the victim's puppy, so the victim grabbed the dog and held on to it. Williams forced the victim into the room across the hall, the Vongvilay's prayer room, which contained many small Buddha figurines. Heyward stole the figurines from the prayer room and searched the house for more valuables.
In the prayer room, Williams held the gun to the victim's head, threatened to kill her, and then forcibly removed her pajamas. He forced the victim to bend forward, and he had intercourse with her against her will from behind. Heyward testified that he saw Williams rape the victim from behind. During the rape, Williams' bandana fell off, and the victim saw his face. When Williams was *831 finished, he wiped the victim's vaginal area off with a towel, and forced her into a closet with her puppy. The victim reached for her clothes, but was only able to grab her pajama bottoms. Williams threatened to kill the victim if she did not stay in the closet. Williams tied the closet's bi-fold doors closed with a cord, and then he and Heyward finished gathering their stolen goods, including the victim's pajama shirt, and left the house through the back door. After about 25 minutes, the victim opened the closet and ran to a neighbor's house for help.
As the victim ran into Channing Street, she saw a neighbor driving away from her home. The neighbor lived just around the corner on Crown Street, an intersecting dead-end street. She testified that just before she left her home at around 2 p.m. that day, she saw two boys come from the back of her house and cross the driveway next door. One was dragging what she thought was a trash can and the other was carrying a rifle. The two walked toward the dead-end section of Crown Court. Heyward, who also lived in the neighborhood, testified that he saw the neighbor look at him as he was walking toward his home on Crown Street. Heyward left the stolen goods in his room at his mother's house, and then he and Williams went out.
Heyward's mother, Cherice Pickney, testified that when she got home from work that evening she saw camera crews and police at the Vongvilay home. She also discovered stolen goods in her son's room, including a rifle, a suitcase, DVDs, liquor, clothing, and electronic equipment. When confronted by his mother, Heyward said that he was holding the things for a friend, but he started crying when his mother told him she did not believe him. Pickney also testified that Williams telephoned her house three times that evening, but that she would not let him speak to Heyward. Williams then appeared at her house and said that "somebody" would be coming to remove the items, but Pickney told Williams that it was too late, that the police were on their way. After Williams left, Pickney walked up to the victim's house and asked a detective to come retrieve the stolen items.
The police photographed the items found in Heyward's room, including a blue bandana, a rifle, Buddha figurines, a knife with the name "Vongvilay" engraved on it, a plastic cookie jar with the victim's name on it, the victim's pajama shirt, luggage, liquor, DVDs, electronics, and the loaded .38 caliber revolver Williams used in the assaults. Heyward gave the police a statement that incriminated Williams in the burglary and rape. The victim picked Williams out of a photographic lineup, and she identified him at trial as her rapist. At trial, the victim identified her pajama shirt, and Mr. Vongvilay identified the items stolen from his home. Finally, the Georgia Bureau of Investigation crime lab tested the stains on the victim's pajama shirt and on the blue bandana for bodily fluids. Stains on both items were positive for the presence of sperm and seminal fluid, and the stains contained DNA that matched the DNA samples taken from both the victim and Williams.
(a) To sustain a conviction in a felony case based solely upon the testimony of an accomplice, "the testimony of the accomplice must be corroborated by independent evidence tending to connect the accused with the crime or leading to an inference that the accused is guilty." (Punctuation and footnote omitted.) Williams v. State, 280 Ga. 584, 585-586(1), 630 S.E.2d 370 (2006). See OCGA § 24-4-8 (in "felony cases where the only witness is an accomplice, the testimony of a single witness is not sufficient [to establish a fact]"). "Slight evidence from an extraneous source identifying the accused as a participator in the criminal act will be sufficient corroboration of the accomplice to support a verdict." (Punctuation and footnote omitted.) Williams v. State, 280 Ga. at 586(1), 630 S.E.2d 370.
In this case, the State adduced ample evidence corroborating Heyward's identification testimony. The victim saw Williams' face during the rape, picked Williams out of a photographic lineup, and identified him at trial as her attacker. Heyward's testimony was also corroborated by the victim's testimony in many respects, including similarities in the timing of events and in details like the presence of the victim's puppy. Moreover, *832 Williams' DNA was found on the victim's night shirt and the bandana that he used as a mask. This evidence sufficiently corroborates Heyward's testimony and identifies Williams as the victim's rapist. See Williams v. State, 280 Ga. at 586(1), 630 S.E.2d 370.
(b) Williams argues that because the evidence does not show when or how he removed the victim's pajama shirt[1] from the room, there is no evidence that it was taken from the victim's immediate presence by use of an offensive weapon and, thus, the armed robbery conviction cannot stand. We disagree. OCGA § 16-8-41(a) provides, in relevant part, that the theft element of an armed robbery is committed by the taking of "property of another from the person or the immediate presence of another[.]" As the Supreme Court of Georgia has explained,
[a]lthough the victim's "person" and his "immediate presence" are separated by the word "or," the former has always been deemed to include the latter for purposes of proving the elements of a robbery. The meaning of this legal phrase is, not that the taking must necessarily be from the actual contact of the body, but if it is from under the personal protection that will suffice. Within this doctrine, the person may be deemed to protect all things belonging to the individual, within a distance, not easily defined, over which the influence of the personal presence extends. In cases of this type, all of the victim's property is, in contemplation of law, upon the person of the owner, which is, at the time of taking, in the immediate presence of the owner, or is so near at hand, or stored in such position, that, at the time of taking, it is under the immediate personal protection of the owner. If the goods are in that condition, then they are, within the contemplation of the law, upon the person of the owner.
(Citations and punctuation omitted.) Felder v. State, 270 Ga. 641, 642-643(2), 514 S.E.2d 416 (1999).
Williams forcibly removed the victim's pajama shirt from her body by use of a handgun. That Williams had the intent to steal it, and that he took it, may be inferred from the fact that the pajama shirt was later found with the other stolen goods in Heyward's room. Whether he or Heyward actually took the shirt is immaterial, as Williams is legally responsible for the acts of his partner in crime.[2] While the victim did not see Williams pick up the pajama shirt and take it from the room, she was aware that Williams and Heyward were stealing things from the room generally. And given Williams' previous use of a handgun and threats to kill her if she did not remain in the closet, the victim could reasonably apprehend that Williams still had the handgun as he continued taking things from the room. See Culver v. State, 230 Ga.App. 224, 231(6), 496 S.E.2d 292 (1998) (although rape victim who was ordered to remain on the floor with her face covered could not see her armed assailant steal $600 from her purse, evidence was sufficient to support conviction for armed robbery). Thus, the evidence adduced was sufficient to support Williams' conviction for the armed robbery of the victim's pajama shirt beyond a reasonable doubt. See id.
2. Williams contends the trial court should have entered an order merging the following crimes: (a) Count 9, false imprisonment, into Count 2, kidnapping; (b) Count 7, aggravated assault with intent to rape, into Count 5, rape; and Count 8, aggravated assault, into Count 2, kidnapping.
(a) As charged in the indictment and as proven by the evidence adduced, the false *833 imprisonment[3] occurred when Williams forced the victim into the prayer room closet after he raped her, bound the closet doors closed with a cord, and ordered the victim under threat of death to remain there until he left. The kidnapping occurred and was complete prior to that, when he forced the victim up the stairs and into the bedroom on the right hand side of the second floor hallway and held her there against her will.[4] Because the kidnapping and false imprisonment offenses were proven by different facts, the trial court did not err in holding that the crimes did not merge. See Chatman v. State, 283 Ga.App. 673, 675(3), 642 S.E.2d 361 (2007) ("If one crime is complete before the other takes place, the two crimes do not merge.").
(b) The trial court did not err in failing to merge the conviction for aggravated assault with intent to rape[5] into the conviction for rape.[6] The record shows that Williams, while in the hallway, touched and fondled the victim while threatening to kill her. He was armed with a handgun at the time. Moments later, he forced the victim into the prayer room across the hall, where he pointed the gun at the victim, forcibly undressed her, and then proceeded to rape her. The acts in the hallway "were separate and distinct acts of force and intimidation outside that necessary to accomplish the rape. Thus, the jury was authorized to find [Williams] guilty of both rape and aggravated assault with [intent to rape] under the circumstances." (Citations omitted.) Culver v. State, 230 Ga.App. at 230-231(5), 496 S.E.2d 292 (1998).
(c) The trial court did not err in failing to merge the aggravated assault conviction,[7] which was based upon Williams striking the victim with a pistol, with the kidnapping conviction, which was based upon his forcing the victim upstairs. The record shows that the assault occurred prior to the kidnapping. Further, assault was not necessary to accomplish the kidnapping. Consequently, the crimes do not merge at a matter of fact. See Maddox v. State, 277 Ga.App. 580, 581, 627 S.E.2d 166 (2006) (where kidnappings occurred independently of an aggravated assault (pistol-whipping), the offenses did not merge).
Because Williams has not shown that any of his convictions merge, we find no error.
Judgment affirmed.
BLACKBURN, P.J., and MILLER, J., concur.
NOTES
[1] The indictment avers that Williams committed the armed robbery when, "with intent to commit theft did take the clothing, the property of [the victim], from her immediate presence by use of a firearm[.]"
[2] OCGA § 16-2-20(a) provides: "Every person concerned in the commission of a crime is a party thereto and may be charged with and convicted of commission of the crime." The pertinent subsections of OCGA § 16-2-20 are (b)(3) and (4), which read: "A person is concerned in the commission of a crime only if he ... (3) Intentionally aids or abets in the commission of the crime; or (4) Intentionally advises, encourages, hires, counsels, or procures another to commit the crime." Heyward testified that he and Williams both committed the thefts.
[3] "A person commits the offense of false imprisonment when, in violation of the personal liberty of another, he arrests, confines, or detains such person without legal authority." OCGA § 16-5-41(a).
[4] "A person commits the offense of kidnapping when he abducts or steals away any person without lawful authority or warrant and holds such person against [her] will." OCGA § 16-5-40(a).
[5] "A person commits the offense of aggravated assault when he or she assaults: (1) With intent to murder, to rape, or to rob[.]" OCGA § 16-5-21(a)(1). The underlying simple assault can occur, as it did here, when the defendant "[c]ommits an act which places another in reasonable apprehension of immediately receiving a violent injury." OCGA § 16-5-20(a)(2).
[6] "A person commits the offense of rape when he has carnal knowledge of: (1) A female forcibly and against her will[.]" OCGA § 16-6-1(a)(1).
[7] A person commits the offense of aggravated assault when he assaults "[w]ith a deadly weapon or with any object, device, or instrument which, when used offensively against a person, is likely to or actually does result in serious bodily injury[.]" OCGA § 16-5-21 (a)(2). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1158612/ | 92 Cal.App.2d 712 (1949)
Estate of JOHN C. FERRALL, Deceased. FAYE F. HAMILTON, Respondent,
v.
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION et al., as Trustees, etc., Appellants.
Civ. No. 16447.
California Court of Appeals. Second Dist., Div. Three.
July 1, 1949.
Earle M. Daniels, Burdette J. Daniels and Hallam Mathews for Appellants.
Potter, Potter & Rouse for Respondent.
WOOD, J.
Appeal by trustees from a judgment directing them to pay to a beneficiary $400 per month from the corpus of a testamentary trust.
The testator, John C. Ferrall, who died October 9, 1940, left surviving him a son, George D. Ferrall, and a daughter, Faye F. Hamilton. Under the provisions of his will, which was made April 15, 1938, he gave $2,000 to each of George D. Ferrall's three sons, and gave one-half of the remainder (after paying said $6,000, his debts and expenses of administration) to George D. Ferrall, and gave the other one-half of the remainder to the Bank of America and George D. Ferrall as joint trustees and in trust for the following uses and purposes:
"(d) After payment of any expenses of management of the trust estate and administering this trust, including the compensation for the services of the trustees, all income from the trust which is available for distribution shall be distributed monthly to and for the use and benefit of my daughter, Faye F. Hamilton during her lifetime, or unless sooner terminated in accordance herewith. That if at any time the income from the corpus of the trust herein created is insufficient to meet the needs of my daughter, Faye F. Hamilton, then and in that event, in the sole discretion of the trustees herein, the trustees may pay to my said daughter, Faye F. Hamilton, such amounts from the principal or corpus of the trust sufficient to meet her needs, care and comforts."
"(e) ...."
"(f) Anything herein contained to the contrary notwithstanding, this trust shall cease and terminate upon the following conditions:"
"(1-a) Provided my daughter, Faye F. Hamilton, be living, this trust shall terminate upon the death of Alex C. Hamilton, or his divorce from my said daughter, Faye F. Hamilton, in which event all the property held by the trustees herein shall be distributed to my daughter, Faye F. Hamilton, or *714"
"(1-b) Upon the death of my daughter, Faye F. Hamilton, this trust shall cease and terminate and all the property held by the trustees under the terms hereof shall be distributed one-half to my son, George D. Ferrall, and one- half to my three grandchildren, George D. Ferrall, Jr., John Charters Ferrall and Frank M. Ferrall, share and share alike."
The decree of distribution, entered February 16, 1943, distributed to said trustees one-half of said remainder in trust for the said uses and purposes stated in the will. The provisions of the decree so distributing said part of the estate to the trustees included verbatim the said above quoted provisions of the will regarding the uses and purposes for which the trust was created.
On June 10, 1947, Mrs. Hamilton petitioned the court for an order directing the trustees to pay to her from the corpus of the trust estate for her needs, care and comfort $450 per month until the further order of the court, and also to pay to her from said source $10,231.46 in repayment of that amount expended by her for her needs, care and comfort.
The court found that at the time of execution of the will Mrs. Hamilton was afflicted with multiple sclerosis and that fact was known to the testator; that by reason of such disease it became necessary, about January 1, 1942, to remove her from her home to a sanitarium, where she has remained since that time; that since she went to the sanitarium she has been bedridden, unable to care for herself or her property, and has required the attention of nurses and physicians; that she received as income from the trust estate, from January 1, 1942, to May 1, 1947, the sum of $5,550.10; that she paid for her care, during said period of time, from her own funds the sum of $10,231.46 in addition to the said amount she received as income from the trust estate; that she "sold whatever property she had in order to maintain herself"; that in addition to the amount expended by Mrs. Hamilton, during said period, her husband paid $3,000 for her care; that she had received about $50 per month from income from the trust estate; that the expense of caring for her during several months last past has amounted to $400 per month; that the present value of the trust estate is in excess of $27,000, about all of which consists of negotiable assets; that in creating said trust it was the intent of the deceased to provide for the care, needs, comfort and maintenance of Mrs. Hamilton from the trust estate and the corpus thereof in the event the income was insufficient for said purposes; that the income is insufficient *715 for said purposes; that $400 per month is a reasonable sum to be paid from the date of filing the petition herein, June 10, 1947; that the income of her husband for 1946 was in excess of $15,000, and as of August 29, 1947 (the date of the hearing herein) his income was in excess of $10,000; and that their income tax returns for the past four years show that the income of Mr. Hamilton was community property.
The judgment was that it was the intent of the testator to provide for the care, needs, comfort and maintenance of Mrs. Hamilton from the trust estate and corpus thereof in the event the income should be insufficient for said purposes; that the income is insufficient for said purposes; that $400 per month is a reasonable sum "to be paid out of income and the corpus" for the care, needs, comfort and maintenance of Mrs. Hamilton; that $400 be paid to her "from income and corpus" on the 10th day of each month, beginning June 10, 1947, until the further order of court.
Appellants contend that the trustees had absolute discretion "as to the circumstances which would entitle them to invade the corpus of the trust"; and also that they had absolute discretion as to the amounts to be paid from the corpus if payments should be made therefrom; and that since there was no allegation, proof, or finding of fraud, or of a demand or refusal to exercise discretion by the trustees, or of an abuse of discretion by them, the court erred in assuming control of the trustees' discretion. [1] As above shown, the decree creating the trust provided that "if at any time the income from the corpus ... is insufficient to meet the needs of my daughter, Faye F. Hamilton, then and in that event, in the sole discretion of the trustees herein, the trustees may pay to my said daughter, Faye F. Hamilton, such amounts from the principal or corpus of the trust sufficient to meet her needs, care and comforts." Under that provision a court is not deprived of power to determine the fact as to whether the income from the corpus is insufficient to meet the needs of Mrs. Hamilton. By that provision, however, the matter of determining the amounts to be paid from the corpus, in the event that the income is insufficient to meet her needs, is left to the sole discretion of the trustees. Section 2269 of the Civil Code provides: "A discretionary power conferred upon a trustee is presumed not to be left to his arbitrary discretion, but may be controlled by the proper court if not reasonably exercised, unless an absolute discretion is clearly conferred by the declaration of trust." An absolute discretion, as to *716 the amounts to be paid from the corpus, was conferred by the trust provisions herein. [2] An absolute discretion, exercised in good faith by a trustee, cannot be controlled by a court on considerations going to the soundness of the discretion so exercised. (Neel v. Barnard, 24 Cal.2d 406, 417 [150 P.2d 177].) If a trustee in the exercise of a sole or absolute discretion acts in bad faith or fraudulently, his exercise of such discretion is subject to review and control by a court. (Ibid) [3a] There was no allegation or finding that the trustees, or either of them, acted in bad faith or fraudulently, or that they abused their discretion. Respondent argues that it was not necessary to make such allegations for the reason that the hearing was had upon the theory that bad faith, fraud and abuse of discretion were in issue. Even if it be assumed that those matters were in issue, the fact remains that there was no finding as to those issues. Findings on those issues were necessary, as above indicated, in order that it might be determined therefrom whether the acts of the trustees were subject to review and control by the court. As above stated, there were two trustees herein--George D. Ferrall and the Bank of America. [4] The burden of proof as to bad faith, fraud and abuse of discretion, was on petitioner, and the trustees were entitled to the benefit of the presumption that they acted in good faith. (Estate of Canfield, 80 Cal.App.2d 443, 451 [181 P.2d 732].) [3b] The court erred in not making findings regarding those matters. In Estate of Smith, 23 Cal.App.2d 383 [73 P.2d 239], the testamentary trust provided that the trustees should apply the income "so far as in their judgment they shall deem it necessary" to the support, maintenance and education of the issue of Sidney V. Smith, Jr. The petitioner therein alleged that she was a daughter of said Smith; that the trustees acted in arbitrary abuse of their discretion; and that they refused to apply any part of the income for the support and education of petitioner. The petitioner therein asked that the court determine the amount necessary for her support and education. The court therein said, in referring to the above quoted provision of the trust (p. 387): "The trustees were therefore given the power to determine the necessity for applying any part of the income of the trust to the support, maintenance and education of said issue and we are of the opinion that there should be no interference by the courts with the exercise of that power except upon the showing of an abuse of discretion by the trustees. The trial court concluded that no abuse of discretion *717 had been shown in the present case and entered its findings and judgment accordingly." In Estate of Marre, 18 Cal.2d 184 [114 P.2d 586], the testamentary trust provided that the trustees should pay out of the net income "such part thereof as said trustees shall in their sole judgment deem advisable" for the proper support and education of trustor's grandson "so long as, in their sole judgment, his education is incomplete." The grandson, who was petitioner therein, asked that the court instruct the trustees to reimburse him for expenses incurred for his support and education during a period prior to the entry of the decree of distribution. The trial court therein ordered the trustees to reimburse the petitioner for certain expenses during that period, and the trustees appealed from the order. The court therein said at page 190: "The amount to be paid for the beneficiary's support, however, was to be determined in the sole judgment of the trustees. The order of the superior court sought to specify the exact amount of the payments to be made to the beneficiary. It is well settled that the courts will not attempt to exercise discretion which has been confided to a trustee unless it is clear that the trustee has abused his discretion in some manner. [Citations.] In the present case the refusal of the trustees to make payment for the period between the death of the testatrix and the date of distribution of the trust estate to them was based upon the belief that any such payment would be improper. There was no attempt on the part of the trustees to fix the amount and, hence, there could be no abuse of discretion in this regard. The amounts to be paid should therefore be determined in the discretion of the trustees." The Supreme Court modified the order therein by directing that the trustees determine, in their discretion, the amounts necessary for the grandson's maintenance during said period.
There was no evidence that the trustees had been requested to make payments from the corpus, and there was no evidence as to what, if anything, the trustee Ferrall or the trustee Bank of America said relative to making payments from the corpus.
It does not appear that if findings, regarding abuse of discretion, had been made they would necessarily under the evidence have been adverse to appellants. It was essential, as above stated, that the court find whether the trustees abused their discretion.
The judgment is reversed.
Shinn, P.J., and Vallee, J., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1418694/ | 16 Cal.3d 313 (1976)
546 P.2d 719
128 Cal. Rptr. 215
RICHARD A. BERNHARD, Plaintiff and Appellant,
v.
HARRAH'S CLUB, Defendant and Respondent.
Docket No. S.F. 23242.
Supreme Court of California. In Bank.
March 2, 1976.
*315 COUNSEL
Frederick W. Stephenson for Plaintiff and Appellant.
Hardy, Erich & Brown and Leo H. Schuering, Jr., for Defendant and Respondent.
Robert List, Attorney General (Nevada), James H. Thompson, Chief Deputy Attorney General, and John H. Garvin as Amici Curiae on behalf of Defendant and Respondent.
OPINION
SULLIVAN, J.
Plaintiff appeals from a judgment of dismissal entered upon an order sustaining without leave to amend the general demurrer of defendant Harrah's Club to plaintiff's first amended complaint.
Plaintiff's complaint, containing only one count, alleged in substance the following: Defendant Harrah's Club, a Nevada corporation, owned and operated gambling establishments in the State of Nevada in which intoxicating liquors were sold, furnished to the public and given away for consumption on the premises. Defendant advertised for and solicited in California the business of California residents at such establishments knowing and expecting that many California residents would use the public highways in going to and from defendant's drinking and gambling establishments.
On July 24, 1971, Fern and Philip Myers, in response to defendant's advertisements and solicitations, drove from their California residence to defendant's gambling and drinking club in Nevada, where they stayed until the early morning hours of July 25, 1971. During their stay, the Myers were served numerous alcoholic beverages by defendant's employees, progressively reaching a point of obvious intoxication rendering them incapable of safely driving a car. Nonetheless defendant continued to serve and furnish the Myers alcoholic beverages.
*316 While still in this intoxicated state, the Myers drove their car back to California. Proceeding in a northeasterly direction on Highway 49, near Nevada City, California, the Myers' car, driven negligently by a still intoxicated Fern Myers, drifted across the center line into the lane of oncoming traffic and collided head-on with plaintiff Richard A. Bernhard, a resident of California, who was then driving his motorcycle along said highway. As a result of the collision plaintiff suffered severe injuries. Defendant's sale and furnishing of alcoholic beverages to the Myers, who were intoxicated to the point of being unable to drive safely, was negligent and was the proximate cause of the plaintiff's injuries in the ensuing automobile accident in California for which plaintiff prayed $100,000 in damages.
Defendant filed a general demurrer to the first amended complaint. In essence it was grounded on the following contentions: that Nevada law denies recovery against a tavern keeper by a third person for injuries proximately caused by the former by selling or furnishing alcoholic beverages to an intoxicated patron who inflicts the injuries on the latter; that Nevada law governed since the alleged tort was committed by defendant in Nevada; and that section 25602 of the California Business and Professions Code which established the duty necessary for liability under our decision in Vesely v. Sager (1971) 5 Cal.3d 153 [95 Cal. Rptr. 623, 486 P.2d 151], was inapplicable to a Nevada tavern. The trial court sustained the demurrer without leave to amend and entered a judgment of dismissal. This appeal followed.
(1) We face a problem in the choice of law governing a tort action. As we have made clear on other occasions, we no longer adhere to the rule that the law of the place of the wrong is applicable in a California forum regardless of the issues before the court. (Hurtado v. Superior Court (1974) 11 Cal.3d 574, 579 [114 Cal. Rptr. 106, 522 P.2d 666]; Reich v. Purcell (1967) 67 Cal.2d 551, 555 [63 Cal. Rptr. 31, 432 P.2d 727].) Rather we have adopted in its place a rule requiring an analysis of the respective interests of the states involved the objective of which is "`to determine the law that most appropriately applies to the issue involved.'" (Hurtado, supra, at pp. 579-580, quoting from Reich, supra, at p. 555.)
The issue involved in the case at bench is the civil liability of defendant tavern keeper to plaintiff, a third person, for injuries allegedly caused by the former by selling and furnishing alcoholic beverages in Nevada to intoxicated patrons who subsequently injured plaintiff in *317 California. Two states are involved: (1) California the place of plaintiff's residence and domicile, the place where he was injured, and the forum; and (2) Nevada the place of defendant's residence and the place of the wrong.
We observe at the start that the laws of the two states California and Nevada applicable to the issue involved are not identical. California imposes liability on tavern keepers in this state for conduct such as here alleged. In Vesely v. Sager, supra, 5 Cal.3d 153, 166, this court rejected the contention that "civil liability for tavern keepers should be left to future legislative action.... First, liability has been denied in cases such as the one before us solely because of the judicially created rule that the furnishing of alcoholic beverages is not the proximate cause of injuries resulting from intoxication. As demonstrated, supra, this rule is patently unsound and totally inconsistent with the principles of proximate cause established in other areas of negligence law.... Second, the Legislature has expressed its intention in this area with the adoption of Evidence Code section 669, and Business and Professions Code section 25602.... It is clear that Business and Professions Code section 25602 [making it a misdemeanor to sell to an obviously intoxicated person] is a statute to which this presumption [of negligence, Evidence Code section 669] applies and that the policy expressed in the statute is to promote the safety of the people of California...." Nevada on the other hand refuses to impose such liability. In Hamm v. Carson City Nuggett, Inc. (1969) 85 Nev. 99 [450 P.2d 358, 359], the court held it would create neither common law liability nor liability based on the criminal statute banning sale of alcoholic beverages to a person who is drunk, because "if civil liability is to be imposed, it should be accomplished by legislative act after appropriate surveys, hearings, and investigations to ascertain the need for it and the expected consequences to follow." It is noteworthy that in Hamm the Nevada court in relying on the common law rule denying liability cited our decision in Cole v. Rush (1955) 45 Cal.2d 345 [289 P.2d 450, 54 A.L.R.2d 1137], later overruled by us in Vesely to the extent that it was inconsistent with that decision. (See Vesely v. Sager, supra, 5 Cal.3d at p. 167.)
Although California and Nevada, the two "involved states" (Reich v. Purcell, supra, 67 Cal.2d 551, 553; see also Hurtado v. Superior Court, supra, 11 Cal.3d 574, 579), have different laws governing the issue presented in the case at bench, we encounter a problem in selecting the applicable rule of law only if both states have an interest in having their respective laws applied. (2) "[G]enerally speaking the forum will *318 apply its own rule of decision unless a party litigant timely invokes the law of a foreign state. In such event he must demonstrate that the latter rule of decision will further the interest of the foreign state and therefore that it is an appropriate one for the forum to apply to the case before it. [Citations.]" (Hurtado, supra, at p. 581.)
Defendant contends that Nevada has a definite interest in having its rule of decision applied in this case in order to protect its resident tavern keepers like defendant from being subjected to a civil liability which Nevada has not imposed either by legislative enactment or decisional law. It is urged that in Hamm v. Carson City Nuggett, supra, 450 P.2d 358, 359, the Supreme Court of Nevada clearly delineated the policy underlying denial of civil liability of tavern keepers who sell to obviously intoxicated patrons: "Those opposed to extending liability point out that to hold otherwise would subject the tavern owner to ruinous exposure every time he poured a drink and would multiply litigation endlessly in a claim-conscious society. Every liquor vendor visited by the patron who became intoxicated would be a likely defendant in subsequent litigation flowing from the patron's wrongful conduct.... Judicial restraint is a worthwhile practice when the proposed new doctrine may have implications far beyond the perception of the court asked to declare it. They urge that if civil liability is to be imposed, it should be accomplished by legislative act after appropriate surveys, hearings, and investigations.... We prefer this point of view." Accordingly defendant argues that the Nevada rule of decision is the appropriate one for the forum to apply.
Plaintiff on the other hand points out that California also has an interest in applying its own rule of decision to the case at bench. California imposes on tavern keepers civil liability to third parties injured by persons to whom the tavern keeper has sold alcoholic beverages when they are obviously intoxicated "for the purpose of protecting members of the general public from injuries to person and damage to property resulting from the excessive use of intoxicating liquor." (Vesely v. Sager, supra, 5 Cal.3d 153, 165.) California, it is urged, has a special interest in affording this protection to all California residents injured in California.
(3) Thus, since the case at bench involves a California resident (plaintiff) injured in this state by intoxicated drivers and a Nevada resident tavern keeper (defendant) which served alcoholic beverages to them in Nevada, it is clear that each state has an interest in the application of its respective law of liability and nonliability. It goes *319 without saying that these interests conflict. Therefore, unlike Reich v. Purcell, supra, 67 Cal.2d 551, and Hurtado v. Superior Court, supra, 11 Cal.3d 574, where we were faced with "false conflicts," in the instant case for the first time since applying a governmental interest analysis as a choice of law doctrine in Reich, we are confronted with a "true" conflicts case. We must therefore determine the appropriate rule of decision in a controversy where each of the states involved has a legitimate but conflicting interest in applying its own law in respect to the civil liability of tavern keepers.
The search for the proper resolution of a true conflicts case, while proceeding within orthodox parameters of governmental interest analysis, has generated much scholarly examination and discussion.[1] The father of the governmental interest approach,[2] Professor Brainerd Currie, originally took the position that in a true conflicts situation the law of the forum should always be applied. (Currie, Selected Essays on *320 Conflicts of Laws (1963) p. 184.) However, upon further reflection, Currie suggested that when under the governmental interest approach a preliminary analysis reveals an apparent conflict of interest upon the forum's assertion of its own rule of decision, the forum should reexamine its policy to determine if a more restrained interpretation of it is more appropriate. "[T]o assert a conflict between the interests of the forum and the foreign state is a serious matter; the mere fact that a suggested broad conception of a local interest will create conflict with that of a foreign state is a sound reason why the conception should be reexamined, with a view to a more moderate and restrained interpretation both of the policy and of the circumstances in which it must be applied to effectuate the forum's legitimate purpose.... An analysis of this kind ... was brilliantly performed by Justice Traynor in Bernkrant v. Fowler (1961) 55 Cal.2d 588 [12 Cal. Rptr. 266, 360 P.2d 906]." (Currie, The Disinterested Third State (1963) 28 Law & Contemp. Prob., pp. 754, 757; see also Sedler in Symposium, Conflict of Laws Round Table, supra, 49 Texas L.Rev. 211, at pp. 224-225.) This process of reexamination requires identification of a "real interest as opposed to a hypothetical interest" on the part of the forum (Sedler, Value of Principled Preferences, 49 Texas L.Rev. 224) and can be approached under principles of "comparative impairment." (Baxter, Choice of Law and the Federal System, supra, 16 Stan. L.Rev. 1-22; Horowitz, The Law of Choice of Law in California A Restatement, supra, 21 UCLA L.Rev. 719, 748-758.)
Once this preliminary analysis has identified a true conflict of the governmental interests involved as applied to the parties under the particular circumstances of the case, the "comparative impairment" approach to the resolution of such conflict seeks to determine which state's interest would be more impaired if its policy were subordinated to the policy of the other state. This analysis proceeds on the principle that true conflicts should be resolved by applying the law of the state whose interest would be the more impaired if its law were not applied. Exponents of this process of analysis emphasize that it is very different from a weighing process. The court does not "`weigh' the conflicting governmental interests in the sense of determining which conflicting law manifested the `better' or the `worthier' social policy on the specific issue. An attempted balancing of conflicting state policies in that sense ... is difficult to justify in the context of a federal system in which, within constitutional limits, states are empowered to mold their policies as they wish.... [The process] can accurately be described as ... accommodation of conflicting state policies, as a problem of allocating domains of law-making power in multi-state contexts limitations on the reach of *321 state policies as distinguished from evaluating the wisdom of those policies.... [E]mphasis is placed on the appropriate scope of conflicting state policies rather than on the `quality' of those policies...." (Horowitz, The Law of Choice of Law in California A Restatement, supra, 21 UCLA L.Rev. 719, 753; see also Baxter, Choice of Law and the Federal System, supra, 16 Stan.L.Rev. 1, 18-19.) However, the true function of this methodology can probably be appreciated only casuistically in its application to an endless variety of choice of law problems. (See, e.g., the hypothetical situations set forth in Baxter, op. cit., pp. 10-17.)
Although the concept and nomenclature of this methodology may have received fuller recognition at a later time, it is noteworthy that the core of its rationale was applied by Justice Traynor in his opinion for this court in People v. One 1953 Ford Victoria (1957) 48 Cal.2d 595 [311 P.2d 480]. There in a proceeding to forfeit an automobile for unlawful transportation of narcotics we dealt with the question whether a chattel mortgage of the vehicle given in Texas and, admittedly valid both in that state and this, succumbed to the forfeiture proceedings. The purchaser of the car, having executed a note and chattel mortgage for the unpaid purchase price, without the consent of the mortgagee drove the vehicle to California where he used it to transport marijuana. Applicable California statutes made it clear that they did not contemplate the forfeiture of the interest of an innocent mortgagee, that is a person whose "interest was created after a reasonable investigation of the moral responsibility, character and reputation of the purchaser and without any knowledge that the vehicle was being, or was to be, used for the purpose charged...." Texas had no similar statute; nor had the mortgagee, though proving that the mortgage was bona fide, also proved that he had made the above reasonable investigation of the mortgagor.
It was clear that Texas had an interest in seeing that valid security interests created upon the lawful purchase of automobiles in Texas be enforceable and recognized. California had an interest in controlling the transportation of narcotics. Each interest was at stake in the case, since the chattel mortgage had been validly created in Texas and the car was used to transport narcotics in California. The crucial question confronting the court was whether the "reasonable investigation" required by statute of a California mortgagee applied to the Texas mortgagee. Employing what was in substance a "comparative impairment" approach, the court answered the question in the negative. "It is contended that a holding that the `reasonable investigation' requirement is not *322 applicable to respondent will subvert the enforcement of California's narcotics laws. We are not persuaded that such dire consequences will ensue. The state may still forfeit the interest of the wrongdoer. It has done so in this case. Moreover, the Legislature has made plain its purpose not to forfeit the interests of innocent mortgagees. It has not made plain that `reasonable investigation' of the purchaser is such an essential element of innocence that it must be made even by an out-of-state mortgagee although such mortgagee could not reasonably be expected to make such investigation." (Id., at p. 599.)
Mindful of the above principles governing our choice of law, we proceed to reexamine the California policy underlying the imposition of civil liability upon tavern keepers. At its broadest limits this policy would afford protection to all persons injured in California by intoxicated persons who have been sold or furnished alcoholic beverages while intoxicated regardless of where such beverages were sold or furnished. Such a broad policy would naturally embrace situations where the intoxicated actor had been provided with liquor by out-of-state tavern keepers. Although the State of Nevada does not impose such civil liability on its tavern keepers, nevertheless they are subject to criminal penalties under a statute making it unlawful to sell or give intoxicating liquor to any person who is drunk or known to be an habitual drunkard. (See Nev. Rev. Stats. 202.100; see Hamm v. Carson City Nuggett, Inc., supra, 450 P.2d 358.)
We need not, and accordingly do not here determine the outer limits to which California's policy should be extended, for it appears clear to us that it must encompass defendant, who as alleged in the complaint, "advertis[es] for and otherwise solicit[s] in California the business of California residents at defendant HARRAH'S CLUB Nevada drinking and gambling establishments, knowing and expecting said California residents, in response to said advertising and solicitation, to use the public highways of the State of California in going and coming from defendant HARRAH'S CLUB Nevada drinking and gambling establishments." Defendant by the course of its chosen commercial practice has put itself at the heart of California's regulatory interest, namely to prevent tavern keepers from selling alcoholic beverages to obviously intoxicated persons who are likely to act in California in the intoxicated state. It seems clear that California cannot reasonably effectuate its policy if it does not extend its regulation to include out-of-state tavern keepers such as defendant who regularly and purposely sell intoxicating beverages to California residents in places and under conditions in which it is *323 reasonably certain these residents will return to California and act therein while still in an intoxicated state. California's interest would be very significantly impaired if its policy were not applied to defendant.
Since the act of selling alcoholic beverages to obviously intoxicated persons is already proscribed in Nevada, the application of California's rule of civil liability would not impose an entirely new duty requiring the ability to distinguish between California residents and other patrons. Rather the imposition of such liability involves an increased economic exposure, which, at least for businesses which actively solicit extensive California patronage, is a foreseeable and coverable business expense. Moreover, Nevada's interest in protecting its tavern keepers from civil liability of a boundless and unrestricted nature will not be significantly impaired when as in the instant case liability is imposed only on those tavern keepers who actively solicit California business.[3]
Therefore, upon reexamining the policy underlying California's rule of decision and giving such policy a more restrained interpretation for the purpose of this case pursuant to the principles of the law of choice of law discussed above, we conclude that California has an important and abiding interest in applying its rule of decision to the case at bench, that the policy of this state would be more significantly impaired if such rule were not applied and that the trial court erred in not applying California law.
Defendant argues, however, that even if California law is applied, the demurrer was nonetheless properly sustained because the tavern keeper's duty stated in Vesely v. Sager, supra, 5 Cal.3d 153, is based on Business and Professions Code section 25602, which is a criminal statute and thus without extraterritorial effect. It is quite true, as defendant argues, that in *324 Vesely we determined "that civil liability results when a vendor furnishes alcoholic beverages to a customer in violation of Business and Professions Code section 25602 and each of the conditions set forth in Evidence Code section 669, subdivision (a), is established." (5 Cal.3d at p. 157.)
It is also clear, as defendant's argument points out, that since, unlike the California vendor in Vesely, defendant was a Nevada resident which furnished the alcoholic beverage to the Myers in that state, the above California statute had no extraterritorial effect and that civil liability could not be posited on defendant's violation of a California criminal law. We recognize, therefore, that we cannot make the same determination as quoted above with respect to defendant that we made with respect to the defendant vendor in Vesely.
However, our decision in Vesely was much broader than defendant would have it. There, at the very outset of our opinion, we declared that the traditional common law rule denying recovery on the ground that the furnishing of alcoholic beverage is not the proximate cause of the injuries inflicted on a third person by an intoxicated individual "is patently unsound." (5 Cal.3d at p. 157.) Observing that "[u]ntil fairly recently, it was uniformly held that [such] an action could not be maintained at common law" (id., at p. 158) and reviewing in detail the common law rule (id., at pp. 158-164) we concluded that "the furnishing of an alcoholic beverage to an intoxicated person may be a proximate cause of injuries inflicted by that individual upon a third person." We reasoned: "If such furnishing is a proximate cause, it is so because the consumption, resulting intoxication, and injury-producing conduct are foreseeable intervening causes, or at least the injury-producing conduct is one of the hazards which makes such furnishing negligent." (Id., at p. 164.)
Proceeding to the question of the tavern keeper's duty in this respect and rejecting his contention that civil liability for tavern keepers should be left to future legislative action, we noted that "liability has been denied in cases such as the one before us solely because of the judicially created rule that the furnishing of alcoholic beverages is not the proximate cause of injuries resulting from intoxication. As demonstrated, supra, this rule is patently unsound and totally inconsistent with the principles of proximate cause established in other areas of negligence law. Other common law tort rules which were determined to be lacking in validity have been abrogated by this court (see Gibson v. Gibson (1971) 3 Cal.3d 914 [92 Cal. Rptr. 288, 479 P.2d 648]; Muskopf v. Corning Hospital Dist. (1961) 55 Cal.2d 211 [11 Cal. Rptr. 89, 359 P.2d 457]), and *325 there is no sound reason for retaining the common law rule presented in this case." (5 Cal.3d at p. 166.)
In sum, our opinion in Vesely struck down the old common law rule of nonliability constructed on the basis that the consumption, not the sale, of alcoholic beverages was the proximate cause of the injuries inflicted by the intoxicated person. Although we chose to impose liability on the Vesely defendant on the basis of his violating the applicable statute, the clear import of our decision was that there was no bar to civil liability under modern negligence law. Certainly, we said nothing in Vesely indicative of an intention to retain the former rule that an action at common law does not lie. The fact then, that in the case at bench, section 25602 of the Business and Professions Code is not applicable to this defendant in Nevada so as to warrant the imposition of civil liability on the basis of its violation, does not preclude recovery on the basis of negligence apart from the statute. Pertinent here is our observation in Rowland v. Christian (1968) 69 Cal.2d 108, 118-119 [70 Cal. Rptr. 97, 443 P.2d 561, 32 A.L.R.3d 496]: "It bears repetition that the basic policy of this state set forth by the Legislature in section 1714 of the Civil Code is that everyone is responsible for an injury caused to another by his want of ordinary care or skill in the management of his property."
The judgment is reversed and the cause is remanded to the trial court with directions to overrule the demurrer and to allow defendant a reasonable time within which to answer.
Wright, C.J., McComb, J., Tobriner, J., Mosk, J., Clark, J., and Molinari, J.,[*] concurred.
Respondent's petition for a rehearing was denied April 22, 1976. Richardson, J., did not participate therein.
NOTES
[1] Baxter, Choice of Law and the Federal System (1963) 16 Stan.L.Rev. 1; Cavers, The Choice of Law Process (1965) pages 114-224: Horowitz, The Law of Choice of Law in California-A Restatement (1974) 21 UCLA L.Rev. 719, 748-758; Conflict of Laws Round Table: A Symposium (1972) 57 Iowa L.Rev. 1219-1270; Symposium, Conflict of Laws Round Table (1971) 49 Texas L.Rev. 211-245: Sedler, Reviews-Conflicts Commentary (1972) 50 Texas L.Rev. 1064-1083: Weintraub, Commentary on the Conflict of Laws (1971). We note that no case has been called to our attention, nor are we aware of one, which has discussed this problem in a context relevant to the case at bench.
[2] Traditionally the search for choice of law rules focused upon the interests of the immediate parties to the action in terms of their private rights. Thus, it concentrated "upon the same factors that would be dispositive in a similar case wholly internal to a single state. I cannot escape the conclusion that a search so oriented must prove unrewarding. Every choice-of-law case involves several parties, each of whom would prevail if the internal law of one rather than another state were applied. Each party is `right,' `worthy,' and `deserving' and `ought in all fairness' to prevail under one of the competing bodies of law and in the view of one of the competing groups of lawmakers. Fact situations which differ only in that they are internal to a single state have been assessed by the different groups of lawmakers, and each has reached a different value judgment on the rule best calculated to serve the overall interest of its community. If attention is confined to the circumstances of the immediate parties, the conflict between the internal laws and between the value judgments they are intended to implement cannot be resolved by the judge unless he is prepared to impose still another value judgment upon the controversy.... [¶] These difficulties can be avoided if normative criteria can be found which relate to the very aspects of a conflicts case that distinguish it from an analogous internal case. That such criteria can be elaborated in many, if not all, conflicts cases has been demonstrated by several writers who have urged that conflicts cases be resolved on the basis of the governmental interests involved.... [¶] [T]he process of resolving choice cases is necessarily one of allocating spheres of legal control among states. His [Professor Currie] thesis, like mine, is that the process of allocation should not be performed unconsciously, that the private interests in choice cases are necessarily in balance, and that the cases can be decided by viewing them as instances of conflicting states interests rather than of conflicting private interests." (Baxter, Choice of Law and the Federal System, supra, 16 Stan.L.Rev. 1, 5, 6, 22, fn. omitted.)
[3] Defendant asserts that Nevada's law must be applied because it is the law of the place of sale and cites three cases in support of that proposition. Trapp v. 4-10 Investment Corporation (8th Cir.1970) 424 F.2d 1261; Zucker v. Vogt (D.Conn 1961) 200 F. Supp. 340; and Schmidt v. Driscol Hotel (1957) 82 N.W.2d 365. It is true that all three cases applied the law of the place of sale of the alcohol, but not for that reason. In Trapp and Zucker all the states involved had dram shop acts which would permit civil liability and the federal courts determined that the applicable forum state would give effect to the common policy of liability for sale to intoxicated persons regardless of traditional tort conflict rules. Schmidt is the only case where one state. Wisconsin, did not have a dram shop act and the other state. Minnesota, did. However, in that case even though the injury occurred in Wisconsin, the alcohol was sold and consumed in Minnesota and all the parties involved were from Minnesota. Moreover, none of these cases involved a case of true conflict between two state interests where the court endeavored to resolve the conflict by resort to the principles of governmental interest analysis. They are therefore inapposite.
[*] Assigned by the Chairman of the Judicial Council. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1481868/ | 34 F.2d 653 (1929)
NEW YORK TRUST CO.
v.
ISLAND OIL & TRANSPORT CORPORATION et al.
Ex parte AMERICAN TRUST CO.
No. 273.
Circuit Court of Appeals, Second Circuit.
June 24, 1929.
*654 Paul B. Barringer, Jr., of New York City, for mortgagee.
Saul J. Lance, of New York City (Francis L. Kohlman, of New York City, on the brief), for receivers.
Before MANTON, L. HAND, and CHASE, Circuit Judges.
L. HAND, Circuit Judge (after stating the facts as above).
We do not find it necessary to decide whether the appointment of the seller's receivers and the subsequent correspondence constituted an anticipatory breach of the contract. Even if they did, the damages are not to be computed in disregard of what took place between then and the filing of the claim, or for that matter this being in equity up to the entry of the decree. It is, indeed, one of the consequences of the doctrine of anticipatory breach that, if damages are assessed before the time of performance has expired, the court must take the chance of forecasting the future as best it can. That does not mean that it will ignore what has happened, when the period of performance has already expired. Damages never do more than restore the injured party to the position he would have been in, had the promisor performed; this is not a rule peculiar to anticipatory breach, though that is an instance. Hence it is always an answer, in that or other similar situations, to show that, had the contract continued, the promisee would not have been entitled to the performance, though he was apparently so entitled when the promisor disabled himself or repudiated. Gray v. Smith, 83 F. 824 (C. C. A. 9); Winston v. Brown, 247 F. 948 (C. C. A. 5); Texas Co. v. Pensacola Maritime Corporation, 279 F. 19, 24 A. L. R. 1336 (C. C. A. 5); Gerli v. Poidebard Co., 57 N. J. Law, 432, 31 A. 401, 30 L. R. A. 61, 51 Am. St. Rep. 611; Williston on Contracts, § 884.
In the case at bar the contract was personal to the buyer; he was not to assign it, nor were there to be assignments by operation of law. This was a valid provision, and really did no more than in earlier times the law itself effected. Burck v. Taylor, 152 U. S. 634, 14 S. Ct. 696, 38 L. Ed. 578; Tabler v. Sheffield Land, Iron & Coal Co., 79 Ala. 377, 58 Am. Rep. 593; Mueller v. Northwestern University, 195 Ill. 236, 63 N. E. 110, 88 Am. St. Rep. 194; Zetterlund v. Texas Land & Cattle Co., 55 Neb. 355, 75 N. W. 860; Wakefield v. Amer. Surety Co., 209 Mass. 173, 95 N. E. 350. The trustee in bankruptcy could not therefore demand the oil, not because of any defect in his title under the statute, but because the contract excluded him by its terms. Nor could the buyer have done so, at least without composition; certainly not if the contract passed by the adjudication, and not, even if it did not, because he could demand oil only for his refinery, which in any case had passed to the trustee. Moreover, if the mortgagee had previously got the receivership extended for his benefit, the same result followed. We need not say that the assignment under the mortgage alone brought the claim into play, but, as soon as the mortgagee entered upon default, performance ceased to be personal to the buyer, and he could not demand it. Nor could the mortgagee, who must claim as assignee, if at all. Thus the master was clearly right in his ruling as to the period after default and entry.
As to the earlier period, what we have already said in disposing of the claim of the Gulf States Oil & Transport Company (claim B-6), New York Trust Co. v. Island Oil & Transport Corporation, 34 F.(2d) 649, applies here. Even were we to suppose that the clause against assignments did not invalidate the assignment of an existing cause of action (Burck v. Taylor, 152 U. S. 634, 14 S. Ct. 696, 38 L. Ed. 578, seems to decide that it did), the mortgage gave the mortgagee no rights to the oil which should have been delivered before entry. Thus the contract at least prevented any assignment for oil due after entry, and the mortgage created no lien before. It follows that the mortgagee had no claim of any kind; the only person who could sue was the buyer or his receivers. We are therefore relieved of any consideration of whether the assignment was partial, and whether the obligor had contracted to make separate performances.
Decree reversed; claim dismissed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1808828/ | 758 F.Supp. 107 (1991)
The CAYUGA INDIAN NATION OF NEW YORK, et al., Plaintiffs,
and
The Seneca-Cayuga Tribe of Oklahoma, Plaintiff-Intervenor,
v.
Mario M. CUOMO, et al., Defendants.
Nos. 80-CV-930, 80-CV-960.
United States District Court, N.D. New York.
March 6, 1991.
*108 O'Connor Cavanagh Anderson Westover Killingsworth & Beshears (Glenn M. Feldman, of counsel), Phoenix, Ariz., Joseph Gajarsa McDermott & Reiner (Arthur J. Gajarsa, of counsel), Washington, D.C., for plaintiffs and plaintiff-intervenor.
*109 Robert Abrams, Atty. Gen. of the State of N.Y. (David B. Roberts, Asst. Atty. Gen., of counsel), Albany, N.Y., for State defendants.
Huber Lawrence & Abell (Howard M. Schmertz, of counsel), New York City, for New York State Elec. & Gas Corp.
Hiscock & Barclay (Richard K. Hughes, of counsel), Syracuse, N.Y., for Consolidated Rail.
Goodwin Procter & Hoar (Allan van Gestel, of counsel), Boston, Mass., for Counties of Cayuga, Seneca & Miller Brewing.
Wiles Fahey & Lynch (Joseph E. Fahey, of counsel), Syracuse, N.Y.
MEMORANDUM-DECISION AND ORDER
McCURN, Chief Judge.
The plaintiffs and the defendants have moved for summary judgment concerning the issue of whether defendants' legal defense of abandonment effectively precludes the plaintiffs from maintaining the instant action. The plaintiffs contend that abandonment is not a viable defense to this lawsuit, and that they can succeed in the present action even though they no longer live on the land at issue in this dispute. The defendants argue that the plaintiffs cannot prevail in this action because they allegedly abandoned the land which is the subject of plaintiffs' claims. For the reasons stated below, this court grants the plaintiffs' motion for partial summary judgment and denies the defendants' motion.
Background
This is the fourth memorandum-decision and order issued by this court concerning the present action, and familiarity with the background of this case is presumed. See Cayuga Indian Nation of New York et al. v. Cuomo et al., 565 F.Supp. 1297 (N.D.N. Y.1983) ("Cayuga I"); Cayuga Indian Nation of New York et al. v. Cuomo et al., 667 F.Supp. 938 (N.D.N.Y.1987) ("Cayuga II") and Cayuga Indian Nation of New York et al. v. Cuomo et al., 730 F.Supp. 485 (N.D.N.Y.1990) ("Cayuga III"). However, a brief review of the facts concerning plaintiffs' claims is in order.
Plaintiff Cayuga Indian Nation of New York and plaintiff-intervenor Seneca-Cayuga Tribe of Oklahoma (collectively referred to as "the plaintiffs" or "the Cayugas") both seek a declaration from this court concerning their current ownership of and right to possess a tract of land in central New York State containing approximately 64,000 acres ("the subject land"), an award of fair rental value for the almost two hundred years during which they have been out of possession of the subject land, and other monetary and protective relief.[1]
This court has previously held that the plaintiffs can present evidence in support of the above claims. Cayuga I, 565 F.Supp. at 1330. In Cayuga II, this court denied both parties' motions for summary judgment on plaintiffs' claims. Id., 667 F.Supp. at 949. In Cayuga III, this court granted the plaintiffs' motion for partial summary judgment and held that agreements entered into in the years 1795 and 1807 between the plaintiffs and New York State, wherein the plaintiffs purportedly conveyed to the State of New York the plaintiffs' interest in the subject land, were invalid. Id., 730 F.Supp. at 493.
By the instant motion, the plaintiffs seek an order from this court holding that the defendants' affirmative defense alleging abandonment is insufficient as a matter of law to preclude recovery on plaintiffs' claims. The defendants contend that this defense bars the plaintiffs from succeeding on their claims against defendants, and have therefore moved for summary judgment on plaintiffs' complaint.
*110 Discussion
(1) The Cayugas' title concerning the subject land.
The first aspect of these motions which this court must consider in arriving at its decision relates to the form or type of title held by the plaintiffs regarding the subject land.
There are two distinct types of title to Indian land; "aboriginal" title and "recognized" or "reserved" title. An Indian tribe obtains aboriginal title in land when it continually uses and occupies said property to the exclusion of other Indian tribes or persons. Conversely, where Congress has, by treaty or statute, conferred upon an Indian tribe, or acknowledged to the Indians, the right to permanently occupy and use certain land, an Indian tribe is said to possess recognized or reserved title in such land. Bennett County v. United States, 394 F.2d 8, 11 (8th Cir.1968); Miami Tribe of Oklahoma v. United States, 175 F.Supp. 926, 936, 146 Ct.Cl. 421 (1959).
Differentiating between these two forms of title is critical in resolving the issues before this court. Since aboriginal title is dependent upon actual, continuous and exclusive possession of the land, proof of a tribe's voluntary abandonment of such property constitutes a defense to a subsequent claim concerning the land. See e.g. F. Cohen, Handbook of Federal Indian Law (1982 ed.) at 492 and cases cited therein.[2] However, if an Indian tribe possesses recognized title in certain land, then Congress, and only Congress, may divest the tribe of its title to such land. Cf. Solem v. Bartlett, 465 U.S. 463, 470, 104 S.Ct. 1161, 1166, 79 L.Ed.2d 443 (1984), reh'g denied 466 U.S. 948, 104 S.Ct. 2148, 80 L.Ed.2d 535 (1984) ("only Congress can divest a reservation of its land and diminish its boundaries. Once a block of land is set aside for an Indian reservation and no matter what happens to the title of individual plots within the area, the entire plot retains its reservation status until Congress explicitly indicates otherwise") (citing United States v. Celestine, 215 U.S. 278, 285, 30 S.Ct. 93, 94-95, 54 L.Ed.2d 195 (1909)); Rosebud Sioux Tribe v. Kneip, 430 U.S. 584, 587-88, 97 S.Ct. 1361, 1363-64, 51 L.Ed.2d 660 (1977); De Coteau v. District County Ct. for Tenth Jud. Dist., 420 U.S. 425, 444, 95 S.Ct. 1082, 1092-93, 43 L.Ed.2d 300 (1975), reh'g denied 421 U.S. 939, 95 S.Ct. 1667, 44 L.Ed.2d 95 (1975); Mattz v. Arnett, 412 U.S. 481, 504-05, 93 S.Ct. 2245, 2257-58, 37 L.Ed.2d 92 (1973); see also F. Cohen, Handbook of Federal Indian Law (1982 ed.) at 493.
Central to the plaintiffs' argument that the defense of abandonment is insufficient as a matter of law with respect to their claims is their contention that the 1794 Treaty of Canandaigua ("the Treaty"), entered into between the federal government and the Six Nations, afforded the plaintiffs recognized title to the subject land.
This Treaty contained, inter alia, the following provisions:
Article I
Peace and friendship are hereby firmly established, and shall be perpetual, between the United States and the Six Nations.
Article II
The United States acknowledge the lands reserved to the Oneida, Onondaga and Cayuga Nations, in their respective treaties with the state of New York, and called their reservations, to be their property; and the United States will never claim the same, nor disturb them or either of the Six Nations, nor their Indian friends residing thereon and united with them, in the free use and enjoyment thereof: but the said reservations shall remain theirs, until they choose to sell the same to the people of the United States, who have the right to purchase.
*111 Article III
The land of the Seneka nation is bounded as follows: [Article III continues by describing in detail the boundaries of the Seneka nation's land, and concludes by stating:] Now, the United States acknowledge all the land within the aforementioned boundaries, to be the property of the Seneka nation; and the United States will never claim the same, nor disturb the Seneka nation, nor any of the Six Nations, or of their Indian friends residing thereon and united with them, in the free use and enjoyment thereof: but it shall remain theirs, until they choose to sell the same to the people of the United States, who have the right to purchase.
Article IV
The United States having thus described and acknowledged what lands belong to the Oneidas, Onondagas, Cayugas and Senekas, and engaged never to claim the same, nor disturb them, or any of the Six Nations, or their Indian friends residing thereon and united with them, in the free use and enjoyment thereof: Now, the Six Nations, and each of them, hereby engage that they will never claim any other lands within the boundaries of the United States; nor ever disturb the people of the United States in the free use and enjoyment thereof.
* * * * * *
In witness whereof, [Federal Treaty Commissioner] Timothy Pickering, and the sachems and war chiefs of the Six Nations, have hereto set their hands and seals.
Done at Konondaigua, in the State of New York, the eleventh day of November, in the year one thousand seven hundred and ninety-four.
Following this provision, the signatures of approximately 60 individuals and 12 witnesses appear. See 7 Stat. 44.
The interpretation of the language contained in this, or any treaty, is a question of law for a court to decide. See Sioux Tribe v. United States, 500 F.2d 458, 462, 205 Ct.Cl. 148 (1974) ("[w]e have repeatedly held that the interpretation of an Indian treaty is a question of law, not a matter of fact") and cases cited therein; United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n. 2 (9th Cir.1986), cert. denied 479 U.S. 1009, 107 S.Ct. 650, 93 L.Ed.2d 705 (1986); Strong v. United States, 518 F.2d 556, 563, 207 Ct.Cl. 254 (1975), cert. denied 423 U.S. 1015, 96 S.Ct. 448, 46 L.Ed.2d 386 (1975). Therefore, this court must examine these provisions of the Treaty and determine whether it conferred recognized title on the plaintiffs.[3]
(a) Did the Treaty confer recognized title to the Cayugas?
When determining whether a treaty or statute confers reserved title to an Indian tribe, courts must keep in mind that "formal statements of recognition are not necessary in order that a Treaty be deemed to have recognized title in a particular Tribe." United States v. Kiowa, Comanche and Apache Tribes of Indians, 479 F.2d 1369, 1374, 202 Ct.Cl. 29 (1973), cert. denied sub nom. 416 U.S. 936, 94 S.Ct. 1936, 40 L.Ed.2d 287 (1974). Such title "may be established in a variety of ways but there must be the definite intention by congressional action or authority to accord legal rights, not merely permissive occupation." Tee-Hit-Ton Indians v. United States, 348 *112 U.S. 272, 278-79, 75 S.Ct. 313, 317, 99 L.Ed. 314 (1955).
As the court of claims noted in Strong: Where Congress has by treaty or statute conferred upon the Indians or acknowledged in the Indians the right to permanently occupy and use land, then the Indians have a right or title to that land.
Id., 518 F.2d at 563 (emphasis in original), quoting Miami Tribe, supra, 175 F.Supp. at 936.
The plaintiffs contend that the plain, unambiguous language of the Treaty conferred recognized title upon the Cayugas. They point out that Article II of the Treaty explicitly provides that "[t]he United States acknowledge the lands reserved to the ... Cayuga Nations, in their respective treaties with the state of New York, and called their reservations, to be their property." This Article concludes by noting that "the said reservations shall remain theirs, until they choose to sell the same to the people of the United States, who have the right to purchase."
Article IV notes that, by this Treaty, the United States "described and acknowledged what lands belong to the ... Cayugas" (emphasis supplied throughout).[4]
Despite the plain language contained in these two Articles, the defendants contend that this Treaty "simply acknowledged whatever aboriginal right of occupancy the Cayuga tribe may have had."[5] In support of this contention, the defendants rely primarily on Andrews v. State of New York, 192 Misc. 429, 79 N.Y.S.2d 479 (Ct.Cl.1948), aff'd 276 A.D. 814, 93 N.Y.S.2d 705 (1949); Seneca Nation of Indians v. United States, 173 Ct.Cl. 917 (1965); People ex rel. Ray v. Martin, 294 N.Y. 61, 60 N.E.2d 541 (Ct.App.1945) and Williams v. Chicago, 242 U.S. 434, 37 S.Ct. 142, 61 L.Ed. 414 (1917). However, defendants' reliance on these cases is misplaced.
In Andrews, New York's court of claims was confronted with a claim by an enrolled member of the Onondaga Indian Nation who, although she did not live on the reservation, argued that the State of New York had abridged certain rights she possessed in communal lands of said Nation. In commenting on the primary defect in the claimant's case, the court noted that Ms. Andrews:
[S]ought to disregard completely the organization of which she claims to be a member. She has provided the Court with no statute which recognizes an obligation running from the State to any and every individual Indian belonging to the Indian Nation, nor has the claimant pointed to any treaty or any agreement where such an obligation was recognized or mentioned.
Id., 79 N.Y.S.2d at 488. In light of these facts, the court dismissed plaintiff's claim, concluding that:
[I]n the absence of legislative action bestowing upon individual Indians the right to litigate internal questions relating to their tribal property in the Court of Claims, and conferring jurisdiction to determine such controversies, this Court should not assume jurisdiction.
Id. 79 N.Y.S.2d at 489.
However, prior to finding that it had no jurisdiction over plaintiff's claim, the court stated, in what was necessarily dicta, that the 1794 Treaty of Canandaigua "did not create the Onondaga Reservation, but confirmed the Onondaga's aboriginal right of possession." Id. 79 N.Y.S.2d at 482.
The defendants claim that this statement in Andrews necessarily precludes the plaintiffs from succeeding in the present action. Since the Andrews court found that the Treaty merely "confirmed the Onondaga's aboriginal right of possession" to the land, the defendants allege that the Cayugas, whose claim to recognized title is based on *113 the same Article of the Treaty discussed in Andrews, likewise only have an aboriginal right of possession in the subject land.
This is not the case.
The court's reference to the rights allegedly created by the Treaty in Andrews was mere dicta, since that court dismissed plaintiff's claim for lack of jurisdiction. A court is free to disregard a prior court's obiter dicta concerning an issue which is squarely in dispute in a subsequent action. See, e.g., United States v. Crawley, 837 F.2d 291, 292 (7th Cir.1988). An important factor weighing against a court's relying on dicta in reaching its own determination concerning such an issue is the fact that the prior court may not have considered the issue as fully as it would have had the issue been essential to the outcome of the prior case. Id. In matters involving treaties, the Andrews court itself recognized that a federal court's interpretation of a treaty is binding on state courts. See id., 79 N.Y.S.2d at 484. This court believes that the Andrews court did not fully consider all of the relevant issues regarding the type of title conferred to the Indian tribes by the Treaty in its comments concerning the same, since that issue was neither essential nor relevant to the court's ultimate holding in that case. Therefore, this court is not constrained, nor is it persuaded by that court's interpretation of the Treaty of Canandaigua.
In Seneca Nation of Indians, supra, the U.S. Court of Claims stated that:
[T]he purpose of [the Treaty] was to reconfirm peace and friendship between the United States and the Six Nations, to correct an inadvertent error in the boundaries theretofore allotted to the Indians, and to relinquish any rights the United States may have acquired through this error. There was no purpose to divest New York and Massachusetts of their rights, nor was there any purpose to prevent or supervise sales or transfers of Seneca territory.
Id., 173 Ct.Cl. at 922 n. 5.
However, the crux of the claims in Seneca Nation of Indians concerned disputes between the parties over the proper role of the federal government with respect to Indian tribes in light of the newly established fiduciary relationship between the Indians and the federal government created by the passage of the 1790 Trade and Intercourse Act. Prior to the Act's passage, the prevailing standard which courts had utilized in reviewing conveyances of Indian land for possible fraud or deceit had been the "just and honorable dealings" standard provided by the Indian Claims Commission Act. Subsequent to the Act's passage, however, the Court of Claims held that Indians were also protected against improvident, unfair or unconscionable conveyances of their land, id. at 925, and that therefore conveyances of Indian land subsequent to the passage of the Act had to be scrutinized in light of this heightened standard. Id. at 927.
Since that court's interpretation of the language of the Treaty concerning the Seneca Nation's lands was not necessary for its ultimate holding, its comments were dicta and therefore not binding on this court. Moreover, that case was concerned with the language contained in Article III of the Treaty, which dealt exclusively with the boundaries of the Seneca Nation's land and the rights afforded to the Seneca Nation regarding this land. There are significant differences between that Article and Article II of the Treaty, which dealt with the Cayugas.
Article II acknowledges the lands "reserved to" the Cayuga Nation and "called their reservations." It continues by stating that these "reservations" shall remain theirs until they choose to sell the same to the people of the United States. Article III never acknowledges lands "reserved" to the Senecas, nor does it refer to the land of the Seneca Nation as a "reservation". As the plaintiffs point out, had the United States intended to deal with the Cayuga reservation and the Seneca lands in an identical manner, it would have used identical language and terminology when referring to these tribes in the Treaty. Its use of the words "reserved" and "reservation" with respect to the Cayuga reservation, and the complete absence of these words in *114 the Treaty's provisions concerning the Seneca lands, clearly indicates to this court that the United States dealt with these two tribes differently when it treated with them at Canandaigua.
In Martin, supra, a prisoner was challenging the validity of his conviction for murder and the life sentence imposed on him because of his crime. Ray alleged that the Supreme Court of the State of New York was without jurisdiction to hear the People's case against him because his offense was committed on an Indian reservation. After discussing at some length the federal and New York State governments' respective involvement with Indian tribes, the Court affirmed the conviction and sentencing of Ray. Before reaching this conclusion, the Court stated that the Treaty of Canandaigua "did not create any reservation but confirmed the Senecas' aboriginal right of possession." Id., 294 N.Y. at 68, 60 N.E.2d at 544. The Court subsequently noted that "the doubts and vagueness that becloud the general subject of law on Indian reservations, have nothing whatsoever to do with criminal prosecutions like that of this relator for the killing of Paul Balsiger. ..." Id. at 73, 60 N.E.2d at 547.
As with the Andrews and Seneca Nation of Indians cases, the Court's statement in Martin regarding the rights created by the Treaty was not necessary for its ultimate finding, and was therefore dicta.[6] Additionally, Martin involved a jurisdictional dispute regarding a crime which occurred on the grounds of the Seneca Nation. As discussed supra, the Treaty of Canandaigua refers to and treats the Seneca lands in a manner different than that of the Cayuga reservation. While the Treaty may not have conferred recognized title on the Seneca Indians, such a finding would not be dispositive of the issue of whether the Treaty created recognized title for the plaintiffs herein.
Since the Court's comments in Martin regarding the rights conferred to the Seneca Nation by the Treaty were both dicta and based upon Article III, and not Article II, of the Treaty, this court finds Martin distinguishable from the present case.
Finally, in Williams, supra, several members of the Pokagon Band of Pottawatomie Indians commenced an action against the city of Chicago and numerous corporations occupying lands in Illinois. The complaint alleged that they and the other members of the Pottawatomie Nation of Indians were owners of certain lands in Illinois being occupied by the defendants. The plaintiffs alleged that the Treaty of Greenville, 7 Stat. 49, had conferred what is now called recognized title to the Pottawatomie Nation, and accordingly sought an injunction ordering the defendants out of the lands, as well as reasonable compensation for their use of the property at issue.
In affirming the dismissal of plaintiffs' claims, the Supreme Court noted that the Treaty of Greenville:
[D]id not convey a fee-simple title to the Indians; that under it no tribe could claim more than the right of continued occupancy; and that when it was abandoned, all legal right or interest which both tribe and its members had in the territory came to an end.
Id., 242 U.S. at 437-38, 37 S.Ct. at 144.
The defendants contend that "the facts before the Supreme Court in Williams are strikingly similar to those before this Court" in that:
In each treaty, the federal government acknowledged that the signatory tribes had a continued right to use and occupy certain land; neither treaty conveyed fee-simple title to the signatory tribes.[7]
*115 However, Williams is readily distinguishable from the present case.
Initially, it must be reiterated that the Williams Court was interpreting the Treaty of Greenville, and not the Treaty of Canandaigua, when it determined that the Pottawatomie Nation of Indians did not possess fee simple title concerning the land at issue in that case. The Treaty of Greenville, unlike the Treaty of Canandaigua, does not acknowledge lands "reserved" to the tribe, nor does it refer to the land as a "reservation". Rather, the Treaty of Greenville provides that the United States relinquished its claims to certain lands referred to in that treaty there is no acknowledgement of any reservation in that treaty, as there is in the Treaty of Canandaigua. Additionally, subsequent to the Williams decision, numerous courts, including the United States Supreme Court, have developed and clarified the distinction between aboriginal and reserved title. See e.g., Tee-Hit-Ton Indians, supra, 348 U.S. at 277-85, 75 S.Ct. at 316-20; United States v. Sioux Nation of Indians, 448 U.S. 371, 415 n. 29, 100 S.Ct. 2716, 2740 n. 29, 65 L.Ed.2d 844 (1980); Lac Courte Oreilles Band etc. v. Voigt, 700 F.2d 341, 351-52 (7th Cir.1983), cert. denied & app'l dismissed sub nom., 464 U.S. 805, 104 S.Ct. 53, 78 L.Ed.2d 72 (1983); Strong, supra, 518 F.2d at 563; Miami Tribe, supra, 175 F.Supp. at 936-37 (interpreting the Treaty of Greenville to confer recognized title on the Miami Tribe of Oklahoma to certain lands described therein).
This court's holding does not stand for the proposition that whenever a treaty describes and refers to land claimed by an Indian tribe that such Indian tribe necessarily obtains recognized title in such land. Rather, this court has interpreted the language contained in the Treaty of Canandaigua which refers specifically to the plaintiffs. In this court's opinion, the Treaty's plain language confers reserved title to the Cayugas. The Treaty acknowledges lands "reserved" to the Cayugas, and refers to such land as their "reservation". Since the plaintiffs possess treaty-recognized title in the subject land, only Congress may divest the tribe of its title to this land. The fact that the Cayugas may no longer reside on the subject land is simply not a legally sufficient defense to the plaintiffs' claims, which are based upon federally recognized title. Cf. Solem, supra, 465 U.S. at 470, 104 S.Ct. at 1166; Rosebud Sioux Tribe, supra, 430 U.S. at 587-88, 97 S.Ct. at 1363-64; De Coteau, supra, 420 U.S. at 444, 95 S.Ct. at 1092-93; Mattz, supra, 412 U.S. at 504-05, 93 S.Ct. at 2257-58. See also F. Cohen, Handbook of Federal Indian Law (1982 ed.) at 493.
(b) New York's interest concerning the subject land.
The defendants claim that the Treaty could not have conveyed recognized title to the plaintiffs because such conduct would have purportedly divested New York State of its alleged fee title interest in the land without affording the defendants the due process and just compensation required by the Fifth Amendment of the United States Constitution. They allege that Federal Treaty Commissioner Timothy Pickering believed that New York State owned fee title to the subject land, and that the only means by which title to the land could be altered would be with the consent of the New York State legislature. They further contend that neither the United States Senate nor the State of New York believed that the Treaty of Canandaigua conferred any rights upon the Cayuga Indian Nation other than those rights the plaintiffs already possessed. Finally, they argue that had the State of New York understood the Treaty of Canandaigua to be interfering with New York's alleged property rights in the subject land, the State would have objected to this Treaty, as it had concerning the 1784 Confederal Treaty of Fort Stanwix and the 1789 Confederal Treaty of Fort Harmar.[8]
*116 It is well settled that a State's affairs with an Indian tribe are subject to the paramount authority of the federal government governing such matters. Tuscarora Nation of Indians v. Power Authority of New York, 257 F.2d 885, 891 (2d Cir.1958); cert. denied 358 U.S. 841, 79 S.Ct. 66, 3 L.Ed.2d 76 (1958) ("[n]ot only has Congress not abandoned the field with respect to the property interests of Indian tribes in the State of New York, but it has ... pointed up and reaffirmed its paramount authority over Indian tribal lands); Mulkins v. Snow et al., 232 N.Y. 47, 51, 133 N.E. 123 (Ct. App.1921) (Pound, J.) ("[w]hen the state of New York legislates in relation to [Indian] affairs, its action is subject to the paramount authority of the federal government").
Contrary to the defendants' assertions, the State of New York did not possess a property interest in the subject land. Their interest in this land was, at most, a right of preemption the right to purchase the property if and when the plaintiffs' title to the land was extinguished. Such a right of preemption is not a property right, but rather a mere expectancy concerning the property, with no right vesting in such person until Congress acts to extinguish the Indian interest in the land. See e.g., F. Cohen, Handbook of Federal Indian Law (1982 ed.) at 514 and cases cited therein. Once New York State ratified the United States Constitution, relations with Indian tribes and authority over Indian lands fell under the exclusive province of federal law. County of Oneida v. Oneida Indian Nation of New York, 470 U.S. 226, 234, 105 S.Ct. 1245, 1251, 84 L.Ed.2d 169 (1985), reh'g denied 471 U.S. 1062, 105 S.Ct. 2173, 85 L.Ed.2d 491 (1985). Thus, the conditions under which New York's right of preemption to the subject property could be exercised by the State are governed solely by federal law. Oneida Indian Nation of New York v. County of Oneida, 414 U.S. 661, 670, 94 S.Ct. 772, 779, 39 L.Ed.2d 73 (1974). The Treaty of Canandaigua was simply an assertion by the federal government of its superior authority over matters involving Indian affairs granted to the federal government by the Constitution; it did not divest the State of New York of any property right concerning the subject land.
Defendants' contention that the Treaty cannot be interpreted as conferring reserved title to the Cayugas because of the State's apparent acquiescence concerning the ratification of the Treaty is also without merit. As this court has noted, by its ratification of the Treaty the federal government did not divest the State of New York of any property interest in the subject land. Moreover, as the plaintiffs point out, any actions taken by the State relating to the Treaties of Fort Stanwix and Harmar treaties which were entered into while this Nation was operating under the Articles of Confederation are irrelevant in interpreting the rights conferred by the 1794 Treaty of Canandaigua. While the State retained certain rights with respect to Indian lands within its borders under the Articles of Confederation, such rights were ceded by the State to the federal government by the State's ratification of the Constitution. Any preemptive rights the State had concerning the purchase of the subject land were necessarily subject to the federal government's power regarding the extinguishment of the Cayugas' title to this land; see e.g., Cayuga I, 565 F.Supp. at 1312 n. 10; for only Congress may divest an Indian tribe of its recognized title to Indian land. Cf. Solem, supra, 465 U.S. at 470, 104 S.Ct. at 1166; Rosebud Sioux Tribe, supra, 430 U.S. at 587-88, 97 S.Ct. at 1363-64; De Coteau, supra, 420 U.S. at 444, 95 S.Ct. at 1092-93; Mattz, supra, 412 U.S. at 504-05, 93 S.Ct. at 2257-58. The State of New York's actions or inactions regarding the ratification of the Treaty of Canandaigua did not somehow exempt the State from the normal operation of federal law concerning the diminishment of an Indian reservation.
Simply put, the plain language of the Treaty of Canandaigua indicates to this court that this Treaty conferred recognized title to the Cayugas concerning the subject property. The State of New York did not have a compensable property interest in this land at the time this Treaty was ratified. New York's failure to object to the *117 federal government's ratification of the Treaty of Canandaigua is not a ground for this court to conclude that this Treaty did not confer recognized title to the plaintiffs concerning the subject land. Accordingly, the plaintiffs' motion for partial summary judgment must be granted, as the affirmative defense of abandonment is legally insufficient to defeat the plaintiffs' claim to the subject land.
(2) Plaintiffs' physical abandonment of the land.
The defendants contend that proof of the plaintiffs' physical abandonment of this land precludes the Cayugas from prevailing on the claims asserted in the present action.[9]
Relying on several affidavits of Dr. Francis G. Hutchins and numerous exhibits submitted therewith, the defendants contend that there is no evidence that the Cayuga tribe ever occupied the subject land after 1794.[10] They claim that in that year, the Cayugas, led by an Indian named Fish Carrier, (whom the defendants allege was the Cayugas' "supreme leader" from 1775 to 1796) left Buffalo Creek and relocated to Grand River in Canada.[11] They further allege that the Indians who remained in the subject lands after 1794 were not members of the Cayuga tribe.[12]
The plaintiffs dispute these contentions. They claim that Fish Carrier was never a League Chief of the Cayugas, and that there was no one supreme leader of the Cayugas.[13] The plaintiffs also disagree with the defendants' assertions concerning the time of the exodus of the Cayugas from the subject land to Grand River. While they concede that some members of the tribe lived at Buffalo Creek from 1780 to 1794,[14] they claim that:
[T]he historical record is clear that other members of the Cayuga Nation, under the leadership of other Cayuga chiefs, continued to live on and occupy the Reservation at Cayuga Lake well after the treaties with the State of New York in 1789 and 1795 and probably into the early years of the nineteenth century.[15]
The plaintiffs proffered several exhibits to the court which supported their position that some members of the Cayuga tribe resided on the subject land some time after 1794.
It is clear that there are questions of fact concerning whether Fish Carrier was a supreme leader of the Cayugas who led all members of the Cayuga tribe out of the subject land in 1794. Both parties have proffered evidence to this court which supports their respective positions. However, even if the defendants are correct in their assertions concerning the Cayugas' physical abandonment of the land at issue, the plaintiffs are nevertheless entitled to partial summary judgment. As stated earlier by this court, proof of a tribe's physical abandonment of land is only a defense to a claim which is based upon aboriginal title to such land. This court has found that the plaintiffs obtained recognized title to the subject land by the Treaty of Canandaigua, and therefore only Congress can divest the plaintiffs of their title to this land. Thus, evidence of the plaintiffs' physical abandonment of the subject land is both irrelevant and immaterial to the present action, which is based upon reserved title to such land.
*118 Conclusion
The 1794 Treaty of Canandaigua conferred recognized title to the Cayugas concerning the land at issue in this proceeding. This Treaty did not deprive the State of New York of any property interest in such land, because the State only possessed, at most, a right of preemption regarding the subject land, i.e., the right to purchase the property if and when the Cayugas' title to the land was extinguished by the federal government. New York's acquiescence concerning federal ratification of the Treaty of Canandaigua did not prevent the plaintiffs from obtaining recognized title to the subject property. Finally, proof of the plaintiffs' physical abandonment of the property at issue is irrelevant in a claim for land based upon reserved title to Indian land, for such title can only be extinguished by an act of Congress.
Accordingly, plaintiffs' motion for partial summary judgment is granted, and defendants' motion for summary judgment is denied.
IT IS SO ORDERED.
NOTES
[1] Plaintiffs maintain that their members are the direct successors in interest to the Cayuga Nation of the Six Nation Iroquois Confederacy which, until the acts complained of in this suit, occupied the land at issue since time immemorial. Cayuga I, 565 F.Supp. at 1302. The Six Nations in this Confederacy were comprised of the Oneida, Tuscarora, Mohawk, Onondaga, Cayuga and Seneca Nations. Id. at 1303.
[2] In fact, the plaintiffs concede that "[b]ecause aboriginal title is based upon continued use and occupancy of the land, aboriginal title can be voluntarily abandoned." See plaintiffs' memorandum in opposition to defendants' motion for summary judgment, p. 9.
[3] In analyzing the provisions of this Treaty, this court is mindful of the general rule courts must follow in interpreting Indian treaties. This axiom provides that "[d]oubtful expressions are to be resolved in favor of the weak and defenseless people who are the wards of the nation, dependent upon its protection and good faith." McClanahan v. State Tax Commission of Arizona, 411 U.S. 164, 174, 93 S.Ct. 1257, 1263, 36 L.Ed.2d 129 (1973) (citing Carpenter v. Shaw, 280 U.S. 363, 367, 50 S.Ct. 121, 122, 74 L.Ed. 478 (1930)). See also Choctaw Nation v. Oklahoma, 397 U.S. 620, 631, 90 S.Ct. 1328, 1334, 25 L.Ed.2d 615 (1970), reh'g denied 398 U.S. 945, 90 S.Ct. 1834, 26 L.Ed.2d 285 (1970) ("treaties with the Indians must be interpreted as they would have understood them, and any doubtful expressions in them should be resolved in the Indians' favor") (citations omitted); F. Cohen, Handbook of Federal Indian Law (1982 ed.) at 221-22.
[4] See 7 Stat. 44. The treaty referred to in Article II concerning the State of New York was the 1789 treaty entered into between the plaintiffs and the State. By this treaty, the Cayugas relinquished approximately 3,000,000 acres in what is now central New York State to the State, reserving for their own use the 64,015 acres that is the subject of the present dispute. Cayuga I, 565 F.Supp. at 1303-04.
[5] Defendants' memorandum in opposition to plaintiffs' motion for partial summary judgment ("Def.Resp.Memo."), p. 3.
[6] In fact, neither Ray nor his victim were members of the Seneca Nation.
[7] Defendants' Reply Memorandum, p. 4. The court notes that in his sixth affidavit submitted to this court, Dr. Francis G. Hutchins states that in both the Treaty of Greenville and the Treaty of Canandaigua "the federal government acknowledged that the signatory tribes had a continued right to use and occupy certain land", and that neither of these treaties "conveyed fee-simple title to the signatory tribes." Sixth affidavit of Dr. Francis G. Hutchins, 11/14/90 ("6th Hutchins Aff."), ¶ 6(r). However, this legal argument is not only improper under Rule 10(c) of the local rules for the Northern District of New York, but it is also irrelevant in this court's analysis of the Treaty. As stated supra, the interpretation of language contained in a treaty is not a matter of fact, but rather a question of law for a court to decide. See Sioux Tribe, supra, 500 F.2d at 462; Ringrose, supra, 788 F.2d at 643 n. 2; and Strong, supra, 518 F.2d at 563.
[8] See generally Def.Resp.Memo., pp. 4-10.
[9] It appears as though this argument in support of their motion for summary judgment is based on the defendants' erroneous assumption that the plaintiffs only possessed aboriginal title to the subject land. Nevertheless, a brief review of this argument is warranted.
[10] See e.g., fifth affidavit of Dr. Francis G. Hutchins, 9/28/90, ¶ 5(1); fourth affidavit of Dr. Francis G. Hutchins, 8/29/90 ("4th Hutchins Aff."), ¶ 5(nn).
[11] 4th Hutchins Aff., ¶ 5(a)-(d); 6th Hutchins Aff., ¶ 6(f)-(h).
[12] 4th Hutchins Aff., ¶ 5(ii)-(jj).
[13] Affidavit of Dr. Elizabeth Tooker, 9/26/90, ¶ 6.
[14] See id. ¶¶ 8-9.
[15] Id., ¶ 9. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1862793/ | 612 N.W.2d 423 (2000)
Ruth JONES, Individually and as Next Friend of Shree Markita Lee, a Minor, Plaintiffs-Appellants,
v.
Sergeant Charles POWELL, Defendant-Appellee, and
City of Detroit, Detroit Police Officers Paul Boyett, Jeffery Bouyer, Durrell Cooper, Gregory Jones, Kenneth Winslow, Lieutenant Cotton, jointly and severally, Defendants.
Docket No. 111842.
Supreme Court of Michigan.
July 5, 2000.
Constitutional Litigation Associates, P.C. (by Hugh M. Davis, Jr.), Detroit, for the plaintiff-appellant.
City of Detroit Law Department (by Phyllis A. James and Joanne D. Stafford) Detroit, for the defendant-appellee.
Opinion
PER CURIAM.
The plaintiff brought this action against individual police officers, seeking damages on various theories arising out of their forced entry into her home in search of a suspect. Some claims were dismissed, and *424 the jury found for the defendants on others. However, it found in plaintiff's favor on her claim that the actions of one officer violated her and her daughter's rights under the Michigan Constitution. The Court of Appeals reversed, with the majority basing its decision on the conclusion that the plaintiff had not established that the defendant officer's actions were undertaken pursuant to a custom, policy, or practice of the Detroit Police Department.
We agree with the result reached by the Court of Appeals, though not with the rationale. Rather, we conclude that there is no judicially inferred cause of action under circumstances like those presented in this case. Therefore, we affirm the judgment of the Court of Appeals.
I
The facts underlying this action were summarized by the Court of Appeals as follows:
On October 29, 1991, several Detroit police officers were pursuing an individual suspected of assault and operating a stolen vehicle. The officers believed that the suspect ran into a nearby house owned by [plaintiff] Ruth Jones.... Plaintiff was home with her minor daughter ... when she heard a man's voice yell, "He's in 17331," followed by the sounds of a crash and a window breaking. Plaintiff and her daughter ran to a back bedroom for several minutes. Plaintiff heard loud voices saying, "B___, open up the mother f___ing door, we know he's in there." Plaintiff returned to the living room, where she saw that the front storm door and inner door had been forcefully opened. However, a security gate remained locked. Plaintiff told the officers that no one was in the house but plaintiff and her baby.
Pursuant to the officers' demands, plaintiff retrieved her keys and opened the security gate. Plaintiff testified that the officers entered the house and that two of the officers, defendants Powell and Kenneth Winslow, pointed their guns at her. Plaintiff was allowed to go next door to her sister's house, while the officers, with the aid of a police dog, searched plaintiff's home. However, no one was found inside. Plaintiff testified that she did not give the officers consent to enter or search the house. [227 Mich.App. 662, 665-666, 577 N.W.2d 130 (1998).]
Plaintiff Jones, individually, and on behalf of her daughter, brought this action in Wayne Circuit Court, against the city of Detroit, Powell, Winslow, and several other Detroit police officers. She advanced various theories, alleging false imprisonment and arrest, assault and battery, and intentional infliction of emotional distress. She also claimed that the defendants, acting under color of state law and pursuant to Detroit Police Department policy, deprived plaintiff and her daughter of their federal civil rights. Finally, plaintiff alleged that the defendants violated their rights under the Michigan Constitution.
The defendants initially removed the action to the United States District Court for the Eastern District of Michigan, but the District Court remanded plaintiff's state claims to the circuit court.
The circuit court granted summary judgment for the city of Detroit on all plaintiff's claims, and the case proceeded to trial against the individual officers. Shortly after the trial began, plaintiff agreed to dismiss all her claims against the individual defendants except Powell and Winslow. After the close of plaintiff's proofs, the defendants moved for a directed verdict on plaintiff's constitutional claims, arguing that Michigan did not recognize a cause of action against individual officers under the Michigan Constitution. The circuit court initially took the matter under advisement, but denied the motion at the close of the defense case.
The jury returned a verdict of no cause of action with respect to defendant Winslow, and found in favor of defendant Powell on all theories except the constitutional *425 claims.[1] On those claims, the jury awarded $75,000 to plaintiff Jones, and $126,000 to her daughter.
After the trial court denied defendant Powell's motions for judgment notwithstanding the verdict or a new trial, he appealed.
II
The Court of Appeals reversed. Much of the analysis focused on our decision in Smith v. Dep't of Public Health, 428 Mich. 540, 410 N.W.2d 749 (1987), aff'd. sub nom. Will v. Dep't of State Police, 491 U.S. 58, 109 S.Ct. 2304, 105 L.Ed.2d 45 (1989). All three judges of the Court of Appeals believed that a damages action should not be available against an individual defendant for violation of state constitutional rights. Because of the availability of alternative remedies against such defendants, the majority would have limited Smith to actions against the state, explaining:
[W]e read Smith as recognizing a narrow remedy against the state where none otherwise would have existed. Conversely, we believe that none of the concerns identified in Smith that support a damage remedy for violations of the state constitution are applicable when the party that is alleged to have violated a plaintiff's state or federal constitutional rights is a municipality or an individual municipal employee rather than the state.
In cases involving entities other than the state as a party defendant, the plaintiffs have available a number of alternative remedies. This is because municipalities, unlike states and state officials sued in an official capacity, are not protected by the Eleventh Amendment, which, of course, safeguards the state's sovereignty in our federal system of government. Lake Country Estates, Inc. v. Tahoe Regional Planning Agency, 440 U.S. 391, 99 S.Ct. 1171, 59 L.Ed.2d 401 (1979); Fitzpatrick v. Bitzer, 427 U.S. 445, 456, 96 S.Ct. 2666, 49 L.Ed.2d 614 (1976). Accordingly, local government units may be sued in federal or state court under § 1983. Monell [v. New York City Dep't of Social Services, 436 U.S. 658, 690, n. 54, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978) ]; Moore v. Detroit, 128 Mich.App. 491, 499, 340 N.W.2d 640 (1983). Relatedly, it is clear that individual government employees cannot seek immunity for their intentional torts. Blackman v. Cooper, 89 Mich.App. 639, 643, 280 N.W.2d 620 (1979).
Here, plaintiffs were free to, and did, assert claims for false arrest and imprisonment, assault and battery, intentional infliction of emotional distress, and deprivation of civil rights in violation of § 1983. Accordingly, there simply was no justification under Smith for plaintiffs here to assert state constitutional violation claims, even claims alleging an offensive custom or policy, against these municipal and individual defendants. [227 Mich.App. at 671-672, 577 N.W.2d 130.]
Despite this view, under MCR 7.215(H) the majority felt constrained by an earlier decision in Johnson v. Wayne Co., 213 Mich.App. 143, 540 N.W.2d 66 (1995), to recognize a damages cause of action against individual defendants for violation of a plaintiff's constitutional rights. Johnson and Marlin v. Detroit (After Remand), 205 Mich.App. 335, 517 N.W.2d 305 (1994), however, also held that in an action against an entity or person other than the state, the plaintiff is required to prove that the alleged constitutional violations occurred by virtue of a custom or policy of the governmental agency involved.[2] The majority *426 concluded that defendant was entitled to judgment because there was no evidence that his actions were pursuant to such a custom or policy.[3]
The Court of Appeals remanded the case for entry of a judgment of no cause of action. The plaintiff has filed an application for leave to appeal from that decision.
III
We agree with the Court of Appeals majority that our decision in Smith provides no support for inferring a damage remedy for a violation of the Michigan Constitution in an action against a municipality or an individual government employee. In Smith, our consideration of the issue focused on whether such a remedy should be inferred against the state, which is not subject to liability under 42 U.S.C. § 1983. The holding in Smith was set forth in a memorandum opinion summarizing the Court's conclusions. It included the following:
5) Where it is alleged that the state, by virtue of custom or policy, has violated a right conferred by the Michigan Constitution, governmental immunity is not available in a state court action.
6) A claim for damages against the state arising from violation by the state of the Michigan Constitution may be recognized in appropriate cases. [428 Mich. at 544, 410 N.W.2d 749 (emphasis added).]
Of the several separate opinions, the one that extensively considered the question was that of Justice Boyle. She noted the United States Supreme Court's recognition of a damage remedy in Bivens v. Six Unknown Named Federal Narcotics Bureau Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), and explained:
We would recognize the propriety of an inferred damage remedy arising directly from violations of the Michigan Constitution in certain cases. As the Bivens Court recognized, there are circumstances in which a constitutional right can only be vindicated by a damage remedy and where the right itself calls out for such a remedy. On the other hand, there are circumstances in which a damage remedy would not be appropriate. The absence of any other remedy would, as in Bivens, heighten the urgency of the question. Justice Harlan, concurring in Bivens, states that "[t]he question then, is, as I see it, whether compensatory relief is `necessary' or `appropriate' to the vindication of the interest asserted." 403 U.S. [at] 407 [91 S.Ct. 1999]. In answering this question in the positive, Justice Harlan commented, "[f]or people in Bivens' shoes, it is damages or nothing." Id., p. 410 [91 S.Ct. 1999]. Where a statute provides a remedy, the stark picture of a constitutional provision violated without remedy is not presented. While a Bivenstype *427 action may still be inferred, see Carlson v. Green [446 U.S. 14, 100 S.Ct. 1468, 64 L.Ed.2d 15 (1980) ] (federal tort claims remedy no bar to Bivens action), the existence of a legislative scheme may constitute "special factors counselling hesitation," Bivens, supra, p. 396 [91 S.Ct. 1999], which militate against a judicially inferred damage remedy. [428 Mich. at 647, 410 N.W.2d 749.]
Smith only recognized a narrow remedy against the state on the basis of the unavailability of any other remedy. Those concerns are inapplicable in actions against a municipality or an individual defendant. Unlike states and state officials sued in an official capacity, municipalities are not protected by the Eleventh Amendment. Lake Country Estates, supra at 400-401, 99 S.Ct. 1171. A plaintiff may sue a municipality in federal or state court under 42 U.S.C. § 1983 to redress a violation of a federal constitutional right. Monell, supra at 690, n. 54, 98 S.Ct. 2018 and accompanying text. Further, a plaintiff may bring an action against an individual defendant under § 1983 and common-law tort theories.
Accordingly, pursuant to MCR 7.302(F)(1), in lieu of granting leave to appeal, we affirm the judgment of the Court of Appeals.
WEAVER, C.J., and TAYLOR, CORRIGAN, and MARKMAN, JJ., concurred.
MARILYN J. KELLY, J. (concurring).
I write separately to point out that Smith v. Dep't of Public Health,[1] does not directly address whether plaintiffs can recover against individuals for violations of rights protected under the Michigan Constitution. Instead of expanding the holding of Smith to bar recovery against individuals, I would affirm the Court of Appeals decision solely on the ground that plaintiff has an alternative remedy. Id. at 651-652, 410 N.W.2d 749.
In Smith, this Court consolidated two related cases, Smith v. Dep't of Public Health and Will v. Dep't of Civil Service. The plaintiff in Smith, a ward of the state, was committed to an institution for the mentally retarded at the age of nineteen months; as a result of this early evaluation, he spent his entire life in state institutions. Smith, supra at 639, 410 N.W.2d 749. His estate brought suit against various state agencies[2] alleging causes of action for (1) false imprisonment, (2) negligent and intentional breaches of the state's duty to care for the plaintiff, and (3) violations of his due process and equal protection rights under the Michigan Constitution. It also sought damages under 42 U.S.C. § 1983. Id. at 551, 410 N.W.2d 749.
In Will, the plaintiff was a state employee. He believed that he had been passed over for a promotion with the State Police because a security check revealed that his brother was a student activist. Id. at 546, 410 N.W.2d 749. He brought suit against the Department of Civil Service and the Department of State Police, as well as the director of the State Police and the State Personnel Director, but in their official capacities only. Id. at 547, 583, 410 N.W.2d 749. He alleged various state and federal constitutional violations.
Neither the plaintiff in Smith nor in Will claimed that a state agent, acting individually and not in an official capacity, violated his state constitutional rights. Smith did not decide whether an individual state agent can be held liable for such violations. Therefore, I cannot agree that *428 Smith always precludes relief in cases such as the case on appeal. Smith addresses whether a cause of action for a state constitutional violation is available against the state; it does not hold that an action is available against the state, alone.
Smith does limit recovery for violations of state constitutional rights to specific situations where a plaintiff has no alternative remedy. Here, plaintiff does have alternative remedies; she was able to pursue state common-law tort claims as well as an action under 42 U.S.C. § 1983 against the individual police officers for violation of her federal constitutional rights. The existence of a federal cause of action does not necessarily protect an individual's state constitutional rights. However, I agree with Judge Murphy's assessment that plaintiffs' § 1983 action vindicated their state constitutional rights. The federal and state constitutional provisions at issue are sufficiently analogous for the purposes of this case.[3]
It may well be that alternative remedies will frequently exist for violations arising from the state constitution. But one should not assume that will always be the case. I would not give Smith so expansive an interpretation as this per curiam does, foreclosing relief to future plaintiffs who have no alternative remedy when individual state officials violate their state constitutional rights.
A grant of leave to appeal would be a more appropriate vehicle for the purpose of holding that no cause of action exists here.
MICHAEL F. CAVANAGH, J., concurred with MARILYN J. KELLY, J.
YOUNG, J., took no part in the decision of this case.
NOTES
[1] I.e., assault, false arrest, false imprisonment, and intentional infliction of emotional distress.
[2] The majority also disagreed with this part of the Johnson decision, explaining:
Again, while we are constrained to follow Johnson, we believe that the Johnson Court not only erred in allowing a Smith-based constitutional tort claim to be brought against individual governmental employees, but confused matters even further by applying the custom or policy standard from Smith in determining liability. The custom or policy standard first arose as a means of holding a local government liable under § 1983 for the acts of its agents. See Monell, supra at 690-691, 98 S.Ct. 2018. Justice Boyle's opinion in Smith, in turn, merely suggested that the same standard should apply to hold the state liable for damages where a state custom, policy, or practice mandated the state official or employee's actions. See Smith, supra at 642-643, 410 N.W.2d 749. Contrary to the decision in Johnson, because constitutional tort claims brought solely against individual municipal employees have nothing to do with whether the municipality itself can be held liable, the custom or policy analysis derived from § 1983 cases simply ought not to apply. [227 Mich.App. at 676, n. 4, 577 N.W.2d 130.]
[3] Judge Murphy concurred in the result, but disagreed with some of the majority's reasoning. He did not believe that Johnson decided that it was appropriate to infer the existence of a constitutional tort. Rather, Johnson presumed that such an inference was appropriate and then disposed of the case on the ground that the plaintiff failed to present the proof necessary to prevail in such a suit. Judge Murphy argued that a judicially inferred cause of action under the Michigan Constitution is unwarranted in this case, principally because of the availability of damages under 42 U.S.C. § 1983, for violations of the analogous provisions of the federal constitution.
[1] 428 Mich. 540, 410 N.W.2d 749 (1987).
[2] Plaintiff's estate sued the state of Michigan, the Department of Public Health, the Michigan Home and Training School, the Lapeer State Home and Training School, Oakdale Center for the Developmentally Disabled, the State Institution Commission, the State Hospital Commission, and the Welfare Department. See Smith v. Michigan, plaintiff's motion for rehearing.
[3] Our holding is limited to the unique circumstances of the present case. We in no way disagree with this Court's prior recognition that Const. 1963, art. 1, § 11 provides greater protection than its federal counterpart in certain situations. See Sitz v. Dep't of State Police, 443 Mich. 744, 506 N.W.2d 209 (1993). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2207444/ | 208 Cal.App.2d 17 (1962)
RICHARD C. WONG et al., Plaintiffs and Appellants,
v.
PAINE, WEBBER, JACKSON & CURTIS, Defendant and Respondent.
Civ. No. 25869.
California Court of Appeals. Second Dist., Div. Three.
Sept. 28, 1962.
Harry M. Irwin for Plaintiffs and Appellants.
Stephens, Jones, La Fever & Smith, Eugene W. Bell and Donald P. Clark for Defendant and Respondent.
SHINN, P. J.
The crucial question upon this appeal is the following: Was the measure of damages for conversion of corporate stock, which was available for purchase upon stock exchanges, to be computed at $35.125 per share, its value at the date of conversion, or at $96.875, its value eight months later. Arbitrators duly appointed to decide this and other questions used the former figure in computing plaintiffs' damages and awarded them $575. Plaintiffs moved the court to amend the award by increasing it to $13,355, based upon the higher valuation. The motion was denied; the order was treated by the parties as an affirmance of the award, and plaintiffs have appealed.
Under the terms of the arbitration agreement the arbitrators were to render a decision in accordance with California law, the question whether the law had been correctly applied being subject to review by the court.
The following material facts were found by the arbitrators. Defendant, a copartnership, was a stock broker and plaintiffs were its customers, trading on a margin account, under a contract reading in part as follows: "Reports of the execution of orders and statements of my accounts shall be conclusive if not objected to in writing, the former within two days, and the latter within ten days, after forwarding by you to me by mail or otherwise." All the transactions were under and pursuant to the quoted provisions of the contract.
March 23, 1959, plaintiffs placed with defendant two orders of 200 shares each for the purchase of American Motors stock at $32.125 per share; March 23, 1959, defendant notified plaintiffs by mail that both orders had been executed; March 28, 1959, defendant claiming that only one order had been received, and that one confirmation was in error, gave notice to plaintiffs cancelling the same and did not purchase the stock; March 30, 1959, plaintiffs demanded delivery of the 200 shares in question, which demand was, and ever since has been refused; the market value of American Motors on March 30, 1959, was $35.125 per share and on November 4, 1959, it was $96.875 per share. On October 10, 1959, plaintiffs sold 1,440 shares, which was all their American Motors stock, at $46.875 per share.
[1] We may notice first defendant's contention that there *19 was no conversion of the stock for the reason that it was not purchased for plaintiffs' account. This contention is untenable.
Plaintiffs did not object after receiving written notice of the execution of the two orders and, therefore, were bound to pay for 400 shares of stock. Since plaintiffs were obligated to pay for the stock, defendant was obligated to deliver it. However plausible may have been defendant's contention that the second confirmation was issued in error, the arbitrators were warranted in disregarding this contention and in giving full effect to the provisions of the contract we have quoted, under which, upon the facts in evidence, each party was precluded from questioning the conclusiveness of the confirmations issued by defendant.
[2] Defendant relies upon and quotes authority for the rule that the statement of an account may be corrected upon a showing of error and mistake therein. This rule has no application where the parties have contracted that they shall be bound by and precluded from questioning the existence of certain facts established or to be established in a certain manner.
The right of the parties to contract with respect to the conclusiveness of statements of transactions had would seem to be particularly applicable to transactions between stock brokers and their customers when dealing with securities of fluctuating value.
Upon the question whether the damages should be computed upon the basis of the value of the stock on the date of its conversion or upon its value some eight months later, as plaintiffs contend, the rule which governs is found in present section 3336 of the Civil Code.
Prior to 1931, the section read: "The detriment caused by the wrongful conversion of property is presumed to be: First--The value of the property at the time of conversion, with the interest from that time, or, where the action has been prosecuted with reasonable diligence, the highest market value of the property at any time between the conversion and the verdict, without interest, at the option of the injured party; and Second--A fair compensation for the time and money properly expended in pursuit of the property." As amended, it read: "The detriment caused by the wrongful conversion of personal property is presumed to be: First--The value of the property at the time of the conversion, with the interest from that time, or, an amount sufficient to indemnify the party *20 injured for the loss which is the natural, reasonable and proximate result of the wrongful act complained of and which a proper degree of prudence on his part would not have averted; and Second--A fair compensation for the time and money properly expended in pursuit of the property."
Plaintiffs are relying upon the section as it read prior to the amendment, as if the amendment accomplished nothing. It is an untenable position.
[3] The amendment deprived the complaining party of the unqualified right to choose, as the basis for his damages, the highest value of the property between the date of the conversion and the trial. That was the very purpose of the amendment.
As early as 1873 in Baker v. Drake, 53 N.Y. 211 [13 Am.Rep. 507], 66 N.Y. 518 [23 Am.Rep. 80], the court pointed out the inequity of the rule as it formerly prevailed in California. In 1916 the author of an article in 4 California Law Review, page 246, emphasized the injustice of the rule, and stated cogent reasons for its amendment. He stated that with respect to stocks of fluctuating value to suppose that one would carry the property through all its fluctuations until the highest point would attribute to him supernatural shrewdness. The Legislature adopted this view in 1931. The facts of the present case graphically illustrate the harshness of the former rule and the reasons for the amendment. They also illustrate a situation in which the one seeking damages is not entitled to recover more than the amount of a loss that would not have been averted in the exercise of a proper degree of prudence.
On March 30, the date of the conversion, plaintiffs could have purchased the stock at $35.125 per share. Defendant would have been indebted to them for $575, the amount of the increase over $32.125 per share. If plaintiffs had purchased the 200 shares they would have run the risk of a loss if the price went down. They decided not to run this risk and did not buy the stock. Under the former rule, as plaintiffs construe it and seek to have it applied, they stood only to gain. If the price went down they could hold defendant to an accounting at $35.125 per share. If the price increased prior to the trial, as it did, defendant would have to pay them a profit of $60 per share, and this, despite the fact that plaintiffs sold all their stock at $46.875 per share less than a month before it advanced to $96.875 per share.
[4] The plain meaning of amended section 3336 is that the wronged party is precluded from recovering the amount *21 of a reasonably avoidable loss. He is, therefore, placed under the burden of proving the unavoidability of the loss for which he claims reimbursement.
[5] The decision of the arbitrators implies a finding that in the exercise of a proper degree of prudence plaintiffs would have purchased the stock on March 30 at $35.125 per share, and have recouped their loss by charging it to defendant. Plaintiffs do not deny that this would have been the prudent thing to do. They merely deny that they had a duty to do anything. They do not discuss the meaning of the amendment; they simply ignore it. They contend that it has been construed by the courts as permitting the recovery of damages based upon the highest price between the date of the conversion and the trial and they cite for this proposition Betzer v. Olney, 14 Cal.App.2d 53 [57 P.2d 1376], Friedman v. Renz, 31 Cal.App.2d 71 [87 P.2d 386] and Crofoot v. Blair Holdings Corp., 119 Cal.App.2d 156 [260 P.2d 156]. None of these cases lends support to their contention.
Upon the facts found by the arbitrators, clearly within their powers, the award was in accordance with the law of California and was properly affirmed by the court.
The order is affirmed.
Ford, J., concurred.
Files, J., concurred in the judgment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2287736/ | 244 F.Supp.2d 289 (2003)
The PRESBYTERIAN CHURCH OF SUDAN, Rev. John Sudan Gaduel, Nuer Community Development Services in U.S.A., Stephen Kuina, Fatuma Nyawang Garbang, and Daniel Wour Cluol, on behalf of all others similarly situated, Plaintiffs,
v.
TALISMAN ENERGY, INC. and the Republic of the Sudan, Defendants.
No. 01 CIV.9882 (AGS).
United States District Court, S.D. New York.
March 19, 2003.
*295 Carey D'Avino, Stephen A. Whinston, Berger & Montague, P.C, Philadelphia, PA, Lawrence Kill, Linda Gerstel, Anderson Kill & Olick, P.C, New York City, for Plaintiffs.
Joseph Cyr, Clifford Chance Rogers & Wells, New York City, for Defendants.
*296 OPINION
SCHWARTZ, District Judge.
I. Introduction
Plaintiffs, current and former residents of the Republic of the Sudan ("Sudan" or "Government"), bring this purported class action against Talisman Energy, Inc. ("Talisman") and Sudan, alleging violations of international law stemming from oil exploration activities conducted in that country. Specifically, plaintiffs allege that defendants collaborated to commit gross human rights violations, including extrajudicial killing, forcible displacement, war crimes, confiscation and destruction of property, kidnapping, rape, and enslavement. Collectively, plaintiffs claim that these activities amount to genocide. Talisman moves to dismiss this action on the basis of lack of subject matter jurisdiction, lack of personal jurisdiction, lack of plaintiffs' standing, forum non conveniens, international comity, act of state doctrine, political question doctrine, failure to join necessary and indispensable parties, and because equity does not require a useless act. For the reasons set forth below, Talisman's motion to dismiss is denied.
II. Factual Background[1]
A. Overview
This action arises out of the alleged activities of Talisman in southern Sudan. Plaintiffs claim that Talisman, a large Canadian energy company, collaborated with Sudan in "ethnically cleansing" civilian populations surrounding oil concessions located in southern Sudan in order to facilitate oil exploration and extraction activities. See Amended Class Action Complaint ("Amended Complaint"), at Ill. This policy of "ethnic cleansing"[2] was aimed at non-Muslim, African residents of southern Sudan, and entailed extrajudicial killing[3], forced displacement, military attacks on civilian targets, confiscation and destruction of property, kidnappings, rape, and the enslavement of civilians. See id. at U 1. In order to understand the current conflict in context, the Court presents some background information on Sudan and its turbulent history.
B. Geography and Population[4]
Sudan is a large African country roughly a quarter of the size of the United States. Its current population is approximately 37 million people[5], of which seventy percent are Sunni Muslim, a quarter practice indigenous *297 religions, and five percent are Christian. Most Muslims, who are predominantly of Arabic ethnicity, live in the north of the country; most non-Muslims, who are predominantly of African ethnicity, live in the south. The north-south conflict that has wracked Sudan for years has played out predominantly along these religious and ethnic lines.
C. History[6]
Sudan historically existed as a collection of small, independent kingdoms and principalities. In 1820-21, Egypt conquered and unified the northern portion of the country. While claiming all of present-day Sudan, Egypt was unable to establish effective control over southern Sudan, which remained largely fragmented. A religious leader, Muhammad ibn Abdalla, after unifying some of the tribes of western and central Sudan, led a nationalist revolt which culminated in the fall of Khartoum in 1885. Ibn Abdalla died thereafter, but the state survived until the arrival of an Anglo-Egyptian force under Lord Kitchener in 1898. For the next fifty years, Sudan was jointly administrated by Britain and Egypt.[7] With the consent of Egypt and Britain, Sudan achieved independence on January 1, 1956. The United States was among the first nations to recognize the new state. However, the Arab-controlled Khartoum government backtracked on a promise it had made to create a federal system. As a result, southern units of the Sudanese army mutinied, sparking seventeen years of civil war (1955-1972).[8]
The 1972 Addis Ababa agreement led to a temporary cessation in the north-south civil war. Under the terms of the agreement, southern Sudan was granted a degree of self-rule. In 1976, the religious "Ansars" ("followers") staged an unsuccessful coup attempt. Sudanese president Col. Gaafar Muhammad Nimeiri met with Ansar leader Sadiq al-Mahdi. The result of the negotiations between the government and the Ansars was a general amnesty and a release of political prisoners. In 1983, President Nimeiri declared his intention to transform Sudan into a Muslim Arab state and began to incorporate traditional Islamic punishments drawn from Shari'a (Islamic Law) into the Sudanese penal code. Al-Mahdi questioned President Nimeiri's credentials to Islamicize Sudanese society, and was promptly placed under house arrest. President Nimeiri declared a state of emergency, and Shari'a was applied more broadly. Amputations for theft and public lashings for alcohol possession became common. Southern, non-Muslim Sudanese living in the north were also subject to Shari'a, In light of these developments, the civil war, in abeyance since 1972, reignited.
In 1986, elections were held and a transitional military council turned over power *298 to a civilian government as promised. Al-Mahdi became prime minister and led a coalition government. During the next three years, the civil war intensified in lethality and the economy continued to deteriorate. In 1989, the army replaced the government with the Revolutionary Command Council for National Salvation led by General Omar Hassan al-Bashir. The military regime repudiated an earlier tentative peace agreement, and sought to restart negotiations with the southern Sudanese rebels without preconditions. These negotiations proved unsuccessful. According to plaintiffs, the post-1989 military regime has "dramatically intensified the religious and ethnic persecution of non-Muslim Sudanese by engaging in a campaign of terror, both domestically and internationally, against non-Muslims it perceives to be its enemies." Amended Complaint, at 1112. The military regime also accelerated the application of Shari'a throughout Sudan. In 1991, the military regime enacted the Criminal Act of 1991, which instituted Shan `a-based penalties nationwide, including amputation and stoning. In 1993, the government transferred all non-Muslim judges from southern Sudan to the north, and replaced southern judges with Muslim judges.
D. Current Conflict
Plaintiffs allege that the present government of Sudan is controlled by a "Talibanstyle Islamic fundamentalist movement" known as the National Islamic Front. Amended Complaint, at H12. Plaintiffs contend that the government of Sudan is prosecuting a "war of genocide" against the population in the southern part of the country. Amended Complaint, at 1114. This genocide, which plaintiffs also describe as a jihad, or holy war, is purportedly aimed at the forced Islamization of the south, and has resulted in approximately two million deaths and the displacement of four million people. See Amended Complaint, at U 14. Christians and those practicing traditional indigenous religions are subject to intense persecution, including extrajudicial killing, kidnapping, rape, enslavement, and confiscation of property. See id. at H 1.
Sudan's attacks on civilians have been widely acknowledged and condemned. Plaintiffs note that in 1997, Sudan was classified by the United States as a state sponsor of terrorism pursuant to the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., based, inter alia, on its record of terrorism and on the prevalence of human rights violations including slavery and restrictions on religious freedom. See Amended Complaint, at 1113. In September 2000, Commissioner Nina Shea of the United States Commission on International Religious Freedom expressed the Commission's view that "the government of Sudan is the world's most violent abuser of the right to freedom of religion and belief." Id. at ¶¶ 50(b). In March 2001, Secretary of State Colin Powell reported that "[t]here is perhaps no greater tragedy on the face of the Earth today than the tragedy that is unfolding in the Sudan." Id. at ¶¶ 50(c).
On October 31, 2001, President Bush extended the sanctions against Sudan, declaring that "the actions and policies of the Government of Sudan continue to pose an unusual and extraordinary threat to the national security and foreign policy of the United States." Amended Complaint, at K 13. Since the Amended Complaint was filed, President Bush signed the Sudan Peace Act, Pub.L. No. 107-245 (2002) ("Peace Act"). The Peace Act, which was passed unanimously in the Senate and by a vote of 359 to 8 in the House of Representatives, states that "[t]he acts of the Government of Sudan, including the acts described in this section, constitute genocide *299 as defined by the Convention on the Prevention and Punishment of the Crime of Genocide." Peace Act, at § 2(10). The Peace Act also condemns, inter alia, Sudan's overall human rights record, its role in tolerating slavery, its aerial bombardment of civilian targets. See id. at § 4(1). It also states that Sudan is systematically engaging in a policy of "low-intensity ethnic cleansing" to destroy the societies, culture, and economies of the Dinka, Nuer, and Nuba peoples. See id. at § 4(2).
E. Oil Connection
1. Overview
Plaintiffs contend that the current conflict in Sudan has evolved into an "oil war" for control of valuable petroleum resources in the south. See Amended Complaint, at K 11. Deposits of oil were discovered in 1979 by the Chevron Oil Company. Upper Nile, Unity, and Southern Kordofan provinces appear to be especially rich in oil deposits. However, the oil deposits in these areas are of a heavy and viscous nature, requiring sophisticated Western methods for extraction and processing. See id. at U 17. Consequently, the Sudanese government granted oil concessions to foreign oil companies. The other factor complicating oil exploration and extraction is the fact that the oil-rich areas lie in southern areas that had been outside of the government's control since 1982 by virtue of the civil war. See id. at 1116. Indeed, Chevron's exploration and extraction efforts came to an end in 1984 after several Chevron workers were killed. See id. at If 16. After an abortive attempt to restart operations in 1988, Chevron sold its concession to the Arakis Energy Corporation ("Arakis"), a Canadian company. See id. at 1116. According to plaintiffs, Arakis (and later Talisman) were aware from the outset that military action would be required to secure the concession for oil exploration and extraction. See id. at H 18.
According to plaintiffs, the Government's oil development policy and its violent campaign against ethnic and religious minorities were inextricably linked from the beginning. See id. at H 21. Plaintiffs allege that the Government saw its oil reserves as potential sources of capital to purchase missiles, tanks, bombers, helicopters, and other sophisticated armaments needed to intensify its "jihad " against the southern population. The Sudanese government realized it would be unable to successfully develop its oil reserves without outside aid. Plaintiffs describe the resulting arrangement between the Government and oil companies thusly:
In exchange for oil concessions, the Government promised to clear the area around the oil fields of the local population. The oil companies agreed to invest in the infrastructure, such as transportation, roads and airfields and communications facilities, to support exploration and the Government would use that same infrastructure to support its genocidal military campaign of ethnic cleansing against the local population. Under this unholy alliance, the oil companies would be able to maximize security around the oil installations and Sudan would get the capital necessary to wage a full scale war against the south.
Amended Complaint, at 1121. Plaintiffs allege that the Government's conflict with the south serves two purposesadvancing the jihad against the non-Muslim south, and depopulating areas around oil concessions. See id. at U1114-15.
2. Talisman
Talisman Energy, Inc. is the largest independent Canadian oil producer and is headquartered in Calgary, Alberta. See Amended Complaint, at 113. It conducts *300 activities throughout the world, with operations in Canada, the United States, the North Sea, Indonesia, Algeria, Trinidad, Colombia, and Sudan. See id. at U 3. It is a public company and its shares are traded on the Toronto and New York Stock Exchanges. See id. at 113. Within the United States, Talisman conducts ongoing and significant business through its wholly-owned subsidiary, Fortuna (U.S.) Inc. ("Fortuna"), and Rigel Petroleum, Inc. ("Rigel"). Fortuna is a Washington corporation; Rigel is a Utah corporation. The extent of Talisman's presence in the United States is examined in depth infra.
On October 28, 1998, Talisman acquired all of the assets and liabilities of Arakis, including its Sudanese operations, for approximately $220 million in stock. See id. at 1122. Currently, Talisman operates in Sudan through a consortium of oil companies, called the Greater Nile Petroleum Operating Company Ltd. ("GNPOC"). See id. at ¶¶ 7. Talisman, through intermediate subsidiaries, owns or controls 25 % of GNPOC. See id. at 117. The other GNPOC constituents' are the Chinese National Petroleum Company (40%); Petronas Carigali Nile Ltd. of Malaysia (30%); and Sudapet Ltd. of Sudan (5%). See id. at H 7. In this action, Talisman is being sued for its own actions and omissions as well as in its capacity as successor-in-interest to Arakis and as a member of GNPOC. See id. at 113.
After GNPOC was formed, each of its constituent members took on specific areas or tasks. Talisman was in charges of exploration and production in certain areas known as Block 1, 2, and 4. See id. at 1119. This area totals approximately 130,000 acres of land with proven oil reserves and nearly 12 million acres of land with no proven oil reserves. See id. at 1119. Block 1, known as Unity field, is in an area northeast of the city of Bentiu. See id. at 1119. Block 2, known as Heglig field, is east of Block 1. Block 4, known as Kaikang field, lies to the south and west of Blocks 1 and 2. See id. at 1119. The areas covered by Blocks 1, 2, and 4 are inhabited primarily by the Dinka and Nuer peoples, who are Christian or practice traditional indigenous religions. See id. at 119.
3. Defendants' Alleged Conduct
Plaintiffs claim that Arakis had a "wellknown and established relationship with the Sudanese military." Amended Complaint, at 1122. In exchange for government protection, Arakis repaired Government military trucks and supplied basic utilities to nearby Government military bases. See id. at U 22. Arakis was aware that the Government was engaged in a campaign of "ethnic cleansing" to provide a cordon sanitaire to facilitate the exploration and extraction of oil. See id. at 1122.
Talisman commenced its operations in Sudan in October 1998. See id. at 1128. Plaintiffs contend that Talisman worked with the Government to devise a plan of security for the oil fields and related facilities. See id. at ¶¶ 26. Talisman hired its own military advisors to coordinate military strategy with the Government. See id. at ¶ 26. Specifically, Talisman would have regular meetings with Sudan's army intelligence unit and the Ministry of Energy and Mining during which the parties would discuss "how to dispose of civilians" in areas in which Talisman intended to operate. Id. at 1132. Based on the joint Talisman-Government strategy, "Government troops and allied militia engaged in an ethnic cleansing operation to execute, enslave or displace the non-Muslim, African Sudanese civilian population from areas that are near the pipeline or where Talisman wanted to drill." Id. at 1126. Talisman was and is aware that Government's "protection" of oil operations entailed *301 "ethnic cleansing" or genocide, including the murder of substantial numbers of civilians (including women and children); the destruction of civilian residences and villages; and the capture and enslavement of civilians who survived the military attacks. See id. at ¶ 33. Defendants' concerted actions are purportedly demonstrated by, inter alia, a May 7, 1999 communication from the Government's Petroleum Security Office in Khartoum to a satellite office in Heglig. See id. at ¶ 27. This directive, denominated as "very urgent," reads as follows:
In accordance with directives of His Excellency the Minister of Energy and Mining and fulfilling the request of the Canadian Company...the armed forces will conduct cleaning up operations in all villages from Heglig to Pariang.
Id. at ¶ 27. Plaintiffs claim that thousands of villages and at least seventeen churches were destroyed in the areas surrounding Talisman's oil fields, and that one, el-Toor, was located within walking distance of a Talisman site. See id. at ¶ 30. The same Government troops assigned to protect Talisman's oil operations participated in the armed campaign against ethnic and religious minorities in the Unity and Ruweng areas. See id. at ¶ 30. In the last year, Talisman has expanded operations in Block 4. This expansion was preceded by an extensive Government military campaign against at least seven Nuer villages. Talisman officials were and are aware of these military activities around its oil fields, and of the Government's tactics of targeting civilians. See id. at ¶ 48. At several points, the then-governor of Unity province advised Talisman officials of the violent displacement of the civilian population. See id. at ¶ 48.
In addition to this alleged direct support, Talisman also allegedly indirectly supported the Government's genocidal campaign. Plaintiffs note that Talisman, through GNPOC, built a network of allweather roads. See id. at ¶ 35. These roads were used by Government forces to launch military offensives against civilian targets. See id. at ¶ 35. Similarly, Talisman expanded an existing dirt runway in Heglig to accommodate large transport planes. See id. at ¶ 36. This runway was later regularly used, with Talisman's knowledge, for military purposes, including bombing and strafing attacks on civilian areas. See id. at ¶ 36. In October 2001, the Heglig airfield was used to bomb a United Nations relief site. See id. at ¶ 37. Another Talisman airfield, in the Unity area is also used by the Government to attack civilian targets. See id. at ¶ 38. GNPOC has also provided vehicles for use by the Government in its war against ethnic and religious minorities in the south. See id. at ¶ 39. Plaintiffs cite two examples. First, at the end of 1998, GNPOC gave the Government fifty camouflaged transport vehicles. See id. at ¶ 39. Second, Talisman worked with the Government to establish a military garrison at Wangkei. See id. at ¶ 39.
Plaintiffs also cite statements made by non-governmental organizations, United States government officials, United Nations officials, and others attesting to the gross human rights violations committed by Sudan. These statements also allege that the oil exploration and extraction activities taking place in Sudan are fueling the war on civilians. For example, plaintiffs cite a statement by the United Nations Commission on Human Rights: "[L]ong-term efforts by the various Governments of the Sudan to protect oil production have included a policy of forcible population displacement in order to clear oil producing areas and transportation routes of southern civilians." Id. at 1154(a). Plaintiffs allege that "Sudan has used its oil revenues to finance the creation *302 of a domestic arms industry necessary to assist in its prosecution of military operations against non-Muslim, African Sudanese minorities in light of the international arms embargo." Id. at ¶ 57.
F. Plaintiffs
Plaintiffs in this action claim to be the victims of the genocidal acts allegedly committed by Sudan and Talisman. They are pursuing this action on their own behalf and on behalf of all non-Muslim, African Sudanese residents of areas within fifty (50) miles of the GNPOC or other oil concession areas and transportation routes in Sudan. See Amended Complaint, at ¶¶ 66.
1. Presbyterian Church of Sudan
The Presbyterian Church of Sudan ("Presbyterian Church") is an unincorporated association of people of the Presbyterian faith who are or were residents of Sudan. See Amended Complaint, at ¶ 2(a). Its parishes are located in a broad area of Upper Nile province within and adjacent to the Unity and Heglig oil concessions.[9]See id. at ¶ 2(a). Plaintiffs claim the Presbyterian Church's churches have been bombed and destroyed and that its church leaders and parishioners have been displaced by Government forces because of their religion and proximity to the oil fields. See id. at ¶ 2(a).
2. Rev. John Sudan Gaduel
Rev. John Sudan Gaduel is a citizen of Sudan currently residing in Kenya and is Pastor of the Presbyterian Church of Sudan in Bentiu. See id. at ¶ 2(b). As a result of the alleged actions of defendants,[10] Rev. Gaduel was forced to seek refuge in Kenya for his own safety. See id. at ¶ 2(b). Rev. Gaduel established the South Sudan Operation Mercy in 1999, a non-denominational relief organization to coordinate emergency relief efforts for the displaced people of southern Sudan. See id. at ¶ 2(b).
3. Nuer Community Development Services in U.S.A.
Nuer Community Development Services in U.S.A. ("NCDS") is a non-profit corporation organized under the laws of the State of Minnesota in 1999. See id. at ¶ 2(e). Its mission is to assist Nuer refugees in the United States and those who remain in Sudan. See id. at ¶ 2(c). Members of NCDS are refugees who fled areas within or adjacent to Talisman's oil concessions in southern Sudan due to defendants' "ethnic cleansing" campaign against non-Muslim Africans. See id. at ¶ 2(c). NCDS members are now citizens of the United States or resident aliens. NCDS has chapters and/or members in states including New York, Nebraska, and Iowa. See id. at ¶ 2(c). Relatives of NCDS members in Sudan have been the subject of extrajudicial killings and kidnappings and have had their property destroyed or confiscated. See id. at ¶ 2(c).
4. Stephen Kuina
Stephen Kuina is a Sudanese citizen who lived in the village of Dibor. See id. at ¶ 2(d). On April 4, 2000, as part of the Government's "ethnic cleansing" campaign against non-Muslim, African Sudanese in oil producing areas, his village was attacked by helicopter gunships and infantry forces. See id. at ¶ 2(d). The military *303 action in Dibor led to deaths, property destruction, and the displacement of numerous villagers, including Kuina. See id. at 2(e).
5. Fatuma Nyawang Garbang
Fatuma Nyawang Garbang is a Sudanese citizen who currently resides in Illinois as a refugee. See id. at ¶ 2(e). Garbang is a Nuer of the Bui tribe and was born and raised in Bentiu. See id. at ¶ 2(e). In 1994, she and her husband were living in Ler when her village was bombed, allegedly as part of the Government's "ethnic cleansing" campaign against non-Muslim, African Sudanese in oil producing areas. See id. at ¶ 2(e). Garbang fled with her family and survived for twenty-one days hiding in the bush. See id. at ¶ 2(e). After seeking refuge in Kenya, Garbang returned to Ler and attempted to reestablish her home; however, repeated Government attacks in support of oil exploration and extraction activities made this impossible. See id. at ¶ 2(e).
6. Daniel Wour Cluol
Daniel Wour Cluol is a Sudanese citizen currently residing as a refugee in Iowa. See id. at ¶ 2(f). He was living in Kier in 1998 when the government attacked his village with infantry units and heavy bombers. See id. at ¶ 2(f). During the attack, civilians were killed and children were sold into slavery. See id. ¶ 2(f). Cluol fled the area, first to Ethiopia and later to the United States. See id. at ¶ 2(f).
G. Prior Proceedings
Plaintiffs filed their class action complaint on November 11, 2001, and filed an amended complaint on February 25, 2002. Plaintiffs seek a declaration that defendants have violated international law; an injunction restraining defendants from continuing to cooperate in committing "ethnic cleansing" against non-Muslim, African Sudanese; compensatory damages from both defendants; punitive damages from Talisman; and attorneys' fees. Talisman moves to dismiss this action on the basis of lack of subject matter jurisdiction, lack of personal jurisdiction, lack of standing (of plaintiffs), forum non conveniens, international comity, act of state doctrine, political question doctrine, failure to join necessary and indispensable parties, and on the grounds that equity does not require a useless act.
III. Legal Analysis
A. Nature of the Alleged Violations of International Law
1. History of the Alien Tort Claims Act
The primary basis for asserting the Court's jurisdiction is 28 U.S.C. § 1350, otherwise known as the Alien Tort Claims Act ("ATCA").[11] The ATCA itself is succinct and simple on its face:
The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.
28 U.S.C. § 1350.[12] Notwithstanding its brevity, however, the ATCA has dramatically *304 altered the legal landscape. The statute was passed by the first Congress as part of the Judiciary Act of 1789.[13] See Lawrence W. Newsman & David Zaslowsky, The Alien Tort Claims Act: How Far Will it Go?, N.Y.L.J., Jan. 2, 2003, at 3. Despite the fact that the ATCA has existed for over two hundred years, little is known of the framers' intentions in adopting itthe legislative history of the Judiciary Act does not refer to section 1350. See Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 105 n. 10 (2d Cir.2000). Judge Friendly proclaimed that "[t]his old and little used section is a kind of legal Lohengrin; although it has been with us since the first Judiciary Act [...], no one seems to know whence it came." IIT v. Vencap, Ltd., 519 F.2d 1001, 1015 (2d Cir. 1975).
As Judge Friendly noted, the ATCA was only invoked a handful of times for nearly two hundred years. That changed with the landmark case of Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir.1980). In that case, two Paraguayan citizens living in the United States brought an action for wrongful death against a Paraguayan police official who had allegedly tortured and killed the son and brother of the plaintiffs. The Second Circuit reversed the district court's dismissal for lack of subject matter jurisdiction and held that the ACTA provided a means of redress for violations of international law, such as the right to be free from torture. In this sense, the Filartiga court held that the ATCA does not grant new rights to aliens, but simply operated to open the federal courts "for adjudication of the rights already recognized by international law." Id. at 887. The Second Circuit's interpretation of the ACTA was intended to be a "small but important step in the fulfillment of the ageless dream to free all people from brutal violence." Id. at 890.
Filartiga proved to be a watershed opinion, catapulting a largely overlooked statute into the limelight as a means of vindicating rights under international law. Later decisions by both the Second Circuit and other courts have upheld and expanded the reasoning of the Filartiga court. See, e.g., Kadic v. Karadzic, 70 F.3d 232 (2d Cir.1995); Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88 (2d Cir.2000). An important aspect of this case is the nature of the alleged violations of international law. In order to be actionable under the Alien Tort Claims Act, a defendant's conduct must violate "well-established, universally recognized norms of international law." Kadic v. Karadzic, 70 F.3d 232, 239 (2d Cir.1995) (quoting Filartiga v. Pena-Irala, 630 F.2d 876, 888 (2d Cir.1980)). Courts must "interpret international law not as it was in 1789, but as it has evolved and exists among the nations of the world today." See Kadic, 70 F.3d at 238 (quoting Filartiga, 630 F.2d at 881). This in turn requires an examination of what international law is.
2. Sources of International Law
Perhaps the most widely-quoted enunciation of the sources of international law is found in the Statute of the International Court of Justice ("ICJ"). According to the Statute, the sources are as follows:
a. international conventions, whether general or particular, establishing rules *305 expressly recognized by the contesting states;
b. international custom, as evidence of a general practice accepted as law;
c. the general principles of law recognized by civilized nations;
d. subject to the provisions of Article 59, judicial decisions and the teachings of the most highly qualified publicists of the various nations, as subsidiary means for the determination of rules of law.
ICJ STAT. art. 38(1).[14] The Second Circuit has cited Article 38(1) as an authoritative reflection of the sources of international law. See Filartiga v. Pena-Irala, 630 F.2d 876, 881 n. 8 (2d Cir.1980). The Supreme Court's articulation of the sources of international law is similar. See, e.g., The Paquete Habana, 175 U.S. 677, 700, 20 S.Ct. 290, 44 L.Ed. 320 (1900); United States v. Smith, 18 U.S. (5 Wheat.) 153,160-61, 5 L.Ed. 57 (1820).
However, unlike the International Court of Justice, which does not operate on the basis of stare decisis[15] or the Supreme Court, which can choose whether or not to follow its own precedent, this Court, as an inferior court, is obligated to accept the law as it has been interpreted by the Supreme Court and Second Circuit. This is no less true with respect to questions of international law than any other question of law. Therefore, in addition to the sources of international law listed above, another must be addedinterpretations of international law of superior courts. See, e.g., United States v. Smith, 18 U.S. (5 Wheat.) 153, 160-61, 5 L.Ed. 57 (1820), quoted in Filartiga v. Pena-Irala, 630 F.2d 876, 880 (2d Cir.1980) (the law of nations may be ascertained by consulting, inter alia, "judicial decisions recognising and enforcing [international law]"); Hilton v. Guyot, 159 U.S. 113, 16 S.Ct. 139, 163, 40 L.Ed. 95 (1895) (in the absence of written international law, "the courts must obtain such aid as they can from [... ] judicial decisions."). Consequently, in this Court, the decisions of the Supreme Court and Second Circuit reflect the state of international law in addition to the traditional sources listed in the Statute of the International Court of Justice.
3. Jus Cogens Violations of International Law
The allegations in the Amended Complaint include charges of genocide, war crimes, torture, and enslavement.[16]See Amended Complaint at ¶¶ 1, 14, 15, 21, 23, 26, 30-33, 35-48, 58, 60-62. It is not disputed that such acts violate universallyrecognized norms of international law (though Talisman contends that corporations are not legally capable of violating international law). States practicing, encouraging, or condoning genocide, slavery or the slave trade, extrajudicial killings, torture, or systematic racial discrimination violate international law. See, e.g., RESTATEMENT (THIRD) OF FOREIGN RELATIONS § 702 (1987). Individuals committing such acts may also be liable under international law. See, e.g., Kadic v. Karadzic, 70 F.3d 232 (2d Cir. 1995) (holding that individuals may violate international law by committing acts of genocide, war crimes, or torture).
These types of acts alleged in the Amended Complaint are qualitatively different from other types of violations of international law. The Amended Complaint *306 is rife with accusations which, if proven true, would constitute behavior manifestly in violation of the most basic rules of international law and, indeed, of civilized conduct. Such acts violate peremptory norms, or jus cogens. See RESTATMENT (THIRD) OF FOREIGN RELATIONS § 702 cmt. n (1987) (stating that acts of genocide, slavery, and extrajudicial killing violate jus cogens norms); Siderman de Blake v. Republic of Argentina, 965 F.2d 699, 717 (9th Cir.1992); Tachiona v. Mugabe, 234 F.Supp.2d 401, 415-16 (S.D.N.Y. 2002). See also Declaration of James Crawford, S.C., at ¶ 37 ("The prohibitions against genocide, torture and slavery are peremptory norms of general international law[...].").
Violations of jus cogens norms constitute violations of obligations owed to all ("erga omnes"). See RESTATEMENT (THIRD) OF FOREIGN RELATIONS § 702 cmt. o (1987). See also id. at § 404:
A state has jurisdiction to define and prescribe punishment for certain offenses recognized by the community of nations as of universal concern, such as piracy, slave trade, attacks on or hijacking of aircraft, genocide, war crimes, and perhaps certain acts of terrorism even where [no other basis of jurisdiction] is present.
In other words, states may exercise universal jurisdiction over acts committed in violation of jus cogens norms.[17] This universal jurisdiction extends not merely to criminal liability but may also extend to civil liability. See id. at § 404 cmt. b. In addition to triggering the potentially universal exercise of jurisdiction, jus cogens violations may entail not only state but individual responsibility. For example, it is well-established in the post-World War II world that individuals may be held liable for acts of genocide, war crimes, or torture. See, e.g., Kadic v. Karadzic, 70 F.3d 232, 241-42 (2d Cir.1995).
The significance of this discussion is to emphasize that jus cogens violations of international law such as are alleged here are fundamentally different in character than other types of international law violations.[18] The fact that they are treated differently under international law (by permitting states to exercise universal jurisdiction over these crimes, and by entailing individual responsibility) reflects the fact that these acts are offenses of universal concern by virtue of the "depths of depravity the conduct encompasses, the often countless toll of human suffering the misdeeds inflict upon their victims, and the consequential disruption of the domestic and international order they produce." Tachiona v. Mugabe, 234 F.Supp.2d 401, 415-16 (S.D.N.Y.2002).
B. The Court Has Subject Matter Jurisdiction Under the ATCA
Talisman moves pursuant to FED. R. CIV. P. 12(b)(1) to dismiss for lack of subject matter jurisdiction. It is not disputed that in considering a motion to dismiss pursuant to FED. R. CIV. P. 12(b)(1), a court must assume as true factual allegations in the complaint and draw all reasonable inferences in the plaintiffs favor. See, e.g., Merritt v. Shuttle, 245 F.3d 182, 186 (2d Cir.2001). Plaintiffs claim jurisdiction in this case pursuant to 28 U.S.C. §§ 1330 *307 (actions against foreign states), 1331 (federal question), and 1350 (alien's action for tort). The instant motion to dismiss is made by Talisman only. Therefore, 28 U.S.C. § 1330, which is exclusively concerned with suits against foreign states, is not relevant to the instant discussion. The question is whether the Court has subject matter jurisdiction under the other two purported bases28 U.S.C. §§ 1331 and 1350. The parties devote several pages of their briefs addressing the question of whether the Court has subject matter jurisdiction under 28 U.S.C. § 1350. In contrast, both parties relegate their discussion about jurisdiction under 28 U.S.C. § 1331 to a footnote. Consequently, the Court first addresses the central subject matter jurisdiction disputenamely, whether jurisdiction lies under 28 U.S.C. § 1350.
1. Level of Review
Talisman contends that the Court must engage in a searching review of plaintiffs' allegations, at least for purposes of determining whether the Court has subject matter jurisdiction over this action. For support, Talisman turns to the Second Circuit's Kadic decision:
Because the Alien Tort Claims Act requires that plaintiffs plead a "violation of the law of nations" at the jurisdictional threshold, this statute requires a more searching review of the merits to establish jurisdiction than is required under the more flexible "arising under" formula of section 1331. [...]. Thus, it is not a sufficient basis for jurisdiction to plead merely a colorable violation of the law of nations. There is no federal subjectmatter jurisdiction under the Alien Tort Act unless the complaint adequately pleads a violation of the law of nations (or treaty of the United States).
Kadic, 70 F.3d at 238 (citation omitted). Talisman claims that this language requires a Court to subject a complaint to elevated scrutiny with respect to whether or not plaintiffs allege that defendants have violated the law of nations. Talisman also claims that the Alien Tort Claims Act is similar to the Racketeer Influenced and Corrupt Organizations Act ("RICO") inasmuch as both statutes provide a civil remedy for underlying criminal acts. Talisman concludes that the elevated pleading requirements of RICO should apply to ATCA claims.
Talisman's conclusion that a court must conduct a searching review of an ATCA claim is far from self-evident. While it is true that the language of the ATCA does not contain the relatively flexible term "arising under," it does not necessarily follow that a strict pleading requirement should apply. The court's holding in Kadic certainly does not mandate that result. Indeed, Talisman ignores the fact that the Second Circuit, on a motion for rehearing, emphasized that "the Alien Tort [Claims] Act has a broad scope [...]." Kadic v. Karadzic, 74 F.3d 377, 378 (2d Cir.1996).
Talisman's argument that the ATCA is similar to RICO and should therefore entail the same strict pleading requirement lacks precedential support. Pleading rules are governed by FED. R. CIV. P. 8(a), which requires merely a "short and plain statement of the grounds upon which the court's jurisdiction depends" and "a short and plain statement of the claim showing that the pleader is entitled to relief." Talisman does not suggest that an ATCA claim is subject to the strictures of FED. R. CIV. P. 9. It does argue, however, that the Court's strict RICO pleading requirements should "guide this Court in its inquiry into the sufficiency of plaintiffs' ATCA claims." Memorandum of Law in Support of Defendant Talisman Energy Inc.'s Motion to Dismiss ("Motion Brief), at 3. However, as the Supreme Court recently noted in *308 the employment discrimination context, a "requirement of greater specificity for particular claims is a result that `must be obtained by the process of amending the Federal Rules, and not by judicial interpretation.'" Swierkiewicz v. Sorema N.A., 534 U.S. 506, 515, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002).
It is unclear whether the "more searching review" contemplated in Kadic survived Swierkiewicz. Indeed, a prominent Post-Sivierkieivicz ATCA decision did not utilize a heightened pleading standard or "more searching review." See Wiwa v. Royal Dutch Petroleum Co., No. 96 Civ. 8386(KMW), 2002 WL 319887, at *5 (S.D.N.Y. Feb. 28, 2002). In this case, however, the issue is moot, because the Court holds, infra, that it has subject matter jurisdiction over the action, whether or not a "more searching review" is utilized.
2. A Corporation is Capable of Violating the Law of Nations
Talisman contends that the Court lacks subject matter jurisdiction because corporations are legally incapable of violating the laws of nations. It argues that international law applies to states and in some cases to individuals, but that "the law of nations simply does not encompass principles of corporate liability." Motion Brief, at 4. Talisman relies primarily on affidavits submitted by two renowned international law scholars, James Crawford and Christopher Greenwood. Both scholars, consulting a variety of international sources, conclude that there is no basis in existing international law for the liability of corporations. Nonetheless, a considerable body of United States and international precedent indicates that corporations may be liable for violations of international law, particularly when their actions constitute jus cogens violations.
a. United States Precedent
As noted supra, interpretations of international law of the Supreme Court and Second Circuit are binding upon this Court. Talisman fails to cite a single Supreme Court, Second Circuit, or even Southern District of New York case holding that a corporation is "legally incapable of violating the law of nations." Motion Brief, at 4. Similarly, Messrs. Crawford and Greenwood, while citing a variety of international law sources, fail to cite a single United States case upholding their position. In fact, numerous Second Circuit cases, as well as cases from courts outside the Second Circuit, make it clear that corporations can be held liable for jus cogens violations.
i. Second Circuit Precedent
Neither party cites any Supreme Court decision for the proposition that corporations are or are not potentially liable under the ATCA for violations of international law, nor is the Court aware of any such decision.[19] Therefore, the Court is obligated to follow the Second Circuit's interpretation of international law. While the Supreme Court has not yet addressed the question of whether corporations may be liable for international law violations under the ATCA, the Second Circuit has.[20] Indeed, *309 since Filartiga, the Second Circuit has led the nation in ATCA jurisprudence. Clear and consistent Second Circuit precedent demonstrates that corporations may be held liable for jus cogens violations of international law.
As noted supra, the transformation of the ATCA from an obscure statute passed by the first Congress to a widely-used tool to vindicate international law violations began with Filartiga. In that case, the Second Circuit reaffirmed that United States courts are, in the absence of a congressional enactment, "bound by the law of nations, which is a part of the law of the land." Filartiga, 630 F.2d at 887 (quoting The Nereide, 13 U.S. (9 Cranch) 388, 422, 3 L.Ed. 769 (1815)). After conducting an examination of international law, the court held that deliberate torture perpetrated under the color of law violated universally accepted rules of international law. Consequently, the Second Circuit reversed the district court's determination that subject matter jurisdiction did not lie in that action.
A second watershed case in the development of ATCA jurisprudence was Kadic v. Karadzic, 70 F.3d 232 (2d Cir.1995). In Filartiga, the alleged acts of torture that violated international law were committed by an individual who acted under color of official authority. This left open the question of whether non-governmental actors could be culpable under the ATCA. Defendant Karadzic was the president of the self-proclaimed Republika Srpska, the Bosnian Serb entity. In Kadic, Karadzic argued (inconsistently) that while he was the president of the entity, he was not an official in any government. See Kadic, 70 F.3d at 239. The district court held that Karadzic was not acting under color of law because the Republika Srpska, even if a state, was not recognized by other states. See Kadic, 70 F.3d at 239 n. 2. On that basis, it dismissed the action, accepting Karadzic's contention that "acts committed by non-state actors do not violate the law of nations." Kadic, 70 F.3d at 239 (quoting Doe v. Karadzic, 866 F.Supp. 734, 739 (S.D.N.Y.1994)).
The Second Circuit reversed the district court. In its ruling, the Second Circuit flatly rejected the notion that the reach of international law was limited to states and those acting under color of state law:
We do not agree that the law of nations, as understood in the modern era, confines its reach to state action. Instead, we hold that certain forms of conduct violate the law of nations whether undertaken by those acting under the auspices of a state or only as private individuals.
Kadic, 70 F.3d at 239. The Second Circuit noted that historically the law of nations had been applied to certain acts of individuals, such as piracy. Pirates were considered hostis humani generis (an enemy of mankind) in part because they acted without the pretense of state authority. See BRIG MALEK ADHEL v. U.S., 43 U.S. (2 How.) 210, 232, 11 L.Ed. 239 (1844). Over time, slave traders grew to be considered enemies of mankind, subject to liability under international law. See Kadic, 70 F.3d at 239. In the modern era, the hijacker, war criminal and genocidaire have also come to be considered hostis humani generis. See Kadic, 70 F.3d at 240. The court concluded that "the inclusion of piracy and slave trade from an earlier era and aircraft hijacking from the modern era demonstrates that offenses of `universal *310 concern' include those capable of being committed by non-state actors." Kadic, 70 F.3d at 240. These crimes of "universal concern" are synonymous with jus cogens violations discussed supra.
The Second Circuit went on to analyze specific crimes. It first looked at international jurisprudence concerning genocide, including declarations of the United Nations General Assembly and the Convention on the Prevention and Punishment of the Crime of Genocide, 78 U.N.T.S. 277, entered into force Jan. 12, 1951, for the United States Feb. 23, 1989 ("Genocide Convention"). In particular, the court noted that under the Genocide Convention, "Persons committing genocide or any of the other acts enumerated in article 3 shall be punished, whether they are constitutionally responsible rulers, public officials or private individuals." Id. at art. 4. The Second Circuit held that the U.N. documents and the Genocide Convention "unambiguously reflect that [... ] the proscription of genocide has applied equally to state and non-state actors." Kadic, 70 F.3d at 232.
The Kadic court then turned to the question of whether war crimes could be imputed to individuals not acting under color of law. In the instant case, plaintiffs accuse defendants of violating the law of nations and customary international law "relating to [... ] the treatment of civilians during armed conflicts," an apparent reference to war crimes. Plaintiffs do not address the existence of a prerequisite for the commission of most war crimes; namely, an international armed conflict. Plaintiffs do not allege, nor is there evidence to support a finding, that the conflict in Sudan constitutes an international armed conflict. Indeed, all evidence suggests that the conflict is internal. There is no suggestion that rebel forces in the south are acting as proxy forces of another country. Thus, the four Geneva Conventions would appear not to apply to the conflict in Sudan. See Convention for the Amelioration of the Condition of the Wounded and Sick in Armed Forces in the Field, entered into force Oct. 21, 1950, for the United States Feb. 2, 1956, 6 U.S.T. 3114, T.I.A.S. 3362, 75 U.N.T.S. 31 ("Geneva Convention I"); Convention for the Amelioration of the Condition of the Wounded, Sick, and Shipwrecked Members of Armed Forces at Sea, entered into force Oct. 21, 1950, for the United States Feb. 2, 1956, 6 U.S.T. 3217, T.I.A.S. 3363, 75 U.N.T.S. 85 ("Geneva Convention II"); Convention Relative to the Treatment of Prisoners of War, entered into force Oct. 21, 1950, for the United States Feb. 2, 1956, 6 U.S.T. 3316, T.I.A.S. 3364, 75 U.N.T.S. 135 ("Geneva Convention III"); Convention Relative to the Protection of Civilian Persons in Time of War, entered into force Oct. 21, 1950, for the United States Feb. 2, 1956, 6 U.S.T. 3516, T.I.A.S. 3365, 75 U.N.T.S. 287 ("Geneva Convention IV"). Sudan acceded to the Geneva Conventions on September 23, 1957.
However, common article 3 applies to armed conflicts which are not of an international character. Common article 3 mandates the following:
(1) Persons taking no active part in the hostilities, including members of armed forces who have laid down their arms and those placed hors de combat by sickness, wounds, detention, or any other cause, shall in all circumstances be treated humanely, without any adverse distinction founded on race, colour, religion or faith, sex, birth or wealth, or any other similar criteria.
To this end the following acts are and shall remain prohibited at any time and in any place whatsoever with respect to the above-mentioned persons:
*311 (a) violence to life and person, in particular murder of all kinds, mutilation, cruel treatment and torture;
(b) taking of hostages;
(c) outrages upon personal dignity, in particular humiliating and degrading treatment;
(d) the passing of sentences and the carrying out of executions without previous judgment pronounced by a regularly constituted court, affording all the judicial guarantees which are recognized as indispensable by civilized peoples.
(2) The wounded and sick shall be collected and cared for.
[...].
Geneva Convention I art. 3; Geneva Convention II art. 3; Geneva Convention III art. 3; Geneva Convention IV art. 3. The Amended Complaint sets forth sufficient facts to allege a violation of common article 3 as well as customary international law protecting non-combatants.
In Kadic, the Second Circuit, reviewing the Geneva Conventions, concluded that violations of common article 3 could be imputed to the acts of individuals:
The offenses alleged by the appellants, if proved, would violate the most fundamental norms of the law of war embodied in common article 3, which binds parties to internal conflicts regardless of whether they are recognized nations or roving hordes of insurgents. The liability of private individuals for committing war crimes has been recognized since World War I and was confirmed at Nuremberg after World War II, [... ] and remains today an important aspect of international law [...].
70 F.3d at 243. On this basis, the Kadic court held that it had subject matter jurisdiction over claims of war crimes and the treatment of civilians during (internal) armed conflicts.
Finally, the Kadic court considered whether acts of torture, summary execution, and rape could lead to the liability of an individual not acting under color of law. The court, after reviewing its prior holding in Filartiga, the Torture Victim Protection Act of 1991, Pub.L. No. 102-256 (1992), and the Convention Against Torture and Other Cruel, Inhuman, or Degrading Treatment or Punishment, 23 I.L.M. 1027 (1984), as modified, 24 I.L.M. 535 (1985), entered into force June 26, 1987, ratified by United States Oct. 21, 1994, 34 I.L.M. 590, 591 (1995), determined that an individual could be held liable for such acts if they were committed under color of law. See Kadic, 70 F.3d at 243-4. In addition, the court held that an individual could be held liable for such acts regardless of whether he was acting under color of law if such acts were committed in the course of genocide and/or war crimes. See id. at 244.
While Filartiga marked the birth of modern ATCA litigation, Kadic established that individuals, even those not acting under color of law, can be held liable for certain violations of the law of nations (i.e., jus cogens violations) whether or not they acted under color of state authority. In Jota v. Texaco Inc., 157 F.3d 153 (2d Cir.1998), Ecuadorian residents brought a class action under the ATCA against a corporation, Texaco, for alleged environmental and personal injuries resulting from the corporation's exploitation of certain oil fields. The district court dismissed the suit on the basis of forum non conveniens, international comity, and failure to join an indispensable party. In Jota, the Second Circuit addressed these issues, and ultimately vacated the district court's decision and remanded the case. It did not explicitly address the question of subject matter jurisdiction, and the parties had apparently not raised the issue on appeal. However, "even when no party has questioned *312 the court's subject matter jurisdiction, the court has the duty to dismiss sua sponte when such jurisdiction is lacking." Endicott Johnson Corp. v. Liberty Mutual Ins. Co., 116 F.3d 53, 58 (2d Cir.1997) (citing Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 152, 29 S.Ct. 42, 53 L.Ed. 126 (1908)). See also Westmoreland Capital Corp. v. Findlay, 100 F.3d 263, 266 (2d Cir.1996) (failure of parties to move to dismiss for lack of subject matter jurisdiction does not work to confer jurisdiction on a court; subject matter jurisdiction cannot be waived and may be raised sua sponte by the court). The fact that the Second Circuit did not address an obvious jurisdictional question sua sponte indicates that it had no reservations about the ATCA reaching the acts of corporations. The Second Circuit's holdings in later cases confirms this impression. Talisman's claim that in Jota and other cases the Second Circuit merely "assumed the possibility of liability" is not compelling, because subject matter jurisdiction, unlike other issues, represents the most fundamental question of whether a court has the legal power to hear a case, and a court has a duty to determine the issue of subject matter jurisdiction, whether or not the parties raise the issue. By reaching the merits in Jota, the Second Circuit tacitly acknowledged that subject matter jurisdiction lay in that case.
In Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88 (2d Cir.2000), the Second Circuit again confronted a situation in which a corporation was sued under the ATCA. As in the instant case, the defendant was alleged to have committed violations of international human rights law. The court did not directly address the question of subject matter jurisdiction. As noted above, this fact indicates that the court believed that subject matter jurisdiction lay in that action. Moreover, the Second Circuit reiterated its recent holding in Kadic that "the ATCA reaches the conduct of private parties provided that their conduct is undertaken under the color of state authority or violates a norm of international law that is recognized as extending to the conduct of private parties." Wiwa, 226 F.3d at 104. Both of the two defendants in Wiwa were private corporations. In light of that fact, Wiwa clearly extended the decision in Kadic to apply the ATCA to the acts of corporations that constitute jus cogens violations.
Only months after the Wiwa decision, the Second Circuit decided Bigio v. Coca-Cola Co., 239 F.3d 440 (2d Cir.2000).[21] In that case, Canadian citizens and an Egyptian corporation sued the Coca-Cola Company and the Coca-Cola Export Company (collectively, "Coca-Cola"), both Delaware corporations. The plaintiffs in Bigio stated that the Egyptian government had unlawfully seized their property in Egypt because they were Jewish. Coca-Cola then allegedly purchased or leased the plaintiffs' property with full knowledge of the unlawful manner in which it was seized. Unlike in Jota or Wiwa, in Bigio subject matter jurisdiction was squarely before the court: "if the complaint did not plead a violation of the law of nations by Coca-Cola, the district court was without subject matter jurisdiction under the Alien Tort Claims Act, and neither it nor we may consider the matter further under the Act." Bigio, 239 F.3d at 447. The Second Circuit emphasized the centrality of the question of subject matter jurisdiction, stating that the "first issue we must address is whether Coca-Cola can have violated `the law of nations' if it acted solely as a non-governmental entity." Bigio, 239 *313 F.3d at 447. The Second Circuit noted that the plaintiffs only alleged that Coca-Cola had acquired property that it knew had been discriminatorily expropriated. The Second Circuit rightly pointed out that although such discriminatory expropriation was "reprehensible," it was not an act of "universal concern" or a jus cogens violation. Bigio, 239 F.3d at 448. Additionally, the Second Circuit found that the Bigio plaintiffs had not alleged that Coca-Cola conspired with the Egyptian government in conducting the unlawful expropriation.
The Second Circuit's reasoning in Bigio is instructive. Although it ultimately held that the district court lacked subject matter jurisdiction under the ATCA, it did so because it was unclear that the acts allegedly committed by Coca-Cola actually violated international law. At the very least, the court held, the acts alleged to have been committed by Coca-Cola only violated international law when committed by state actors. See Bigio, 239 F.3d at 448. The Bigio court contrasted these acts with slave trading, genocide, and war crimes, citing Kadic and RESTATEMENT (THIRD) OF FOREIGN RELATIONS § 404 (1987). The clear implication is that subject matter jurisdiction would have existed if the Bigio plaintiffs had alleged jus cogens violations such as enslavement, genocide, or war crimesexactly the acts alleged in the instant caserather than procurement of unlawfully expropriated property.[22]
The Second Circuit recently delivered an opinion in Aguinda v. Texaco, Inc., 303 F.3d 470 (2d Cir.2002) which also involved a suit against a private corporation under the ATCA for alleged violations of international law. The court ultimately affirmed the district court's dismissal of the case on the basis of forum, non conveniens. In so doing, however, the court merely held that Ecuador was the most convenient forum for the action; it did not hold that the action could not be brought in the Southern District of New York. Indeed, in deciding the forum non conveniens motion, the Second Circuit painstakingly weighed the various factors militating for and against trying the action in the United States. Such analysis would have been wholly superfluous if there was no subject matter jurisdiction to try the case in federal court in the first place. Thus, the recent Aguinda decision adds credence to the notion that corporations may be held liable for international law violations under the ATCA.
As noted, Talisman contends that the Second Circuit has never squarely addressed the question of whether corporations are potentially liable for international law violations under the ATCA. While the Second Circuit has not explicitly held that corporations are potentially liable for violations of the law of nations, it has considered numerous cases, as noted above, where a plaintiff sued a corporation under the ATCA for alleged breaches of international law: Jota, Wiwa, Bigio, and Aguinda.[23] In each of these cases, the Second Circuit acknowledged that corporations are potentially liable for violations of the law of nations that ordinarily entail individual responsibility, including jus cogens violations.
ii. Other Circuit Precedent
In addition to Second Circuit precedent, other circuit courts have held that corporations *314 may be held liable under the ATCA for certain international law violations. Earlier this year, the Ninth Circuit decided Deutsch v. Turner Corp., 317 F.3d 1005 (9th Cir.2003). In that case, plaintiffs, who alleged that they had been forced to work as slave laborers during World War II, sued a myriad of German and Japanese corporations under various statutes, including the ATCA. The Ninth Circuit, while dismissing the ATCA claims on statute of limitations grounds, tacitly acknowledged subject matter jurisdiction by not addressing that issue sua sponte. See Deutsch, 317 F.3d at 1028-29.
The Ninth Circuit more explicitly recognized that a corporation could be sued under the ATCA in Doe v. Unocal Corp., ___ F.3d ___, 2002 WL 31063976 (9th Cir.2002).[24] According to the Doe court, "[a] threshold question in any ATCA case against a private party such as Unocal, is whether the alleged tort requires the private party to engage in state action for ATCA liability to attach, and if so, whether the private party in fact engaged in state action." Doe, ___ F.3d at ___, 2002 WL 31063976, at *9. The court, citing Kadic, held that because the complaint alleged jus cogens violations (including rape, torture, and summary execution), no state action was necessary and Unocal could be held liable. See Doe, ___ F.3d at ___, 2002 WL 31063976, at *9.
The Fifth Circuit also confronted the issue of corporate liability under the ATCA in Beanal v. Freeport-McMoran, Inc., 197 F.3d 161 (5th Cir.1999). The Fifth Circuit dismissed the ATCA claims, but did so based on the fact that the alleged acts, including surveillance, mental torture, death threats, house arrest, and environmental abuse did not clearly violate the law of nations. See id. at 165-66. The court did not question the fact that it had jurisdiction over the subject matter of the action.[25] More than a decade earlier, the Fifth Circuit explicitly assumed without deciding that it had subject matter jurisdiction in an ATCA action against a corporation for violations of international law. See Carmichael v. United Technologies Corp., 835 F.2d 109, 113-14 (5th Cir.1988).
iii. District Court Precedent
In addition to the Second, Ninth, and Fifth Circuits, numerous district courts have examined cases in which corporations were sued under the ATCA for alleged violations of the law of nations. In these cases, the district courts either assumed or held that the court had subject matter jurisdiction over a corporation for alleged international law violations. See e.g., Abdullahi v. Pfizer, Inc., No. 01 Civ. 8118, 2002 WL 31082956 (S.D.N.Y. Sept. 17, 2002) (upholding subject matter jurisdiction where a corporation allegedly acted in concert with the Nigerian government to violate international law); Wiwa v. Royal Dutch Petroleum Co., No. 96 Civ. 8386, 2002 WL 319887 (S.D.N.Y. Feb. 28, 2002) (denying a motion to dismiss for lack of subject matter jurisdiction where a corporation was alleged to have been complicit *315 with a foreign state in violating international law)[26]; Bodner v. Banque Paribas, 114 F.Supp.2d 117, 127-28 (E.D.N.Y.2000) (holding that subject matter jurisdiction existed under the ATCA where plaintiffs alleged a French bank had been complicit with the Nazi regime); Iwanowa v. Ford Motor Co., 67 F.Supp.2d 424, 445 (D.N.J. 1999) ("No logical reason exists for allowing private individuals and corporations to escape liability for universally condemned violations of international law merely because they were not acting under color of law."); Eastman Kodak Co. v. Kavlin, 978 F.Supp. 1078, 1090-95 (S.D.Fla.1997) (holding that subject matter jurisdiction existed in an ATCA action against a Bolivian corporation).
b. International Precedent[27]
As noted supra, this Court is obliged to follow international law as interpreted by the Supreme Court and Second Circuit. In light of the precedent cited above, the Court must reject Talisman's claim that it is legally incapable of violating the law of nations. A further examination of international legal precedent similarly reveals that Talisman's position is "anachronistic." Declaration of Professor Ralph G. Steinhardt, at ¶ 8, appended to Declaration of Stephen A. Whinston dated June 26, 2002 as Exhibit 1. A review of international precedent and practice reveals that corporate liability, at least for jus cogens violations, is contemplated under international law.
i. International Tribunal Precedent
The concept of corporate liability for jus cogens violations has its roots in the trials of German war criminals after World War II. The Nuremberg Charter permitted the prosecution of "a group or organization" and allowed the tribunal to declare that entity a "criminal organization." Agreement for the Prosecution and Punishment of Major War Criminals of the European Axis, and Establishing the Charter of the International Military Tribunal, 1951, arts. 9, 10, 82 U.N.T.S. 279. In United States v. Flick, United States v. Krauch, and United States v. Krupp, the heads of major German corporations were prosecuted for, inter alia, war crimes and crimes against humanity. See Steven R. Ratner, Corporations and Human Rights: A Theory of Legal Responsibility, 111 YALE L.J. 443, 477-78 (2001). Talisman points out, correctly, that in each of these cases, individuals, and not corporate entities, were put on trial. However, it ignores the fact that the court consistently spoke in terms of corporate liability:
With reference to the charges in the present indictment concerning Farben's [a German corporation] activities in Poland, Norway, Alsace-Lorraine, and France, we find that the proof establishes beyond a reasonable doubt that offenses against property as defined in *316 Control Council Law No. 10 were committed by Farben, and that these offenses were connected with, and an inextricable part of the German policy for occupied countries. [...]. The action of Farben and its representatives, under these circumstances, cannot be differentiated from acts of plunder or pillage committed by officers, soldiers, or public officials of the German Reich. [...] Such action on the part of Farben constituted a violation of the Hague Regulations [on the conduct of warfare].
United States v. Krauch, quoted in Ratner, at 478 (emphasis added). The language of the decision makes it clear that the court considered that the corporation qua corporation had violated international law. The same logic guided the court in a case involving the Krupp corporation:
[T]he confiscation of the Austin plant [a tractor factory owned by the Rothschilds] [... ] and its subsequent detention by the Krupp firm constitute a violation of Article 43 of the Hague Regulations [... and] the Krupp firm, through defendants[,... ] voluntarily and without duress participated in these violations.
United States v. Krupp, quoted in Ratner, at 478 n. 134. As in Krauch, the Krupp court makes it clear that while individuals were nominally on trial, the Krupp company itself, acting through its employees, violated international law.
The Nuremberg precedent cited above is particularly significant not merely because it constitutes a basis for finding corporate liability for violations of international law, but because the language ascribes to the corporations involved the necessary mens rea for the commission of war crimes and crimes against humanity; the types of criminal behavior at issue in the instant case.[28]
ii. International Treaty Precedent
As a preliminary note, several of the major conventions protecting basic human rights, such as the Genocide Convention and common article 3 of the Geneva Convention, do not explicitly reach corporations. Nonetheless, such instruments may reach conduct by corporations:
These regimes do not distinguish between natural and juridical individuals, and it is implausible that international law would protect a corporation that engaged in the slave trade or produced the contemporary equivalent of Zyklon B for the destruction of Jews in concentration camps.
Declaration of Professor Ralph G. Steinhardt, at ¶ 14, appended to Declaration of Stephen A. Whinston dated June 26, 2002 as Exhibit 1. Thus, corporations may be liable under codified international law.[29] As *317 noted below, a variety of international treaties hold corporations directly responsible for tort violations.
Treaties, by definition, are concluded between states. See BLACK'S LAW DICTIONARY 1507 (7th ed.1999). Nonetheless, international treaties occasionally hold corporate defendants, as opposed to states, liable for certain acts. For instance, a major International Labour Organization convention ratified by more than 150 nations proclaims that "[w]orkers shall enjoy adequate protection against acts of anti-union discrimination in respect of their employment." Convention Concerning the Application of the Principles of the Right to Organise and To Bargain Collectively, July 1, 1949, art. 1(1), available at http://ilolex. lex.ilo.ch:1567/cgi-lex/convde.pl?C098. Such language clearly "presupposes [... ] a duty on the corporation not to interfere with the ability of employees to form unions." Ratner, supra note 27, at 478-79.
Numerous treaties impose liability directly upon corporations. For example, the 1960 Paris Convention on Third Party Liability in the Field of Nuclear Energy states that "[t]he operator of a nuclear installation shall be liable" for, inter alia, "damage to or loss of life of any person" and damage to property. Convention on Third Party Liability in the Field of Nuclear Energy of 29th July 1960, as amended by the Additional Protocol of 28th January 1964 and by the Protocol of 16th November 1982, July 29, 1960, art. 3(a), 956 U.N.T.S. 251. Similarly, the International Convention on Civil Liability for Oil Pollution Damage holds that "the owner of a ship at the time of an incident [... ] shall be liable for any pollution damage caused by oil which has escaped or been discharged from the ship as a result of the incident." International Convention on Civil Liability for Oil Pollution Damage, Nov. 29, 1969, art. 3(1), 26 U.S.T. 765, 973 U.N.T.S. 3. The 1963 Vienna Convention on Civil Liability for Nuclear Damage states that "[t]he operator of a nuclear installation shall be liable for nuclear damage upon proof that such damage has been caused by a nuclear incident." Vienna Convention on Civil Liability for Nuclear Damage, May 21, 1963, art. 2(1), 1063 U.N.T.S. 265. An "operator" includes "any private or public body whether corporate or not." See id. at art. 1(a) and (c). Several other treaties similarly impose liability not upon states but upon private, often corporate actors. See, e.g., Brussels Convention Relating to Civil Liability in the Field of Maritime Carriage of Nuclear Material, Dec. 17, 1971, 974 U.N.T.S. 255; Convention on Civil Liability for Oil Pollution Damage Resulting from Exploration for and Exploitation of Seabed Mineral Resources, Dec. 17, 1976, reprinted at 16 I.L.M. 1450.
Significantly, all of these treaties impose corporate liability for actions or omissions by companies that have major deleterious effects such as nuclear accidents and oil spills. While most treaties do not bind corporations, the line of instruments cited above indicates that precedent does exist for holding corporations liable for largescale torts. If corporations can be held liable for unintentional torts such as oil spills or nuclear accidents, logic would suggest that they can be held liable for intentional torts such as complicity in genocide, slave trading, or torture.
iii. International Organization Precedent
The practice of several international organizations indicates that corporations are potentially subjects of international law. The United Nations Universal Declaration of Human Rights enumerates a series of rights, the most basic of which have become part of customary international law *318 (such as the prohibition on slavery and torture). By its terms, it is binding on states as well as corporations:
The General Assembly proclaims this Universal Declaration of Human Rights as a common standard of achievement for all peoples and all nations, to the end that every individual and every organ of society, keeping this Declaration constantly in mind, shall strive by teaching and education to promote respect for these rights and freedoms and by progressive measures, national and international, to secure their universal and effective recognition and observance [...].
G.A. Res. 217 A(III), Dec. 10, 1948 ("Universal Declaration of Human Rights"). Noted legal scholar and Chief Reporter for the RESTATEMENT (THIRD) OF FOREIGN RELATIONS has stated that "[ejvery individual includes juridical persons. Every individual and every organ of society excludes no one, no company, no market, no cyberspace. The Universal Declaration applies to them all." Louis Henkin, The Universal Declaration at 50 and the Challenge of Global Markets, 25 BROOK. J. INT'L L. 17, 25 (1999). Consequently, corporations are obligated to respect basic human rights of individuals, such as the right to life, the right to freedom from slavery, and the right to be free from torture and cruel and inhuman treatment.
Other United Nations precedent indicates that corporations have duties under international law. For example, the United Nations Security Council has frequently utilized economic sanctions to punish the unlawful acts of states. While such sanctions are formally directed at states, they also entail certain duties for corporations. For example, corporations wishing to purchase oil from Iraq following the implementation of sanctions were required by the Security Council to follow certain procedures. See, e.g., S.C. Res. 986, U.N. SCOR, U.N. Doc. S/RES/986 (1995); Letter dated 26 July 2001 from the Chairman of the Security Council Committee Established by Resolution 661 (1990) Concerning the Situation Between Iraq and Kuwait Addressed to the President of the Security Council, U.N. Doc. S/2001/738. Similarly, the General Assembly passed a resolution deploring "the continued cooperation by certain States and foreign economic interests with South Africa in the military, economic, political and other fields, as such cooperation encourages the Government of South Africa in the pursuit of its inhuman policies." G.A. Res. 2671 F, U.N. GAOR, 25th Sess., Supp. No. 28, at 33-34, U.N. Doc. A/8028 (1970). Thus, "[w]hile it may appear that sanctions obligations are confined to U.N. member states, the reality has suggested otherwise." Ratner, supra note 27, at 484.
The practice of the European Union indicates that corporations may be subject to international law. Indeed, the Treaty Establishing the European Community and the binding decisions of the European Council and Commission have "created a vast body of legal obligations which apply directly to corporate entities" including, for example, a prohibition on anticompetitive behavior. Ratner, supra note 27, at 484. Beyond commercial regulations, precedent from the European Court of Justice has held that corporations may be held liable for human rights violations such as discrimination. See, e.g., Case 36/74, Walrave v. Association Union Cycliste Internationale, 1974 E.C.R. 1405, 1419; Case 43/75, Defrenne v. Societe Anonym-e Beige de Navigation Aerienne Sabena, 1976 E.C.R. 455, 457-63.
c. Conclusion
Historically, states, and to a lesser extent individuals, have been held liable under international law. However, as examined *319 supra, substantial international and United States precedent indicates that corporations may also be held liable under international law, at least for gross human rights violations. Extensive Second Circuit precedent further indicates that actions under the ATCA against corporate defendants for such substantial violations of international law, including jus cogens violations, are the norm rather than the exception.
Such a result should hardly be surprising. A private corporation is a juridical person and has no per se immunity under U.S. domestic or international law. See Jordan J. Paust, Human Rights Responsibilities of Private Corporations, 35 VAND. J. TRANSNAT'L L. 801, 803 (2002). As noted above, a corporation may be imputed with having the requisite specific intent to commit a criminal action. See supra note 28. Given that private individuals are liable for violations of international law in certain circumstances, there is no logical reason why corporations should not be held liable, at least in cases of jus cogens violations. Indeed, while Talisman disputes the fact that corporations are capable of violating the law of nations, it provides no logical argument supporting its claim. As noted at length supra, substantial U.S. and international precedent indicates that corporations may be responsible, in certain cases, for violations of international law. In this case, where plaintiffs allege jus cogens violations, corporate liability may follow. Consequently, the Court denies Talisman's motion to dismiss for lack of subject matter jurisdiction on this basis.
C. The Court Need Not Decide if Federal Question Jurisdiction Exists
Both parties relegate the discussion of subject matter under 28 U.S.C. § 1331 to a footnote. See Motion Brief, at 2 n. 1; Plaintiffs' Memorandum of Law in Opposition to Talisman's Motion to Dismiss ("Opposition Brief), at 3 n. 4. In Filartiga, the Second Circuit sidestepped the question of whether 28 U.S.C. § 1331, in addition to the ATCA, could provide a basis for jurisdiction. See Filartiga v. Pena-Irala, 630 F.2d 876, 887 n. 22 (2d Cir.1980). Fifteen years later, the Second Circuit, having found that subject matter jurisdiction existed under the ATCA, declined to answer the question of whether jurisdiction also existed under 28 U.S.C. § 1331: "we need not rule definitively on whether any causes of action not specifically authorized by statute [i.e., the ATCA] may be implied by international law standards as incorporated into United States law and grounded on section 1331 jurisdiction." Kadic v. Karadzic, 70 F.3d 232, 246 (2d Cir.1995). Like the Second Circuit in Filartiga and Kadic, this Court has held that subject matter jurisdiction exists in this case under the ATCA. The Court need not, therefore, determine whether 28 U.S.C. § 1331 would provide an alternative basis for finding subject matter jurisdiction.
D. Plaintiffs Allege a Violation of the Law of Nations Against Talisman
Talisman contends that even if a corporation can be held liable for a violation of the law of nations, plaintiffs have failed adequately to allege such a violation against Talisman. Talisman states that this argument is made pursuant to FED. R. CIV. P. 12(b)(1). The arguments also fall under the rubric of FED. R. CIV. P. 12(b)(6). In either case, the Court must accept the allegations of plaintiffs as true. See, e.g., Merritt v. Shuttle, 245 F.3d 182, 186 (2d Cir.2001) (on a motion pursuant to FED. R. CIV. P. 12(b)(1), the court must accept as true allegations in the complaint); Taylor *320 v. Vermont Dep't of Educ., 313 P.3d 768, 776 (2d Cir.2002) (on a motion pursuant to FED. R. CIV. P. 12(b)(6), a court must accept as true factual allegations in the complaint and draw all reasonable inferences in the plaintiffs favor); York v. Assoc. of the Bar of the City of New York, 286 F.3d 122, 125 (2d Cir.2002) (same); Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir.1998) (same).
1. Conspiracy and Aiding and Abetting
a. Conspiracy and Aiding and Abetting are Actionable Under the ATCA
Talisman claims that aiding and abetting and conspiracy allegations are not actionable theories of civil liability under the ATCA. Specifically, it argues, citing Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 181, 114 S.Ct. 1439, 128 L.Ed.2d 119 (1994), that aiding and abetting theory does not provide a basis for civil liability absent an express congressional directive. Similarly, Talisman cites Dinsmore v. Squardron, Ellenoff, Plesent, Sheinfeld & Sorkin, 135 F.3d 837, 841 (2d Cir.1998), which purportedly extended Central Bank`s reasoning to civil conspiracy claims. Talisman concludes that because there is no explicit congressional directive applying aiding and abetting or conspiracy theory to the ATCA, such theories are not actionable.
Talisman's contention is incorrect. Its analysis misapprehends the fundamental nature of the ATCA. The ATCA provides a cause of action in tort for breaches of international law. In order to determine whether a cause of action exists under the ATCA, courts must look to international law. See Filartiga v. Pena-Irala, 630 F.2d 876, 889 (2d Cir.1980); Kadic v. Karadzic, 70 F.3d 232, 238 (2d Cir.1995). Thus, whether or not aiding and abetting and complicity are recognized with respect to charges of genocide, enslavement, war crimes, and the like is a question that must be answered by consulting international law. See generally Bigio v. Coca-Cola Co., 239 F.3d 440 (2d Cir.2000); Kadic v. Karadzic, 70 F.3d 232 (2d Cir.1995); Filartiga v. Pena-Irala, 630 F.2d 876 (2d Cir.1980). See also Wiwa v. Royal Dutch Petroleum Co., No. 96 Civ. 8386, 2002 WL 319887 (S.D.N.Y. Feb. 28, 2002). Talisman itself appears to concede this point. Earlier in its brief, Talisman urges the Court to dismiss the action for lack of jurisdiction because, it claims, corporations are not legally capable of violating international law. In arguing this point, Talisman states that "Courts must look to public international law to determine whether the plaintiffs have alleged a violation of the law of nations." Motion Brief, at 3 (emphasis added). In other words, Talisman has already conceded that the Court must look to international law to determine whether a corporation can commit genocide or war crimes. Similarly, the Court must look to international law to determine whether a corporation can conspire to commit, or aid and abet the commission of, genocide or war crimes.
While many courts have addressed situations in which corporations were alleged to have conspired with or aided and abetted states, Talisman is unable to cite a single decision in which a court held that the ATCA does not recognize an action for aiding and abetting or conspiracy. In Kadic v. Karadzic, 70 F.3d 232, 244-5 (2d Cir.1995), the Second Circuit made clear that the ATCA contemplated liability for private defendants who have "acted in concert" with a state to commit torture and other gross human rights violations. In Bigio v. Coca-Cola Co., 239 F.3d 440 (2d Cir.2000), the Second Circuit addressed a *321 case in which plaintiffs sought to expand claims made in the complaint to allege that Coca-Cola was a co-conspirator in the actions of the Egyptian government. The Second Circuit rejected the claim because the plaintiffs in that case failed to articulate a causal chain between the actions of Egypt and those of Coca-Cola. However, the court did not hold that the ATCA prohibited such conspiracy-based claims. Similarly, Judge Wood refused to dismiss a claim under the ATCA that alleged that a private corporation had "directed and aided the Nigerian government in violating plaintiffs' rights." Wiwa v. Royal Dutch Petroleum Co., No. 96 Civ. 8386, 2002 WL 319887, at *1 (S.D.N.Y. Feb. 28, 2002). The district court in Kodak v. Kavlin, 978 F.Supp. 1078, 1091 (S.D.Fla.1997), drawing heavily on Second Circuit precedent, held that "it would be a strange tort system that imposed liability on state actors but not on those who conspired with them to perpetrate illegal acts through the coercive use of state power."
The precedent cited by Talisman is therefore unconvincing. Both cases cited by Talisman, Central Bank and Dinsmore, analyzed whether domestic securities law provides a civil cause of action for aiding and abetting or conspiracy. However, as noted supra, an examination of the particular jurisprudence of the Alien Tort Claims Act reveals that courts, including the Second Circuit, have almost unanimously permitted actions premised on a theory of aiding and abetting and conspiracy. This line of cases, and not the more general analysis provided by Talisman, rules the day under the maxim of lex specialis derogat lex generalis. U.S. courts have consistently permitted ATCA suits to proceed based on theories of conspiracy and aiding and abetting. As noted supra, courts must look to international law to determine the relevant substantive law. An examination of international law reveals that the concepts of conspiracy and aiding and abetting are commonplace with respect to the types of allegations contained in the Amended Complaint, such as genocide and war crimes.
b. Conspiracy and Aiding and Abetting Exist in International Law
After arguing that the ATCA does not contemplate actions based on claims of conspiracy and aiding and abetting, Talisman states that international law does not provide a legal basis for aiding and abetting or conspiracy claims in this case. See Motion Brief, at 9. Although Talisman acknowledges that "international law recognizes theories of complicit liability," it argues that plaintiffs fail to allege that Talisman provided assistance to Sudan with the intention of facilitating a violation of the law of nations. As a preliminary matter, under FED. R. CIV. P. 9(b), intent, malice, and other states of mind may be "averred generally." Moreover, even a cursory review of the Amended Complaint reveals otherwise. For example, the Amended Complaint states that Talisman and Sudan worked together to devise a security plan for the oil concession areas, and that based "upon their joint strategy, Government troops and allied militia engaged in an ethnic cleansing operation to execute, enslave or displace the non-Muslim, African Sudanese population [...]." Amended Complaint, at ¶ 26. Elsewhere, the Amended Complaint states that Talisman would "map out areas intended for exploration and [Talisman and Sudan] would discuss how to dispose of civilians in those areas." Id. at ¶ 32. These and other paragraphs set forth plaintiffs' case that Talisman deliberately worked with Sudan to plan certain unlawful acts. Plaintiffs therefore do allege that Talisman intended to facilitate a violation of the law of nations. Talisman also argues *322 that its acts in maintaining roads and extending landing strips are too distant causally from the alleged injuries inflicted by Sudan to be imputed to Talisman. See Motion Brief, at 9-10. However, the Amended Complaint does not merely state that Talisman maintained roads and extended landing strips, but instead alleges, for example, that "[Sudan] has used the Heglig field, with Talisman's knowledge, on a regular basis for military purposes, including bombing and strafing attacks on civilians [...]." Amended Complaint, at ¶ 37. Talisman cites no authority other than the declarations of its international law experts for the contention that such acts cannot entail liability.
Indeed, the concept of complicit liability for conspiracy or aiding and abetting is well-developed in international law, especially in the specific context of genocide, war crimes, and the like. The Statute of the International Military Tribunal, the body that tried Nazi war criminals, stated that "[l]eaders, organizers, instigators and accomplices participating in the formulation or execution of a common plan or conspiracy to commit any of the foregoing crimes are responsible for all acts performed by any persons in execution of such a plan." Agreement for the Prosecution and Punishment of Major War Criminals of the European Axis, and Establishing the Charter of the International Military Tribunal, art. 6, 82 U.N.T.S. 279. Allied Control Council Law No. 10, used to prosecute German war criminals domestically, created criminal liability not only for principals who committed acts of genocide or war crimes but also for those who were connected with any plans or enterprises involving the commission of such crimes. See William A. Sehabas, Enforcing International Humanitarian Law: Catching the Accomplices, 83 INT'L REV. RED CROSS 439, 442 (June 2001). Such complicity could include corporate liability. Talisman cites the von Weizsacker case, in which a banker was acquitted of crimes against humanity for making loans that were used by an enterprise which exploited slave labor. However, unlike the facts in that case, here plaintiffs allege that Talisman worked directly with the government in its policy of "ethnic cleansing" and provided material aid to its efforts. In such cases, liability may follow. For example, the supplier of Zyklon B, the poison used for mass execution in many German concentration camps, was condemned by a British military court for violations of "the laws and usages of war." United Kingdom, v. Tesch, 1 L. Rep. Tr. War.Crim. 93 (1947).
The Statute of the International Criminal Tribunal for the former Yugoslavia ("ICTY") and the International Criminal Tribunal for Rwanda ("ICTR") similarly establish criminal liability for those who have "planned, instigated, ordered, committed, or otherwise aided and abetted in the planning, preparation or execution of a crime." ICTY STAT. art. 7(1); ICTR STAT. art. 6(1). The Statute for the new International Criminal Court ("ICC") similarly recognizes complicit liability:
In accordance with this Statute, a person shall be criminally responsible and liable for punishment for a crime within the jurisdiction of the Court if that person:
(a) Commits such a crime, whether as an individual, jointly with another or through another person, regardless of whether that other person is criminally responsible;
(b) Orders, solicits or induces the commission of such a crime which in fact occurs or is attempted;
(c) For the purpose of facilitating the commission of such a crime, aids, abets or otherwise assists in its commission or *323 its attempted commission, including providing the means for its commission;
(d) In any other way contributes to the commission or attempted commission of such a crime by a group of persons acting with a common purpose. Such contribution shall be intentional and shall either:
(i) Be made with the aim of furthering the criminal activity or criminal purpose of the group, where such activity or purpose involves the commission of a crime within the jurisdiction of the Court; or
(ii) Be made in the knowledge of the intention of the group to commit the crime;
(e) In respect of the crime of genocide, directly and publicly incites others to commit genocide;
(f) Attempts to commit such a crime by taking action that commences its execution by means of a substantial step, but the crime does not occur because of circumstances independent of the person's intentions. However, a person who abandons the effort to commit the crime or otherwise prevents the completion of the crime shall not be liable for punishment under this Statute for the attempt to commit that crime if that person completely and voluntarily gave up the criminal purpose.
ICC STAT. art. 25(3). Major human rights instruments, including the Genocide Convention and the Convention Against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, Dec. 10, 1984, 1465 U.N.T.S. 85 ("Torture Convention"), recognize complicity. See, e.g., Schabas, at 442. Cf. Prosecutor v. Tadic (Case No. IT-94-1-T), Opinion and Judgment, May 7, 1997, at ¶¶ 662-69.[30]
Talisman claims that under international law, an actor may be liable under a theory of complicit liability if the actor intended to facilitate the violation and if the aid or assistance "significantly contributed to [the] commission of the actual violation." Motion Brief, at 9. As noted supra, intent need be only averred generally, see FED. R. CIV. P. 9(b), and, in any event, plaintiffs do make such allegations. With regard to the level of aid, international law, as reflected in the judgments of the International Criminal Tribunal for the former Yugoslavia, appears to have settled on a requirement that assistance be "direct and substantial." Prosecutor v. Tadic (Case No. IT-94-1-T), Opinion and Judgment, May 7, 1997, at ¶¶ 691-92. See also Prosecutor v. Delalic (Case No. IT-96-21-T), Judgment, Nov. 16, 1998, at ¶¶ 326; Prosecutor v. Furundzija (Case No. 195-17/1-T), Judgment, Dec. 10, 1998, ¶¶ 223, 245; Prosecutor v. Aleksovski (Case No. IT-95-14/1-T), Judgment, June 25, 1999, at ¶ 61. Similarly, "the actus reus of aiding and abetting in international criminal law requires practical assistance, encouragement, or moral support which has a substantial effect on the perpetration of the crime." Prosecutor v. Furundzija (Case No. IT-95-17/1-T), Judgment, Dec. 10, 1998, at ¶ 235. The ICTR has similarly held that the actus reus of aiding and abetting is constituted by "all acts of assistance in the form of either physical or moral support" that "substantially contribute to the commission of the crime." Prosecutor v. Musema, (Case No. ICTR-96-13-T), Judgment, Jan. 27, 2000, at *324 ¶ 126. While the assistance must be substantial, it "need not constitute an indispensable element, that is, a conditio sine qua non for the acts of the principal." Prosecutor v. Furundzija (Case No. IT-95-17/1-T), Judgment, Dec. 10, 1998, at ¶ 209.
The ICTY added that participation in a crime is substantial if "the criminal act most probably would not have occurred in the same way had not someone acted in the role that the accused in fact assumed." Prosecutor v. Tadic (Case No. IT-94-1-T), Opinion and Judgment, May 7, 1997, at ¶ 688. Tellingly, the ICTY added that providing certain means to carry out crimes constitutes substantial assistance, even if the crimes could have been carried out some other way: "For example, if there had been no poison gas or gas chambers in the Zyklon B cases, mass exterminations would not have been carried out in the same manner." Id. at ¶ 688. That being said, some knowledge that the assistance will facilitate the crime is necessary. Thus, for example, a United States war crimes tribunal acquitted several businessmen who ran the German company I.G. Farben, accepting that they honestly believed that the Zyklon B would be used as a delousing agent. See United States v. Krauch, 8 Tr. War Crim. 1169 (1948). Such knowledge may be actual or constructive. The United States Military Tribunal found, for example, that every person, whether a government or military employee or civilian, who was employed in, present in, or residing in the Mauthausen concentration camp, had knowledge of the criminal activities occurring in the camp without requiring a showing of actual knowledge. Cf. Prosecutor v. Tadic (Case No. IT-94-1-T), Opinion and Judgment, May 7, 1997, at ¶ 677.
The Amended Complaint properly alleges that Talisman aided and abetted or conspired with Sudan to commit various violations of the law of nations. As noted supra, the Amended Complaint includes allegations that Talisman worked with Sudan to carry out acts of "ethnic cleansing"; that Talisman encouraged Sudan to do so; and that Talisman provided material support to Sudan, knowing that such support would be used in carrying out such unlawful acts. Moreover, the allegations set forth that Talisman's acts were substantial as that term is understood in international law. At this stage, at least, where the Court must accept the allegations in the Amended Complaint as true, the Court has no basis to dismiss the action.
2. Claims by Named Plaintiffs
Talisman claims that the named plaintiffs only suffered displacement and, in the case of the Presbyterian Church, property loss. Talisman contends that "it is not a violation of the law of nations for a state to confiscate and convert the property of its own citizens without just compensation." Motion Brief, at 6. It also argues that plaintiffs never allege with particularity "what action Talisman Energy took to assist [Sudan] in the attacks that allegedly caused the plaintiffs to leave their villages." Id. at 6-7.
Talisman's argument with respect to international law is accurate: generally speaking, confiscation of property without just compensation does not violate the law of nations. However, Talisman neglects to mention that the allegations of displacement and property loss mentioned in the Amended Complaint occurred during the alleged commission of genocide, war crimes, and crimes against humanity. For example, while the Amended Complaint notes that the Presbyterian Church suffered property loss, it also states that "[i]ts churches have been bombed and destroyed and church leaders and parishioners *325 have been killed, enslaved and displaced by Government forces because of their ethnic background or religion and their location in proximity to the oil fields." Amended Complaint, at ¶ 2(a). Only the most myopic reading of the Amended Complaint could conclude that the Presbyterian Church is solely alleging property loss. Talisman's narrow reading of the Amended Complaint is even more apparent when one considers the precedent it cites. Talisman quotes Cohen v. Hartman, 634 F.2d 318, 320 (5th Cir.1981) for the proposition that tortious conversion does not violate the law of nations. In Cohen, an employee allegedly embezzled an employer's money and used the funds to buy property in Florida. To compare a simple case of employee theft with the Amended Complaint, which alleges military attacks on civilian targets using helicopter gunships and bombers, enslavement of civilians, and genocide, is, to say the least, hyperbolic.[31] While expropriation or property destruction alone may not violate the law of nations, the Court finds that expropriation or property destruction, committed as part of a genocide or war crimes, may violate the law of nations. See, e.g. United States v. Krupp, cited in Steven R. Ratner, Corporations and Human Rights: A Theory of Legal Responsibility, 111 YALE L.J. 443, 478 n. 134 (2001).[32]
Talisman apparently concedes that displacement violates international law. See, e.g., Universal Declaration of Human Rights, at art. 9; ICC STAT. art. 7 (listing deportation and forced transfer of population as crimes against humanity). However, it argues that plaintiffs have failed to allege details about what action Talisman took to assist Sudan in attacking them and forcing them to leave their villages. See Motion Brief, at 6-7. Given the nature of Amended Complaint, however, and in light of the fact that this is a motion to dismiss, not a motion for summary judgment, this argument lacks merit. Plaintiffs have alleged that Talisman was complicit with Sudan in "sanitizing" areas surrounding the oil concessions. They have alleged that Sudanese troops engaged in ethnic cleansing based upon a joint strategy formulated by Talisman and Sudan. See Amended Complaint, at ¶ 26. Although no discovery has taken place, plaintiffs quote a memo in which a Sudanese government official directed that "cleaning up operations" be conducted to fulfill the request of the "Canadian Company." Id. at ¶ 27. It would be an unfair and insurmountable burden, particularly at this stage, to require plaintiffs to allege the specific acts undertaken by Talisman and Sudan that lead to the attack on, for example, Mr. Cluol's village.[33]
3. Claims on Behalf of the Class
Under the heading, "Count IInternational Law," plaintiffs allege that defendants violated the law of nations and customary international law "relating to *326 torture, slavery[,] the treatment of civilians during armed conflicts[,] and the treatment of ethnic and religious minorities and their property." Amended Complaint, ¶ 75. Talisman claims that, in fact, plaintiffs have failed to allege that Talisman committed any of these acts.
a. Torture
Talisman states that the term "torture" only appears in paragraph 75 and that the Amended Complaint fails to allege that Talisman or Sudan engaged in torture. Although the term "torture" is used colloquially, it has a discreet meaning in international law. The most commonly accepted definition is that found in the Torture Convention:
[T]he term "torture" means any act by which severe pain or suffering, whether physical or mental, is intentionally inflicted on a person for such purposes as obtaining from him or a third person information or a confession, punishing him for an act he or a third person has committed or is suspected of having committed, or intimidating or coercing him or a third person, or for any reason based on discrimination of any kind, when such pain or suffering is inflicted by or at the instigation of or with the consent or acquiescence of a public official or other person acting in an official capacity. It does not include pain or suffering arising only from, inherent in or incidental to lawful sanctions.
Torture Convention, at art. 1(1). Cf. Torture Victim Protection Act of 1991, Pub.L. No. 102-256, 106 Stat. 73 (1992), codified at 28 U.S.C. § 1350 note (Supp. V 1993). The Amended Complaint does not allege that Talisman or Sudan inflicted pain or suffering upon plaintiffs to obtain information or confessions. However, the definition of torture also includes acts causing pain or suffering which are intentionally inflicted "for any reason based on discrimination of any kind" so long as such pain or suffering is inflicted "with the consent or acquiescence of a public official or other person acting in an official capacity." The Amended Complaint frequently alleges that Talisman conspired with, or aided and abetted, Sudan in its "ethnic cleansing" campaign against African non-Muslims. It can be inferred that military bombing raids, rapes[34], forced displacement, and extrajudicial killings caused "severe pain and suffering." Consequently, the Amended Complaint alleges torture, as long as plaintiffs can show that these acts were committed for any reason based on discrimination and with the consent or acquiescence of a public official or other person acting in an official capacity.
b. Slavery
Talisman similarly alleges that the Amended Complaint does not allege that Talisman utilized slave labor or that Talisman benefited from slave labor. This argument is irrelevant, because parties that conspire to commit acts of enslavement, or those that aid and abet parties who commit acts of enslavement, are potentially liable. The case Talisman cites for support, Doe v. Unocal, 110 F.Supp.2d 1294, 1309 (C.D.Cal.2000), was reversed by the Ninth Circuit. But see supra note 24. The Amended Complaint alleges that Talisman was complicit in Sudan's campaign of "ethnic cleansing" which included a policy of enslavement. Therefore dismissal is inappropriate at this stage.
c. War Crimes
Talisman claims that plaintiffs have not sufficiently alleged war crimes. *327 In particular, Talisman claims that it could not have committed war crimes because the Amended Complaint alleges that the acts it committed were "directed specifically at furthering its oil operations." Motion Brief, at 8. However, the fact that the desired end of Talisman's acts was the extraction of oil is irrelevant if it employed means that violated the law of nations. Plaintiffs, while noting that Talisman's primary interest was in oil extraction, not in "ethnic cleansing," allege that Talisman willingly worked with Sudan to commit acts of "ethnic cleansing" as a means of securing the oil supply:
Defendants have collaborated in a joint strategy to deploy military forces in a brutal ethnic cleansing campaign against a civilian population based on their ethnicity and/or religion for the purpose of enhancing Defendants' ability to explore and extract oil from areas of southern Sudan by creating a cordon sanitaire surrounding the oil concessions located there.
Amended Complaint, at ¶ 1. See also Amended Complaint, at ¶¶ 26, 27, 29, 32, 33, 37, 58, 60, 61, 62. The fact that the allegedly unlawful acts also generated oil revenue does not mean they were not war crimes.
d. Treatment of Ethnic and Religious Minorities
Talisman claims that the "treatment of ethnic and religious minorities" does not violate the law of nations unless it rises to the level of genocide. While Amended Complaint ¶ 75 does not state the word "genocide", it is clear from the Amended Complaint as a whole that this is exactly what plaintiffs are alleging. Indeed, the terms "genocide" and "ethnic cleansing"[35] are peppered throughout the Amended Complaint. See Amended Complaint, at ¶¶ 1, 21, 23, 26, 33, etc. The Amended Complaint alleges, that Talisman pays Sudan to "protect" oil concession areas, knowing that "such `protection' [... ] includes ethnic cleansing or genocide [...]." Amended Complaint, at ¶¶ 31, 33. While poor treatment of an ethnic or religious minority might not always violate international law, the alleged acts committed by Talisman and Sudan would.
The Genocide Convention requires acts undertaken "with intent to destroy, in whole or in part, a national, ethnical, racial or religious group, as such [...]." Genocide Convention, art. 2. Talisman then argues that the term "non-Muslim, African Sudanese minority" is not a potentially protected group. The Court holds otherwise. The term "non-Muslim" as applied to Sudan is simply a shorthand for "Christian and animist." To say that Sudan is attempting to wipe out its non-Muslim population is equivalent to saying that it is attempting to wipe out its Christian and animist population. Cf. Amended Complaint, at ¶ 14 (stating that Sudan's war against non-Muslim, African Sudanese is a "jihad"). Talisman provides no argument as to why "non-Muslims" do not constitute a religious group. In any event, the non-Muslim, African Sudanese minority certainly constitutes an ethnic group, and Talisman provides no evidence or analysis to the contrary. Consequently, plaintiffs do not fail to state a claim.
4. Whether Talisman Acted Under Color of Law
Talisman claims that the law of nations does not apply to private individuals except when they act under color of state law or commit an offense of universal concern. Talisman concedes that slavery, war crimes (including those relating to the *328 treatment of civilians during internal armed conflicts), and genocide are offenses of universal concern. See Kadic v. Karadzic, 70 F.3d 232, 241-3 (2d Cir.1995) (holding that genocide and war crimes can be committed by private actors without the need for state involvement). Talisman contends, however, that the allegations of torture and the (mis)treatment of ethnic and religious minorities and their property can only be imputed to Talisman if it acted under color of state law. Talisman's contention is incorrect. With respect to torture, the Second Circuit has recently held that there is no state action requirement if, as here, the torture is committed in the course of genocide or war crimes:
We held in Kadic that war crimes and acts of genocide are actionable under the Alien Tort Claims Act without regard to state action, but that "torture and summary executionwhen not perpetrated in the course of genocide or war crimesare proscribed by international law only when committed by state officials or under color of law."
Bigio v. Coca-Cola Co., 239 F.3d 440, 448 (2d Cir.2000) (emphasis added). With respect to the claims arising out of the treatment of ethnic and religious minorities, the Court has already held that plaintiffs are alleging genocide on the part of Sudan with Talisman in the role of co-conspirator or aider and abettor. Consequently, no showing of state action is necessary for any of the claims alleged in the Amended Complaint.
Regardless, the Court finds that the Amended Complaint adequately sets forth that Talisman acted under color of law. The case cited by Talisman with respect to whether or not Talisman acted under color of law is NCAA v. Tarkanian, 488 U.S. 179, 109 S.Ct. 454, 102 L.Ed.2d 469 (1988). This case examined whether a state university's compliance with NCAA rules and regulations turned the NCAA's conduct into state action. A far more relevant and recent case is Wiwa v. Royal Dutch Petroleum Co., No. 96 Civ. 8386, 2002 WL 319887 (S.D.N.Y. Feb. 28, 2002). Unlike NCAA, which analyzed general color of law principles, Wiwa concerned whether the human rights violations of a foreign state could be imputed to a corporation operating in that country. The facts in Wiwa are nearly identical to those here. Looking at 42 U.S.C. § 1983 jurisprudence as a guide, Judge Wood held that the "relevant test in this case is the `joint action' test, under which private actors are considered state actors if they are `willful participants] in joint action with the State or its agents." Id. at *13. The Wiwa court also noted that "[W]here there is a substantial degree of cooperative action between the state and private actors in effecting the deprivation of rights, state action is present." Id. at *13 (citation omitted).
The Wiwa court held that a substantial degree of cooperative action was present between the corporate defendants and the government of Nigeria. This substantial degree of cooperative action included payments to the Nigerian government, corporate contracts for the purchase of arms, and coordination with the Nigerian government with respect to certain military attacks on civilians. See id. at *13. Likewise, in this case plaintiffs allege that Talisman paid Sudan for "protection" knowing that such protection included unlawful acts; that it purchased dual use military equipment and permitted the Sudanese military to use certain facilities to launch unlawful attacks on civilians; and that it helped plan a strategy involving "ethnic cleansing." Just as in Wiwa, plaintiffs have adequately pled a "substantial degree of cooperation" between Talisman and Sudan. Therefore, the Court finds *329 that Talisman can be treated as a state actor for purposes of the ATCA (though it reiterates, as noted supra, that such a finding is not necessary in light of the nature of plaintiffs' allegations).
E. The Court has Personal Jurisdiction Over Talisman
Talisman next moves to dismiss on the basis of lack of personal jurisdiction. The Amended Complaint states that Talisman is a Canadian company headquartered in Calgary, Alberta, with operations in a variety of countries, including the United States. See Amended Complaint, at ¶ 3. Talisman allegedly conducts ongoing and significant business in the United States through wholly-owned subsidiaries Rigel and Fortuna. See id. at ¶ 4. Both Rigel and Fortuna conduct 100% of their business with or on behalf of Talisman, and plaintiffs allege that Talisman operates these wholly owned subsidiaries as departments or agents. See id. at ¶ 5. Moreover, Talisman officers and directors allegedly dominate the boards of Rigel and Fortuna. See id. at ¶ 5(a). Fortuna's business address is the same as Talisman's, and it has no separate financial standing. See id. at ¶ 5(b) and (c). Talisman is the agent of both Rigel and Fortuna, See id. at ¶ 5(d).
Ordinarily, when responding to a motion pursuant to FED. R. CIV. P. 12(b)(2) to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of establishing that the court has jurisdiction over the defendant. See Distefano v. Carozzi North America, Inc., 286 F.3d 81, 84 (2d Cir.2001). When a court relies merely on pleadings and affidavits, the plaintiff need only make a prima facie case showing that the court has personal jurisdiction over the defendant. See id. at 84. In this case, however, the Court informed plaintiffs' counsel orally at a conference on March 19, 2002, that no discovery would be allowed with respect to the question of personal jurisdiction prior to the Court's determination of defendant's motion. See Declaration of Stephen A. Whinston, June 26, 2002, at ¶¶ 17-18. At that time, the Court instructed plaintiffs' counsel that plaintiffs could satisfy their initial burden by pleading facts sufficient to demonstrate a need for discovery on that issue. See id. at ¶ 18. In making that determination, the Court construes the Amended Complaint in the light most favorable to plaintiffs.
Under the Federal Rules of Civil Procedure, a court may exercise jurisdiction over any defendant who "could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located," assuming such exercise of jurisdiction meets the due process requirements of the Fifth Amendment. FED. R. CIV. P. 4(k)(1)(A). Under New York, law, a foreign corporation is subject to general personal jurisdiction if it is "doing business" in the state. N.Y. C.P.L.R. § 301. The Second Circuit analyzed the concept of "doing business" in Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 95 (2d Cir.2000):
[A] corporation is "doing business" and is therefore "present" in New York and subject to personal jurisdiction with respect to any cause of action, related or unrelated to the New York contacts, if it does business in New York "not occasionally or casually, but with a fair measure of permanence and continuity."
(quoting Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 58 (2d Cir.1985)). In order to meet this standard, a plaintiff must show that a defendant engaged in "continuous, permanent, and substantial activity in New York." Wiwa, 226 F.3d at 95.
The continuous presence and substantial activities need not be conducted *330 by the foreign corporation itself. Indeed, personal jurisdiction may be based upon activities performed on behalf of a foreign corporation by an agent:
Under well-established New York law, a court of New York may assert jurisdiction over a foreign corporation when it affiliates itself with a New York representative entity and that New York representative renders services on behalf of the foreign corporation that go beyond mere solicitation and are sufficiently important to the foreign entity that the corporation itself would perform equivalent services if no agent were available.
Wiwa, 226 F.3d at 95. In order to come within the ambit of this rule, "a plaintiff need demonstrate neither a formal agency agreement, nor that the defendant exercised direct control over its putative agent." Id. at 95 (internal citations omitted). However, the agent must be primarily employed by the defendant and not be engaged in similar services for other clients. See id. at 95.
Like the instant case, Wiwa concerned an ATCA suit by various plaintiffs against a large oil concern for alleged human rights violations in Africa. The defendants in that case were incorporated in the Netherlands and England. However, both were listed on the New York Stock Exchange, ("NYSE") prepared filings for the Securities and Exchange Commission in New York, and employed transfer agents and depositories in New York for their shares. In Wiwa, the named defendants owned a subsidiary (a Delaware corporation) that in turn owned a subsidiary that conducted extensive operations in New York. Defendants in Wiiva also maintained an investor relations office in New York City that was nominally owned by the subsidiary of the subsidiary. The Wiiva court held that the defendants' listing on the New York Stock Exchange, coupled with the maintenance of an investor relations office in New York, subjected the two foreign corporations to jurisdiction in New York.
In the instant case, Talisman is a Canadian company that is traded on the NYSE. Talisman states, citing Wiiva, that a New York Stock Exchange listing is not enough to confer personal jurisdiction. Talisman is correct, but ignores the balance of the Second Circuit's argument. In Wiwa, the Second Circuit held that personal jurisdiction does not exist when a corporation's "only contacts with the forum are listings on the New York stock exchanges and ancillary arrangements involving the distribution of their shares." Wiwa, 226 F.3d at 97 (emphasis in original). However, the Second Circuit emphasized that "it is not that activities necessary to maintain a stock exchange listing do not count, but rather that, without more, they are insufficient to confer jurisdiction." Id. at 97. Consequently, the fact that Talisman is listed on the New York Stock Exchange is a factor militating in favor of conferring jurisdiction on this Court. If plaintiffs alleged only this fact and nothing more, personal jurisdiction would not exist, as per the Second Circuit's directive in Wiwa. However, as in Wiwa, plaintiffs have alleged numerous additional links to New York.
Beyond Talisman's listing on the NYSE, plaintiffs have alleged that Fortuna, a wholly owned subsidiary of Talisman, serves as a department or agent of Talisman and conducts significant operations in New York. Plaintiffs also contend, inter alia, that Talisman's officers and directors dominate the Fortuna board, that Fortuna has no separate financial standing, that Fortuna and Talisman share the same address, and that Talisman posts corporate bonds for Fortuna. Talisman's statement that the mere ownership by a *331 parent company of a subsidiary subject to personal jurisdiction in the forum state is insufficient to confer jurisdiction is therefore irrelevant, because plaintiffs allege a number of links between Talisman and its subsidiaries, including Fortuna. Talisman's statement that the subsidiaries are engaged in business unrelated to the issues in this litigation and that therefore jurisdiction does not lie is incorrect. Once a corporation is found to be doing business in the forum, jurisdiction lies with respect to "any cause of action, related or unrelated to the New York contacts." Wiwa, 226 F.3d at 88 (citations omitted). Indeed, in Wiwa, the Second Circuit upheld a finding of personal jurisdiction based in part on the existence of a New York investor relations office, whose business was entirely unrelated to the parent companies' activities in Nigeria. At this stage, plaintiffs' allegations are sufficient to confer jurisdiction and entitle them to conduct discovery on the matter.[36]
F. Plaintiffs Have Standing to Assert Claims
Talisman alleges that both the organizational and individual plaintiffs lack standing to assert claims in this case. The doctrine of standing is constitutional in nature and stems from the dictates of Article III. Any analysis of standing must be guided by the Supreme Court's decision in Allen v. Wright, 468 U.S. 737, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984). In that case, the Court held that in order to meet the standing requirement, "[a] plaintiff must allege [1] personal injury [2] fairly traceable to the defendant's allegedly unlawful conduct and [3] likely to be redressed by the requested relief." Id. at 751, 104 S.Ct. 3315.
1. The Organizational Plaintiffs Have Standing
Talisman alleges that the Presbyterian Church has failed to meet the first element of Allen because it has not suffered any injury that gives rise to a cause of action under the ATCA. Talisman concedes that the Presbyterian Church and NCDS have standing to assert claims for property loss, but states that such injuries are not cognizable under the law of nations. However, property damage may violate the law of nations when committed in the context of a genocide or war crimes, as noted supra.
More importantly, both organizations are suing in a derivative capacity; that is, on behalf of their members. Both parties agree that the relevant case on point is Hunt v. Washington State Apple Adver. Comm'n, 432 U.S. 333, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). That case held that an association has standing to bring suit on behalf of its members when: "[1] its members would otherwise have standing to sue in their own right; [2] the interests it seeks to protect are germane to the organization's purpose; and [3] neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit." Id. at 343, 97 S.Ct. 2434.
Talisman does not dispute that the organizational defendants in this case meet the first prong of Hunt. With respect to the second prong, Talisman argues that the purposes of the Presbyterian Church and NCDS are unrelated to this action. The Court disagrees. With respect to the Presbyterian Church, Talisman cites Mussington v. St. Luke's-Roosevelt Hosp., 824 F.Supp. 427, 431 (S.D.N.Y. 1993), affd 18 F.3d 1033 (2d Cir. 1994) for *332 the proposition that churches are not appropriate associational plaintiffs "merely because they are concerned with the wellbeing of their community and feel it threatened by other parties." Talisman's quotation of Mussington is misleading, however, because it omits the first half of that sentence, which states in part that "churches may certainly deserve associational standing in certain cases, for example, those involving religious issues [...]." Id. at 431. Far from supporting Talisman's contention that the Presbyterian Church should not have standing, Mussington in fact supports the opposite conclusion. Unlike Mussington, which involved an effectively secular dispute, here plaintiffs allege the commission of a genocide and war crimes based in substantial part upon plaintiffs' religion. Indeed, even a cursory glance at Sudan's troubled history adds credence to the allegation of plaintiffs that Talisman is assisting Sudan in its "jihad" against non-Muslims. Amended Complaint, at ¶ 14. Moreover, plaintiffs allege that the Presbyterian Church's churches have been targeted by Government forces and that its leaders and parishioners have been killed. Plaintiffs suggest, and the Court is inclined to agree, that a central part of a church's function is to protect its clergy and lay members from attacks and discrimination based on their religion. Whether or not this is the Presbyterian Church's primary function, the interests it seeks to protect in this case are certainly "germane" to its purposes. Hunt, 432 U.S. at 343, 97 S.Ct. 2434.
Talisman also claims that NCDS's interest in this action is not germane to its purpose as an organization. Talisman quotes the Amended Complaint, stating that NCDS is "dedicated to assisting Nuer refugees." Amended Complaint, at ¶ 2(c). According to Talisman, because NCDS's members are U.S. citizens or resident aliens, they are not "non-Muslim, African Sudanese residents" and therefore not part of the class. Talisman's argument is misleading, because it only quotes the Amended Complaint selectively. According to the Amended Complaint, NCDS is "dedicated to assisting Nuer refugees in the United States," as Talisman states, but is also dedicated to assisting "those remaining in Sudan who are victims of the ethnic cleansing campaign to secure their land for oil development." Id. at ¶ 2(c). By only quoting half of the sentence, Talisman gives the false impression that NCDS's purpose is solely to help Nuer refugees living outside of Sudan, and ignores the allegation that NCDS is also dedicated to assisting Nuer people who remain in Sudan and who are victims of the "ethnic cleansing" campaign. Given that NCDS's purpose includes assisting current victims of the alleged "ethnic cleansing" campaign in Sudan, the interests NCDS seeks to vindicate are not only germane to its purpose but central to it.
Turning to the third prong of Hunt, Talisman contends that each of the claims asserted by the organizational plaintiffs requires the participation of individual members. Specifically, Talisman claims that the organizational plaintiffs lack standing because the damage claims of the members are not common to the entire membership nor shared by all in equal degree. Instead, Talisman argues that participation by individual members is required to determine the level of compensatory damages. It also argues, without providing any legal or logical analysis, that neither organization can seek injunctive relief because "the grant of relief is dependent on alleged harm to individual plaintiffs which can only be adjudicated by considering the testimony and evidence of those individuals." Motion Brief, at 15. With respect to compensatory damages *333 (Talisman does not address punitive damages at this point), the Court notes that there are a number of individual named plaintiffs. Moreover, the instant action is a class action pursuant to FED. R. CIV. P. 23. In light of those factors, the Court rejects Talisman's argument, and finds that both the Presbyterian Church and NCDS have standing in this case. The Court also rejects Talisman's cryptic claim that a plaintiff-by-plaintiff assessment of damages are required in order to consider whether to enjoin defendants from continuing to cooperate or assist in waging "ethnic cleansing" against the non-Muslim, African Sudanese population.
The Court also notes that the Second Circuit has previously confronted a case in which organizational plaintiffs together with individual plaintiffs sued a defendant under the ATCA seeking damages and injunctive relief because of the alleged commission of genocide and gross human rights violations. In Kadic v. Karadzic, 70 F.3d 232 (2d Cir.1995), plaintiffs included individuals as well as the Internationalna Iniciativa Zena Bosne I Hercegovine "Biser" and Zene Bosne I Hercegovine, two organizations dedicated to helping victims of the atrocities being committed in the former Yugoslavia. As Talisman notes, standing is a constitutional issue. Reviewing courts therefore have a duty to raise the issue sua sponte even when none of the parties addresses standing. See Pashaian v. Eccelston Props., Ltd., 88 F.3d 77, 82 (2d Cir.1996) ("Neither party raises the standing issue on appeal, but because it is jurisdictional, see Thompson v. County of Franklin, 15 F.3d 245, 248 (2d Cir. 1994), we must examine the issue sua sponte when it emerges from the record"). The fact that the Kadic court did not dispute the organizations' standing to file suit further supports the standing of the organizational plaintiffs in this case.
2. The Individual Plaintiffs Have Standing
Talisman contends that the individual named defendants lack standing to bring this action. Its first argument is that plaintiffs fail to allege injuries "fairly traceable" to Talisman's actions. According to Talisman, plaintiffs' injuries resulted from the acts of Sudan, not of Talisman. The Court has already refuted this argument above. As noted, international law makes clear that incitement to genocide, as well as complicity in gross human rights violations, violates international law. For example, the United States Military Tribunal, trying post-World War II war criminals, embraced a wide-ranging conception of complicity:
This is but an application of general concepts of criminal law. The person who persuades another to commit murder, the person who furnishes the lethal weapon for the purpose of its commission, and the person who pulls the trigger are all principals or accessories to the crime.
United States v. Alstotter, 6 L. Rep. Tr. War Crim. 1, 62 (1948). The International Criminal Tribunal for the former Yugoslavia has similarly held that "direct contribution does not necessarily require the participation in the physical commission of the illegal act," and that "participation in the commission of the crime does not require an actual physical presence or physical assistance [...]." Prosecutor v. Tadic (Case No. IT-94-1-T), Opinion and Judgment, May 7, 1997, at ¶¶ 78, 691. The Amended Complaint sets forth allegations of Talisman's complicity with Sudan in its campaign of "ethnic cleansing." The Court therefore rejects this argument.
Talisman also argues that the individual plaintiffs lack standing to assert claims on behalf of third parties who may *334 have suffered injuries. Talisman states that a plaintiff "generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties," quoting Altman v. Bedford Cent. Sch. Dist, 245 F.3d 49, 70 (2d Cir.2001). The quoted language in Altman in fact comes from Worth v. Seldin, 422 U.S. 490, 499, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975). Warth concerned certain zoning policies that were allegedly discriminatory against the poor and racial minorities. Certain individual plaintiffs in the purported class action were poor and members of racial minorities. However, while alleging these shared characteristics, they failed to allege that they themselves were injured by the zoning policies:
[T]he fact that these petitioners share attributes common to persons who may have been excluded from residence in the town is an insufficient predicate for the conclusion that petitioners themselves have been excluded, or that the respondents' assertedly illegal actions have violated their rights.
Warth, 422 U.S. at 502, 95 S.Ct. 2197. In contrast, in the instant case the individuals not only share certain characteristics with the class by being non-Muslim African Sudanese, but they also allege specific injuries allegedly caused by defendants' actions. Talisman further claims that standing requires a close relation to the third party as well as some hindrance to the third party's ability to protect his or her own interests, citing Tasini v. New York Times, 184 F.Supp.2d 350, 357 (S.D.N.Y.2002). While this is generally correct, it does not necessarily hold true in the context of class actions.[37] While each member of the class must have standing with respect to injuries suffered as a result of defendants' actions, the named plaintiffs do not need to have a "close relation" to the other class members so long as the strictures of FED. R. Crv. P. 23 are followed.
Indeed, as plaintiffs correctly note, Talisman's argument in this section is incorrect because it conflates standing under Article III of the Constitution with the class action requirements of FED. R. CIV. P. 23. Talisman argues, in effect, that plaintiffs do not adequately represent other alleged victims of defendants' conduct. Whatever the merits of Talisman's position, they fall under the rubric of Rule 23 and not standing.[38] Therefore, the arguments should be raised when plaintiffs move for class certification. See 1 NEWberg ON CLASS ACTIONS § 2.07 (3d ed.) ("Whether or not the named plaintiff who meets individual standing requirements may assert the rights of absent class members is neither a standing issue nor an Article III case or controversy issue but depends rather on meeting the prerequisites of Rule 23 [...]."). See also Open Hons. Ctr. v. Samson Mgmt. Corp., 152 F.R.D. 472, 476 (S.D.N.Y.1993) ("standing to sue [...] is separate and distinct from the issue of whether the class representatives have claims that are typical of the proposed class members.").
3. Plaintiffs Have Standing to Assert Claims Based on Arakis's Conduct
Talisman alleges that plaintiffs fail to allege that they have suffered injuries as a result of conduct by Arakis. Plaintiffs *335 allege, however, that Talisman succeeded to Arakis's assets and liabilities, and that Arakis was complicit in the alleged "ethnic cleansing." See Amended Complaint, at ¶¶ 3, 18, 21, 22, 23, 24. This allegation must be accepted as true at this stage. Talisman claims that to the extent that Garbang alleges claims for injuries stemming from 1994, she fails to allege that Arakis caused those injuries. However, the Amended Complaint does state that the 1994 attack was "part of the Government's ethnic cleansing campaign against non-Muslim, African Sudanese in the oil producing areas [...]." Amended Complaint, at ¶ 2(e). Examining this language in the context of the Amended Complaint as a whole, the clear implication is that Arakis was complicit with Sudan in causing the 1994 injuries. To the extent that Talisman is arguing that the named plaintiffs were injured at different times than other members of the class, the question is one of typicality which should be raised when plaintiffs seek to have the class certified.
G. The Doctrine of Forum Non Conveniens Does Not Mandate Dismissal
Talisman argues that the doctrine of forum non conveniens mandates dismissal of the action. The doctrine permits a court to dismiss a claim, "even if the court is a permissible venue with proper jurisdiction over the claim", in order to allow the action to be tried elsewhere for the convenience of litigants and witnesses. Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 100 (2d Cir.2000). The grant or denial of a motion to dismiss for forum non conveniens reasons is generally "committed to the district court's discretion." Wiwa, 226 F.3d at 99. However, the Second Circuit, in the context of an ATCA claim, has recently cautioned courts that dismissal should be granted in "rare instances," and the plaintiffs choice of forum should "rarely be disturbed." Id. at 100. In assessing whether or not to grant a dismissal based on the doctrine of forum non conveniens, a two step analysis is required. First, the court must determine whether an adequate alternative forum exists. Second, if such a forum exists, the court must undertake a balancing test and weigh several factors involving the private interests of the parties and the public interests at stake. See id. at 100. The test for forum non conveniens is not a simple matter of which side has the weightier uargument. Instead, the burden is on the defendant to show that the factors tilt "strongly" in favor of trial in a foreign forum. Id. at 100.
1. Adequate Forum Analysis
Talisman argues that both Sudan and Canada are adequate alternative fora. The Court finds that Sudan is not an adequate alternative forum, but assumes, without so deciding, that Canada is.
a. Sudan is Not an Adequate Alternative Forum
Talisman suggests that plaintiffs bring their claims in Sudan. In support of this claim, Talisman includes an affidavit by Dr. Abdul Rahman Ibrahim el Khalifa, an associate professor of law at the University of Khartoum. The affidavit outlines in detail procedures and jurisprudence of the Sudanese judicial system. Notably absent from the affidavit, however, is any statement indicating that the Sudanese judicial system is fair and free from corruption, and that plaintiffs, who are alleging that Sudan committed genocide and war crimes, could get a fair trial. Plaintiffs' expert, Dr. Abdullahi Ahmed An-Na'im addresses this point, and notes that plaintiffs, who are non-Muslims, enjoy greatly reduced rights in Sudan under the system of Islamic law (Shari`a) in place. See *336 Affidavit of Dr. Abdullahi Ahmed An-Na'im, at ¶¶ 8, 17, 18. These reduced rights include a total lack of legal personality for plaintiffs who practice traditional African religions, and diminished testimonial competence for Christians. See id, at ¶ 17. Dr. An-Na'im concludes that "the trial of this case in Sudan will result in a total failure of justice." Id, at ¶ 9.
Putting aside for the moment the fact that Sudan has been classified as a state sponsor of terrorism, see Amended Complaint, at ¶ 13, at this stage, the Court is obligated to accept the allegations of plaintiffs as true. It would be rather surprising if the government of Sudan conducted a war of "ethnic cleansing" against plaintiffs and at the same time granted them a fair judicial process to remedy those injuries. In addition, it would be perverse, to say the least, to require plaintiffs to bring this suit in the courts of the very nation that has allegedly been conducting genocidal activities to try to eliminate them. The Second Circuit has been cognizant of this fact and has not required alleged victims of gross human rights violations to file suit in the place where the alleged violations occurred:
One of the difficulties that confront victims of torture under color of a nation's law is the enormous difficulty of bringing suits to vindicate such abuses. Most likely, the victims cannot sue in the place where the torture occurred. Indeed, in many instances, the victim would be endangered merely by returning to that place. It is not easy to bring such suits in the courts of another nation. Courts are often inhospitable. Such suits are generally time consuming, burdensome, and difficult to administer. In addition, because they assert outrageous conduct on the part of another nation, such suits may embarrass the government of the nation in whose courts they are brought. Finally, because characteristically neither the plaintiffs nor the defendants are ostensibly either protected or governed by the domestic law of the forum nation, courts often regard such suits as "not our business."
Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 106 (2d Cir.2000). This Court made the same determination in Cabiri v. Assasie-Gyimah, 921 F.Supp. 1189, 1199 (S.D.N.Y.1996). In that case, this Court denied the defendant's motion to dismiss on the grounds of forum non conveniens in part because the plaintiff would be "putting himself in grave danger" were he to return to Ghana where he had allegedly been tortured. This Court also noted that "[a] motion to relegate a plaintiff to a foreign forum will be denied if the plaintiff shows that foreign law is inadequate, or that conditions in the foreign forum plainly demonstrate that the plaintiffs are highly unlikely to obtain basic justice therein." Id. at 1199 (quoting Rasoulzadeh v. Associated Press, 574 F.Supp. 854 (S.D.N.Y. 1983), aff'd, 767 F.2d 908 (2d Cir.1985)). In light of the almost self-evident fact that, if plaintiffs' allegations are true, plaintiffs would be unable to obtain justice in Sudan and might well expose themselves to great danger in trying to do so, the Court finds that Sudan is not an appropriate forum under forum non conveniens analysis.
b. The Court Assumes that Canada is an Adequate Forum
Having found that Sudan would not be an appropriate alternative forum, the Court examines whether Canada would be. Talisman encloses the affidavits of two accomplished Canadian lawyers: Christopher D. Bredt of the Ontario bar and Frank R. Foran of the Alberta bar. The Court will assume, without deciding, that plaintiffs would be able to receive a fair *337 trial in Canada, notwithstanding the fact that Talisman is a Canadian company.
Plaintiffs do not address the question of whether Canada is an adequate alternative forum, and concentrate on the balancing test prong of the forum non conveniens test. While Canadian courts may be fair and impartial, there are aspects of the substantive law which would be applied in Canadian courts which make Canada an inadequate alternative forum. A preliminary issue is the choice of law that would be applied. Mr. Foran notes that an Alberta court would, prima facie, apply the lex loci delicti, or the law of the place where the activity occurred. In this case, that would mean that the Alberta court would apply Sudanese, Shari'a law. However, as noted above, under Sudanese law, plaintiffs as non-Muslims would enjoy greatly reduced rights. Given this fact, it is difficult to see how a Canadian court applying Shari'a law would be a great improvement over a Sudanese court applying Shari'a law. While Mr. Foran notes that the Canadian Supreme Court has held that domestic law could be applied instead of international law to avoid injustice, that court also held that it envisioned "few cases where this would be necessary." Tolofson v. Jensen, [1994] 3 S.C.R. 1022, at ¶ 50. Mr. Bredt's affidavit does not address whether Sudanese law could be applicable were this action transferred to an Ontario court.
Assuming, however, that a Canadian court (either Alberta or Ontario) would apply domestic law, another problem remains. Both Mr. Foran and Mr. Bredt set forth the potential causes of action plaintiffs would have in Alberta and Ontario courts. These causes of action included a variety of common law claims (battery, false imprisonment, assault, intentional infliction of mental suffering, conspiracy, unlawful interference with economic interests, trespass to chattels, and negligence). See Affidavit of Frank R. Foran, at ¶ 15-16; Affidavit of Christopher D. Bredt, at ¶ 12. In addition, both affidavits discuss various statutory causes of action. See Affidavit of Frank R. Foran, at ¶ 17; Affidavit of Christopher D. Bredt, at ¶¶ 13-15, However, neither affidavit makes any mention of a cause of action for violations of the law of nations, and in particular, for jus cogens violations thereof.
The concern is that the causes of action available do not reflect the gravity of the alleged offenses, and in particular, the universally-condemned nature of these acts. The offenses alleged in the Amended Complaint are considered international crimes entailing individual responsibility and subject to universal jurisdiction precisely because they constitute a fundamental affront to the international order. Such crimes are more than the sum of their parts. Genocide may quantitatively be the same as a large number of murders, but it is qualitatively different, and this difference is recognized by the fact that the act enjoys special status under international law. See RESTATEMENT (THIRD) OF FOREIGN RELATIONS §§ 404, 702 (1987). While plaintiffs may be able to obtain the same relief in Canadian courts that they seek in this jurisdiction, it is evident from the affidavits provided that Canadian courts will only be able to treat plaintiffs' allegations as violations of Canadian, rather than international law. Because this treatment fails to recognize the gravity of plaintiffs' allegations, the Court questions whether Canadian courts (in either Alberta or Ontario) would be adequate alternative fora.[39]*338 However, plaintiffs do not challenge Talisman's assertion that Canadian courts would be adequate alternative fora. In light of this fact, the Court assumes, without so deciding, that Canadian courts would be adequate alternative fora.
2. Weighing the Interests at Stake
Assuming, arguendo, that Canadian courts are adequate alternative fora, the Court must now weigh the various public and private interests at stake. In so doing, the Court is cognizant that the burden is on Talisman to show that the factors tilt "strongly" in favor of trial in a foreign forum. Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88,100 (2d Cir.2000).
The Wiwa case is directly on point but is only cited peripherally by Talisman. Wiwa involved several Nigerian citizens resident in the United States who sued a British and Dutch company under the ATCA for alleged gross human rights violations including crimes against humanity and torture. The district court dismissed the case based on forum non conveniens grounds. The Second Circuit reversed the decision, and stated that the district court had failed to give weight to three significant considerations in favor of retaining jurisdiction for trial:
(1) a United States resident plaintiffs choice of forum;
(2) the interests of the United States in furnishing a forum to litigate claims of violations of the international standards of the law of human rights; and
(3) the factors that led the district court to dismiss in favor of a British forum were not particularly compelling.
Wiwa, 226 F.3d at 101. An analysis of each of these factors in the instant case similarly reveals that dismissal on forum non conveniens grounds would be improper.
a. Deference to a Choice of U.S. Forum by a U.S. Resident Plaintiff
In the instant case, NCDS, Garbang, and Cluol are all United States residents. See Amended Complaint, at ¶ 2(c), (e), and (f). The Presbyterian Church may also have members who are United States residents. See id. at ¶ 2(a). The Wiiva court held that a "plaintiffs choice of forum is entitled to substantial deference and should only be disturbed if the factors favoring the alternative forum are compelling." Wiwa, 226 F.3d at 101. The Second Circuit went on to explain that while all plaintiffs are entitled to some degree of deference, that deference increases when the plaintiffs are citizens or residents. See id. at 101-02. The Second Circuit's determination that residents are entitled to substantial deference was based on its analysis of Supreme Court precedent:
During the last two decades, our caselaw and that of the Supreme Court has clearly and unambiguously established that courts should offer greater deference to the selection of a U.S. forum by U.S. resident plaintiffs when evaluating a motion to dismiss for forum non conveniens.
Wiwa, 226 F.3d at 102 (emphasis added). The rule that United States citizens and residents are entitled to greater deference in their forum choice is not based on "chauvinism or bias" but on the fact that United States residents and plaintiffs have greater ties to the United States and therefore would be more inconvenienced by a requirement that they file suit in another jurisdiction. Id. at 102.
The Court notes that NCDS is incorporated in Minnesota, that Garbang is an Illinois resident, and that Cluol is an Iowa resident. In short, while several plaintiffs are United States residents, none is a New York resident. Similarly, in Wiwa, none of the plaintiffs was a resident *339 of New York. The district court in that case had weighed that fact against plaintiffs. As the Second Circuit has made clear, that was reversible error:
In this case, the district court weighed against the plaintiffs that none of them were [sic] residents of the Southern District of New York but did not count in favor of their choice of a U.S. forum that two of them were residents of the United States. This was error.
Wiwa, 226 F.3d at 103. For purposes of a forum non conveniens determination, the home forum of any United States resident is any United States Court. See id. at 103. Thus, the fact that none of the plaintiffs in the instant case is a resident of the Southern District is irrelevant. The fact that none of the individual plaintiffs is a United States citizen is similarly irrelevant: "We have never accorded less deference to a foreign plaintiffs choice of a United States forum where that plaintiff was a U.S. resident." Wiwa, 226 F.3d at 103. The fact that the case is a class action suit does not necessarily mean that less deference is due. See, e.g., In re: Assicurazioni Generali S.p.A. Holocaust Ins. Litigation, 228 F.Supp.2d 348, 352 (S.D.N.Y.2002) (deference is due "notwithstanding the fact that plaintiffs are acting in a representative capacity" where plaintiffs had legitimate reasons for bringing suit in the forum).
That several plaintiffs are U.S. residents differentiates the case from a recent Second Circuit case cited by Talisman, Aguinda v. Texaco, Inc., 303 F.3d 470 (2d Cir. 2002). In that case, which like Wiwa was authored by Judge Leval, the court upheld dismissal on forum non conveniens grounds. However, in Aguinda, all of the plaintiffs and all members of their putative classes were living in Ecuador or Peru. See Aguinda v. Texaco, Inc., 303 F.3d 470, 479 (2d Cir.2002). Consequently, unlike the instant plaintiffs, the Aguinda plaintiffs were entitled to no greater degree of deference in their choice of forum.
b. U.S. Interest in Vindicating International Human Rights Violations
A second factor militating against dismissal on forum non conveniens grounds is the strong United States interest in vindicating international human rights violations. In this case, plaintiffs seek redress for jus cogens violations of international law. As noted above, the allegations include charges of genocide, war crimes, torture, and enslavement. These acts are universally condemned, and the United States has a strong interest in seeing violations of international law vindicated. See, e.g., Testa v. Katt, 330 U.S. 386, 390 n. 4, 67 S.Ct. 810, 91 L.Ed. 967 (1947). The Second Circuit in Wiwa, a case that also alleged major human rights violations including torture and crimes against humanity, reversed a district court decision granting dismissal on the basis of forum non conveniens, in part because the "district court did not accord proper significance [... ] to the policy interest implicit in our federal statutory law in providing a forum for adjudication of claims of violations of the law of nations." Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 100 (2d Cir. 2000). This is not to say that the United States has a small interest in adjudicating ATCA claims alleging non-jus cogens violations; rather, the Second Circuit's holding in Wiwa indicates that the United States has an interest in addressing international law violations (through suits under the ATCA), most notably where the allegations include "claims of violations of the international standards of the law of human rights." Wiwa, 226 F.3d at 101.
According to Talisman, "[n]either the United States nor New York has more than a minimal interest in adjudicating in *340 New York a case on behalf of a Sudanese class against a Canadian corporation relating to alleged events wholly within Sudan." Motion Brief, at 20. In making this statement, Talisman fails to recognize the significance of the fact that the Amended Complaint alleges jus cogens violations of international law such as genocide, war crimes, torture, and enslavement. As noted supra, these acts are universally abhorrent and entail individual responsibility. Because of the nature of the alleged acts, the United States has a substantial interest in affording alleged victims of atrocities a method to vindicate their rights. See, e.g., Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 106 (2d Cir.2000) (in the context of torture, "suits should not be facilely dismissed on the assumption that the ostensibly foreign controversy is not our business").[40]
The grave nature of the allegations in this case make it similar to Wiwa and distinguishes it from several recent cases cited by Talisman. For example, in Aguinda v. Texaco, Inc., 303 F.3d 470 (2d Cir.2002), the Second Circuit upheld a dismissal based on forum non conveniens grounds. In addition to the fact that none of the plaintiffs in that case was a United States resident (as noted supra), the allegations in Aguinda were that Texaco had caused environmental damage and personal injuries. While the Aguinda court did not address subject matter jurisdiction, it is well-established that environmental damage, without more, generally does not violate international law. See, e.g., Flores v. So. Peru Copper Corp., No. 00 Civ. 9812, 2002 WL 1587224, at *11 (S.D.N.Y. July 16, 2002). Similarly, Talisman has called the Court's attention to Abdullahi v. Pfizer, Inc., No. 01 Civ. 8118, 2002 WL 31082956 (S.D.N.Y. Sept. 17, 2002). In that case, the district court dismissed an action on forum non conveniens grounds in which plaintiffs alleged that the defendant had conducted medical experimentation on them. The Abdullahi court noted specifically that "the conduct alleged here, however reprehensible, falls short of constituting a [RESTATEMENT (THIRD) OF FOReign RELATIONS] section 404 violation of `universal concern.'" Id. at *5. The interest of the United States in adjudicating the case was therefore less great than it is in the instant case, where plaintiffs allege genocide, war crimes, torture, and enslavement, all of which are jus cogens violations of "universal concern."
c. Weighing of Other Factors
An examination of other factors in this case indicate that dismissal would be inappropriate. The factors cited by Talisman include the fact that Talisman is headquartered in Canada and that its records are located in Alberta. These factors weigh only slightly in Talisman's favor. First, the argument that Talisman needs to litigate the case where it is headquartered is undermined by the fact that Talisman also seeks to dismiss the action in favor of the much more distant forum of Sudan. Second, large corporations like Talisman routinely litigate cases outside of their home jurisdiction. Third, as plaintiffs point out, "the need to photocopy and ship documents is hardly unprecedented in American litigation." DiRienzo v. Philip Servs. Corp., 232 F.3d 49, 66 (2d Cir.2000). Talisman also argues that witnesses are located in Canada. This argument similarly is not entitled to great weight, especially given that Talisman has suggested that this action be dismissed in favor of an action to *341 be brought in Sudan. By all accounts, New York City constitutes a more convenient transportation hub than Khartoum. To the extent that Talisman employees would have to travel from Calgary, Alberta to New York, this does constitute an inconvenience, but not a particularly oppressive one. Moreover, Talisman has not provided the Court with any information as to the particular witnesses who reside in Canada who would be called. Such a list of witnesses has been held to be a prerequisite for forum non conveniens dismissal. See, e.g., Weltover, Inc. v. Republic of Argentina, 753 F.Supp. 1201, 1209 (S.D.N.Y.1991) ("In the absence of such information, the Court cannot assess how defendant will be prejudiced by litigation in New York."). Cf. Calavo Growers of California v. Generali Belgium, 632 F.2d 963, 969 (2d Cir.1980) (Newsman, J., concurring) ("It will often be quicker and less expensive to transfer a witness or a document than to transfer a lawsuit."). With respect to Sudan, Talisman presents no evidence that litigating this action in New York would be less convenient than litigating it in Canada. Indeed, common sense would indicate that in light of the existing Sudanese presence in New York (by virtue of its permanent mission to the United Nations) litigating the case here would be more convenient than Canada.
A countervailing factor is the relative means of the parties. As in Wiwa, Talisman has not demonstrated that the costs of litigating this action in New York would be excessively burdensome, especially in view of its vast resources. See Wiwa, 226 F.3d at 107. In this case, defendants clearly have the upper hand when it comes to resources. The relative poverty of plaintiffs is a factor the Court may consider:
[T]he additional cost and inconvenience to the defendants of litigating in New York is fully counterbalanced by the costs and inconvenience to the plaintiffs of requiring them to reinstitute the litigation in [the foreign forum]-especially given the plaintiffs' minimal resources in comparison to the vast resources of the defendants.
Wiwa, 226 F.3d at 107. In addition, as in Wiwa, plaintiffs in this case have obtained excellent pro bono counsel to litigate this case. This factor, too may be considered by the Court. See Wiwa, 226 F.3d at 108 n. 13 ("plaintiffs have already obtained excellent pro bono counsel [...]; there is no guarantee that they will be able to obtain equivalent representation in [the foreign forum] without incurring substantial expenses.").
While it might be more convenient for Talisman to litigate this case in its home forum, this inconvenience is substantially outweighed by the much greater inconvenience plaintiffs would face if they were forced to litigate this action in Canada. Having considered all of the relevant factors, the Court holds that Talisman has failed to justify its motion to dismiss this action on the grounds of forum non conveniens because it has not shown that pertinent factors "tilt strongly" in favor of trial in the foreign forum. Wiwa, 226 F.3d at 100.
H. Principles of International Comity do Not Bar this Action
Talisman argues that principles of international comity counsel against this Court asserting jurisdiction over the action. In particular, it argues that Sudan and Canada have strong interests in resolving the dispute which serves as the basis for this action. Talisman's notion of comity is more far-reaching than the traditional conception of what that term means. International comity has been defined as the "recognition which one nation allows *342 within its territory to the legislative, executive or judicial acts of another nation." Bigio v. Coca-Cola Co., 239 F.3d 440, 454 (2d Cir.2000) (quoting Hilton v. Guyot, 159 U.S. 113, 164, 16 S.Ct. 139, 40 L.Ed. 95 (1895)). Here, however, Talisman does not point to any particular legal decision or even legislative enactment to which this Court ought to pay deference. Instead, it argues that this Court should dismiss the ease based on Sudanese and Canadian interests. As set forth below, neither of these interests is especially compelling, and the Court rejects Talisman's request to not assert jurisdiction in this case. The Court notes that international comity is a fundamentally discretionary act and is not obligatory. See Bigio, 239 F.3d at 454. Cf. Gurnard S.S. Co. v. Salen Reefer Servs. AB, 773 F.2d 452, 457 (2d Cir.1985) ("Although more than mere courtesy and accommodation, comity does not achieve the force of an imperative or obligation") (quoting Somportex Ltd, v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 440 (3d Cir.1971)).[41]
1. Sudan's Interest in this Action Does Not Merit Granting Comity
Talisman argues that Sudanese interests in the adjudication of this case merit granting comity. As noted above, comity generally means deference to a foreign nation's legislative, executive, or judicial enactment. Talisman fails to indicate any specific enactment to which this Court should pay deference. Instead, Talisman implies that dismissal is warranted, because "[r]egardless of any criticism that has been levied against it for its domestic policies, [Sudan] is the legitimate and recognized government of that country with sovereign rights that warrant deference from other members of the international community." Motion Brief, at 22. In essence, Talisman argues that this Court is not in a position to judge Sudan's acts and that it should effectively mind its own business.
This argument is incorrect.[42] Normally, comity entails a domestic court honoring a foreign court's judgment or dismissing a case in favor of a pending proceeding. See, e.g., Cunard S.S. Co. v. Salen Reefer Servs. AB, 773 F.2d 452 (2d Cir.1985) (affirming the grant of comity to a Swedish court decision staying creditor actions); Allstate Life his. Co. v. Linter Group, Ltd. 994 F.2d 996 (2d. Cir.1993) (affirming dismissal in favor of a pending proceeding in Australia). Talisman, however, asks this court to grant comity with regard to Sudan's allegedly genocidal acts. Such acts are fundamentally different than a foreign court's determination in, for example, a bankruptcy matter. Moreover, *343 granting comity to allegedly genocidal acts violates the strong United States interest in addressing jus cogens violations through the ATCA. See Wiwa, 226 F.3d at 103-04. Second Circuit precedent indicates that comity need not be granted in such cases. See id.; see also Pravin Banker Assocs. Ltd. v. Banco Popular Del Peru, 109 F.3d 850, 854 ("No nation is under unremitting obligation to enforce foreign interests which are fundamentally prejudicial to those of the domestic forum.") (quoting Laker Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909, 937 (D.C.Cir.1984)).
Talisman also urges the Court to grant comity with respect to Sudanese remedies. However, as indicated above, Talisman has presented no evidence that plaintiffs could realistically expect to vindicate their rights in Sudan.[43] Assuming plaintiffs' claims to be true, as the Court must at this stage, Talisman would require plaintiffs to seek justice from the very regime that is conducting a genocidal campaign against them. Requiring plaintiffs to seek justice in the courts of an allegedly genocidal regime bent on their extermination would be a grotesque miscarriage of justice, and the case law concerning comity precludes such a result. See, e.g., Pravin Banker Assocs., Ltd. v. Banco Popular Del Pent, 109 F.3d 850, 854 (2d Cir.1997).[44]
Talisman also urges deference to Sudan's ongoing peace negotiations. Talisman fails to point to any specific enactment or process, however, to which this Court purportedly ought to pay deference. Instead, Talisman states that Sudan is in the midst of intense negotiations to resolve an ongoing civil war. The implication is that adjudication of this matter will somehow hinder these peace efforts.[45] Talisman does not specify how or why adjudication of this matter in this Court is a threat to ongoing efforts to resolve the Sudanese civil war. As noted supra, the civil war in Sudan has been raging on and off for decades.[46] The Court also notes Sudan has already been declared a state sponsor of terrorism by the United States government, and that the United States Congress has declared that Sudan has been conducting acts of genocide. See Amended Complaint, at ¶ 13; Sudan Peace Act, Pub.L. No. 107-245 (2002), at § 2(10). Any adjudication of private plaintiffs' rights in this Court would certainly have far less impact than either of these government pronouncements.
2. Canada's Interest in this Action Does Not Merit Granting Comity
Talisman also argues that comity should be granted in favor of Canada. *344 Again, it fails to articulate a specific enactment by the executive, legislative, or judicial branch of Canada that merits deferral. Talisman merely states that Canada has a "comprehensive policy of `engagement'" that consists of participating in the U.S.brokered Nuba Mountain ceasefire, opening a Canadian embassy office in Khartoum, and the appointment of two envoys to Sudan. Motion Brief, at 21; Declaration of Rajiv I.S. Manhas, at ¶¶ 17-18. While Talisman has demonstrated that Canada has a policy towards Sudan, it appears to be no more comprehensive than the United States policy towards Sudan. Given the lack of specificity, and the lack of any explanation as to how this case would blunt Canadian efforts to help achieve a resolution of hostilities in Sudan, the Court finds no basis to grant comity. Talisman also suggests that the Court should grant comity and defer to Talisman's internal Corporate Social Responsibility ("CSR") program. The doctrine of comity stems from deference and respect to other nations, not to private corporations. The doctrine of comity therefore does not extend to Talisman's CSR program.
I. Dismissal is Not Warranted Under the Act of State Doctrine
Talisman moves to dismiss the action under the act of state doctrine. While ordinarily invoked by sovereign defendants, the doctrine may be invoked by private defendants in cases that call into question the legality of acts of a foreign government. See O.N.E. Shipping Ltd. v. Flota Mercante Grancolombiana, S.A., 830 F.2d 449, 452 (2d Cir.1987). In its traditional formulation, the act of state doctrine "precludes the courts of this country from inquiring into the validity of the public acts a recognized foreign sovereign power committed within its own territory." Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 401, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964). Although the doctrine has constitutional underpinnings, neither the Constitution nor international law require the act of state doctrine. See id. at 421-23, 84 S.Ct. 923. With respect to the ATCA, the Second Circuit has held that "it would be a rare case in which the act of state doctrine precluded suit under section 1350." Kadic v. Karadzic, 70 F.3d 232, 250 (2d Cir.1995). Talisman argues that dismissal is required pursuant to the act of state doctrine because plaintiffs are challenging official government acts within Sudan's borders, and because the adjudication of plaintiffs' suit could hinder executive diplomacy and potentially contradict legislative decisions. For the reasons set forth below, neither argument is compelling.
1. The Court May Adjudicate Official Government Acts of Sudan
Under the act of state doctrine, courts "generally refrain from judging the acts of a foreign state with its territory." Kadic v. Karadzic, 70 F.3d 232, 250 (2d Cir.1995). However, "it cannot of course be thought that `every ease or controversy which touches foreign relations lies beyond judicial cognizance.'" Sabbatino, 376 U.S. at 423, 84 S.Ct. 923 (citation omitted). Here, Talisman argues that dismissal is appropriate because plaintiffs' claims directly challenge "Sudan's uniquely sovereign rights to take military action during a civil war, to maintain civil order during a state of emergency, to control its natural resources and to raise and spend revenue." Motion Brief, at 23. The burden of proof lies with Talisman to justify the application of the doctrine. See, e.g., Wiva v. Royal Dutch Petroleum Co., No. 96 Civ. 8386, 2002 WL 319887, at *28 (S.D.N.Y. Feb. 28, 2002) (citing Alfred Dunhill of London, Inc. v. Republic of Cuba, 425 U.S. 682, 694, 96 S.Ct. 1854, 48 L.Ed.2d 301 (1976)); Bigio *345 v. Coca-Cola Co., 239 F.3d 440, 453 (2d Cir.2000).
In determining whether to apply the act of state doctrine, the Supreme Court has embraced a sliding scale. The more clearcut the alleged violation of international law, the less deference is due to the acts of a foreign sovereign, and vice-versa.
It should be apparent that the greater the degree of codification or consensus concerning a particular area of international law, the more appropriate it is for the judiciary to render decisions regarding it, since the courts can then focus on the application of an agreed principle to circumstances of fact rather than on the sensitive task of establishing a principle not inconsistent with the national interest or with international justice.
Sabbatino, 376 U.S. at 428, 84 S.Ct. 923. In Sabbatino, a case cited by Talisman, the Supreme Court applied the act of state doctrine to a case in which Cuban authorities had expropriated certain property. The Supreme Court's decision was based in large part upon the great disagreement at the time over whether states violated international law by expropriating alien property. See id. at 428, 84 S.Ct. 923 ("There are few if any issues in international law today on which opinion seems to be so divided as the limitations on a state's power to expropriate the property of aliens."). The Second Circuit recently reiterated this view, stating that the act of state doctrine should be applied only "in a context [....] in which world opinion [is] sharply divided." Kadic v. Karadzic, 70 F.3d 232, 250 (2d Cir.1995).
Notwithstanding Talisman's protestations to the contrary, the instant case does not challenge Sudan's right to prosecute a civil war or its ability to declare a state of emergency. Instead, the Amended Complaint alleges that Sudan committed acts of genocide, war crimes, enslavement, and torture. In marked contrast to Sabbatino, there are few if any issues in international law today on which opinion is so unanimous. This unanimity of opinion is reflected by the fact that under customary international law, states may exercise universal jurisdiction in prosecuting these acts. See RESTATEMENT (THIRD) OF FOREIGN RELATIONS § 404 (1987). Talisman claims that the act of state doctrine does apply with respect to human rights violations, citing Underhill v. Hernandez, 168 U.S. 250, 254, 18 S.Ct. 83, 42 L.Ed. 456 (1897). That case, however, involved charges of unlawful detention and failure to grant a passport application. Neither of these acts constitutes a jus cogens violation of international law, and clearly neither is remotely akin to universally-condemned acts such as genocide, war crimes, enslavement, and torture. The second case cited by Talisman, Riggs Nat'l Corp. & Subsidiaries v. Comm'r of I.R.S., 163 F.3d 1363, 1367 (D.C.Cir.1999), is even more inapposite. That case examined whether a United States court owed deference to a determination by the Brazilian Minister of Finance that the Central Bank of Brazil was required under Brazilian law to pay certain tax obligations. There is virtually no similarity to the instant case, and, regardless, Riggs did not involve allegations of jus cogens violations of international law. As noted supra, jus cogens violations are considered violations of peremptory norms, from which no derogation is permitted. Acts of state to the contrary are invalid. See RESTATEMENT (THIRD) OF FOREIGN RELATIONS § 702 cmt. b (1987) (international law requires states to outlaw, inter alia genocide and slavery, and states refusing to enforce these prohibitions are responsible under international law); id. at cmt. n (international agreements in violation of jus cogens norms are void).
*346 2. Adjudication of this Action Will not Hinder U.S. Foreign Policy
Talisman's second basis for dismissing this action on act of state grounds is that adjudication of this case could embarrass or hinder the foreign relations of the United States. See Motion Brief, at 24. For support, it cites two State Department daily press briefings and a newspaper article. See id. at 24. Each of these sources, however, states nothing more than that the United States is pursuing efforts to broker peace within Sudan and has engaged in dialogues with that country about terrorism. Talisman states that having a court sit in judgment of Sudanese governmental policy "may jeopardize" United States diplomatic efforts. Motion Brief, at 24. Talisman presents no factual or logical argument as to why the mere existence of certain U.S. diplomatic overtures towards Sudan should prevent this case from proceeding. Indeed, as the world's foremost superpower, the United States has complex diplomatic relationships with virtually every country. This fact, without more, does not militate in favor of dismissal. Nothing in Talisman's brief or exhibits supports its contention that adjudicating this case would have a detrimental effect on United States-Sudan relations.
Talisman alludes to congressional disagreement concerning the then-proposed Sudan Peace Act, and argues that this disagreement indicates the sensitive nature of foreign relations with Sudan. Since the briefs were submitted, the Sudan Peace Act, Pub.L. No. 107-245 (2002), was passed overwhelmingly by the House of Representatives and unanimously by the Senate and was signed into law by President Bush on October 21, 2002. The Sudan Peace Act includes a finding by the Congress that the acts of the Government of Sudan constitute genocide. See id. at § 2(10). The law also includes a lengthy condemnation of Sudan:
The Congress hereby
(1) condemns
(A) violations of human rights on all sides of the conflict in Sudan;
(B) the Government of Sudan's overall human rights record, with regard to both the prosecution of the war and the denial of basic human and political rights to all Sudanese;
(C) the ongoing slave trade in Sudan and the role of the Government of Sudan in abetting and tolerating the practice;
(D) the Government of Sudan's use and organization of "murahalliin" or "mujahadeen", Popular Defense Forces, and regular Sudanese Army units into organized and coordinated raiding and slaving parties in Bahr al Ghazal, the Nuba Mountains, and the Upper Nile and the Blue Nile regions; and
(E) aerial bombardment of civilian targets that is sponsored by the Government of Sudan; and
(2) recognizes that, along with selective bans on air transport relief flights by the Government of Sudan, the use of raiding and slaving parties is a tool for creating food shortages and is used as a systematic means to destroy the societies, culture, and economies of the Dinka, Nuer, and Nuba peoples in a policy of low-intensity ethnic cleansing.
Id. at § 4. In addition to these condemnations, the government of the United States has declared Sudan to be a state sponsor of terrorism. See Amended Complaint, at ¶ 13. Given the extensive condemnations that the United States government has already issued, any criticism of Sudan that would arise as a result of the adjudication of this case would be a mere drop in the bucket. In light of these facts, the Court declines to dismiss this action based on the act of state doctrine.
*347 J. This Action is Not Barred by the Political Question Doctrine
Talisman argues that the instant action should be dismissed because it raises nonjusticiable political questions. The Supreme Court has enunciated six factors to guide courts in determining whether controversies present nonjusticiable political questions:
Prominent on the surface of any case held to involve a political question is found [1] a textually demonstrable constitutional commitment of the issue to a coordinate political department; or [2] a lack of judicially discoverable and manageable standards for resolving it; or [3] the impossibility of deciding without an initial policy determination of a kind clearly for nonjudicial discretion; or [4] the impossibility of a court's undertaking independent resolution without expressing lack of the respect due coordinate branches of government; or [5] an unusual need for unquestioning adherence to a political decision already made; or [6] the potentiality of embarrassment from multifarious pronouncements by various departments on one question.
Baker v. Carr, 369 U.S. 186, 217, 82 S.Ct. 691, 7 L.Ed.2d 663 (1962). Talisman argues that the instant action implicates factors 1, 2, 3, 4, and 6. See Motion Brief, at 25 n. 47. Specifically, it claims that this case is "unmanageable" because the acts alleged in the Amended Complaint occurred in the context of a complex civil war. However, Talisman ignores the fact that many cases in federal court involve complex facts, including those implicating complex civil wars. For example, Kadic v. Karadzic, 70 F.3d 232 (2d Cir.1995) was an action stemming from the complicated and bloody civil war in the former Yugoslavia. Despite the complexity of the underlying events and despite the sensitivity of the questions involved, the Second Circuit did not dismiss the case on the grounds that it presented nonjusticiable political questions. Moreover, the issues before the Court are not nearly as complex as Talisman makes them out to be. Contrary to Talisman's assertions, the issues in this case are not political. The Court's function is to determine whether Sudan and Talisman violated international law by committing certain acts. The standards of behavior under international law are judicially-ascertainable. The Court need not act as a truth and reconciliation commission and unravel the intricacies of Sudan's civil war.
Fortunately, the Second Circuit has provided clear guidance with respect to the application of the political question doctrine in the context of an ATCA suit alleging gross human rights violations. In Kadic v. Karadzic, the Second Circuit confronted a case in which several plaintiffs filed suit against Radovan Karadzic, the leader of the Bosnian Serb entity. The case was politically sensitive. Nonetheless, the Second Circuit rejected Karadzic's argument that the case be dismissed on the basis of the political question doctrine. In particular, the Second Circuit cautioned that "judges should not reflexively invoke these doctrines to avoid difficult and somewhat sensitive decisions in the context of human rights." Kadic, 70 F.3d at 249. The Second Circuit added that "[although these cases present issues that arise in a politically charged context, that does not transform them into cases involving nonjusticiable political questions." Id. at 250.
The Second Circuit then examined each of the six Baker factors. With regard to the first factor (textual commitment to another branch), the Second Circuit held that an ATCA tort suit based on alleged gross human rights violations was constitutionally committed to the judiciary. See Kadic, *348 70 F.3d at 249. Similarly, in this case, plaintiffs seek a tort remedy under the ATCA for gross human rights violations. Resolution of such a matter is textually committed to the judiciary. With regard to the second and third factors (lack of judicially discoverable standards and the need for nonjudicial discretion), the Second Circuit held that "universally recognized norms of international law provide judicially discoverable and manageable standards for adjudicating suits brought under the [ATCA], which obviates the need to make initial policy decisions of the kind normally reserved for nonjudicial discretion." Id. at 249. Such universally recognized norms of international law are also present in the instant case. With regard to the remaining factors (the impossibility to resolve the case without disrespecting other branches of government, the need to adhere to a previously-made political decision, and the potential to embarrass another branch of government), the Second Circuit held that Baker factors four through six would only be applicable if "judicial resolution of a question would contradict prior decisions taken by a political branch in those limited contexts where such contradiction would seriously interfere with important governmental interests." Kadic, 70 F.3d at 249. The Second Circuit concluded by again admonishing district courts not to assume that every case implicating foreign diplomacy raises a nonjusticiable question: "it is `error to suppose that every case or controversy which touches foreign relations lies beyond judicial cognizance.'" Kadic, 70 F.3d at 250 (quoting Japan Whaling Ass'n v. American Cetacean Sue, 478 U.S. 221, 229-30, 106 S.Ct. 2860, 92 L.Ed.2d 166 (1986)). The other major Second Circuit case to examine the political question doctrine in the context of a claim for an alleged violation of human rights also refused to order dismissal of the action. See Klinghoffer v. S.N.C. Achille Lauro Ed Altri-Gestione Motonave Achille Lauro in Amministrazione Straordinaria, 937 F.2d 44, 50 (2d Cir. 1991). In that case, several plaintiffs sued, inter alia, the Palestine Liberation Organization in connection with the hijacking of the passenger liner Achille Lauro and the murder of passenger Leon Klinghoffer. Notwithstanding the politically delicate nature of the case, the Second Circuit, examining the Baker factors, held that the political question doctrine was inapplicable. See id. at 50. Other courts, examining ATCA claims, have also rejected dismissal based on the political question doctrine. See, e.g., Abebe-Jira v. Negewo, 72 F.3d 844, 848 (11th Cir.1996).
The cases cited by Talisman purportedly supporting its assertion that the instant action presents political questions are not compelling. It cites Tel-Oren v. Libyan Arab Republic, 726 F.2d 774, 823 (D.C.Cir. 1984) for the argument that the internal conflict in Sudan "consists of a web that the courts are not positioned to unweave." The three judges in the Tel-Oren case, while agreeing on the result, each gave widely divergent reasons for their decisions. Talisman cites the opinion not of the D.C. Circuit but of Judge Robb, who argued in favor of dismissing the case on the basis of the political question doctrine. However, Talisman neglects to mention that Judge Robb's reasoning has been explicitly rejected by the Second Circuit: "Although we too recognize the potentially detrimental effects of judicial action in cases of this nature, we do not embrace the rather categorical views as to the inappropriateness of judicial action urged by Judges Robb and Bork." Kadic v. Karadzic, 70 F.3d 232, 249 (2d Cir.1995) (emphasis added). Finally, Judge Robb's decision in Tel-Oren was based in part upon the fact that, at that time, nations were "divisively split on the legitimacy of such aggression *349 as to make it impossible to pinpoint an area of harmony or consensus." Tel-Oren, 726 F.2d at 823 (Robb, J., concurring) (quoting Tel-Oren, 726 F.2d at 795 (Edwards, J., concurring)). In other words, it was unclear in 1984 as to whether or not terrorism violated international law. Whatever the validity of that position, it is clear that in 2003, acts such as genocide, war crimes, enslavement, and torture do violate customary (and codified) international law.
Talisman also cites Iwanowa v. Ford Motor Co., 67 F.Supp.2d 424, 483 (D.N.J. 1999) for the proposition that the political question doctrine mandates dismissal of this case. The plaintiff in Iwanowa sought damages for forced labor during World War II. The court dismissed the case based in part on the political question doctrine. However, that case is readily distinguishable from the instant one. For example, in Iwanowa, the executive branch had declared that all World War II reparations should be dealt with in the context of a peace treaty or similar arrangement. See id. at 486. No such executive declaration has been made concerning Sudan. In Iwanowa, the United States had entered into an agreement with the German government to create a compensation fund for victims of forced labor. See id. at 488. No such agreement is present here. Finally, Iwanowa concerned claims that arose fifty years before the action was instituted. See id. at 489. Here, the events occurred only a few years ago and are ongoing.
The Court, having examined the Second Circuit authority above, and finding that the contrary cases cited by Talisman are not persuasive, declines to dismiss the instant action based on the political question doctrine.
K. The Action Need Not be Dismissed for Failure to Join a Party
Talisman contends that the instant action should be dismissed pursuant to FED. R. Civ. P. 12(b)(7) and 19 because of plaintiffs' failure to join necessary and indispensable parties. In particular, Talisman argues that the Sudan People's Liberation Movement/Army ("SPLM/A"), Sudan, and the Greater Nile Petroleum Operating Company Ltd. ("GNPOC") are necessary parties for just adjudication in this litigation, because effective equitable relief cannot be accorded without their presence.[47]
1. The SPLM/A is Not a Necessary Party
Talisman argues that the SPLM/A is a necessary party under FED. R. CIV. P. 19(a)(1). According to that rule, a person subject to process and whose presence does not defeat jurisdiction shall be joined if "in the person's absence complete relief cannot be accorded among those already parties." FED. R. CIV. P. 19(a)(1). Talisman argues that because the SPLM/A is the lead rebel group, its presence is necessary because the allegations in the Amended Complaint are set in the context of a civil war between Sudan and the SPLM/A. It also argues that the injunctive relief asked for in the Amended Complaint cannot be accorded without the SPLM/A's presence.
The Court rejects Talisman's argument. The fact that the acts alleged may have occurred in the context of a civil war does not mean that all parties to the civil war are necessary. Moreover, Talisman *350 fails to explain why the SPLM/A is a necessary party if injunctive relief is be given. The only equitable relief sought is an injunction restraining defendants from continuing to cooperate or assist in waging "ethnic cleansing" against the non-Muslim, African Sudanese minority population. The Court fails to see how the SPLM/A is a necessary party in the context of this relief, especially given that the Amended Complaint does not allege any wrongdoing by the SPLM/A. Merely because the alleged acts occurred in the context of a civil war does not mean that all parties to that civil war are necessary. See, e.g., Kadic v. Karadzic, 70 F.3d 232 (2d Cir.1995). The alleged violations of international law stem not from the fact that Sudan is fighting a civil war but from alleged acts of genocide, war crimes, enslavement, and torture. Consequently, the SPLM/A is not a necessary party.[48] Talisman appears to concede this point as it does not mention the SPLM/A in its reply brief.
2. Sudan is Not a Necessary Party
The Court notes that Sudan is named as a defendant in this case and has been served. Sudan has not formally entered an appearance, even to contest the Court's jurisdiction under the FSIA. The only response by Sudan to being served was a letter stating that it did not intend to participate in this action. See supra note 45. At this time, the Court has not determined whether or not Sudan is immune under the FSIA.
Regardless, the Court finds that even if Sudan is found to be immune from suit under the FSIA, it is not a necessary party under Rule 19(a). Jota v. Texaco, Inc., 157 F.3d 153 (2d Cir.1998), which Talisman cites, is on point. In that case, which involved two consolidated appeals, Ecuadorian plaintiffs, along with Peruvian plaintiffs who lived downstream, sued Texaco for certain environmental and personal injuries caused by its oil exploration activities between 1964 and 1992 and sought damages and "equitable relief to remedy the contamination and spoliation of their properties, water supplies and environment." Jota, 157 F.3d at 156. The Texaco subsidiary that had been conducting activities in Ecuador became wholly owned by Ecuador in 1992. The district court granted Texaco's motion to dismiss based on plaintiffs' failure to join an indispensable partyEcuador.
The Second Circuit reversed the district court decision. While noting that "some aspects of the equitable relief sought by the plaintiffs would have required substantial participation by the Ecuadorian government," wholesale dismissal constituted an abuse of discretion and thus reversible error. Jota, 157 F.3d at 162. In particular, "since much of the relief sought could be fully provided by Texaco without any participation by Ecuador, dismissal of the entire complaint on Rule 19 grounds exceeded the district court's] discretion." Id. at 162. The same is true with respect to the instant action as well. The declaratory, compensatory, and punitive relief sought by plaintiffs does not per se require the participation of Sudan, if Sudan is immune from suit under the FSIA.
More importantly, the equitable relief sought by plaintiffs in this ease is available without the participation of Sudan. Plaintiffs seek an injunction restraining defendants from continuing to cooperate or assist in waging "ethnic cleansing" against the non-Muslim, African Sudanese minority *351 population and from refusing to provide restitution. In their Amended Complaint, plaintiffs have identified the cooperation between Talisman and Sudan as the cause of their injuries. Even if Sudan is found to be immune, Talisman can still be enjoined, terminating the Sudan-Talisman nexus of cooperation. The equitable relief sought in this case would thus be effective even if only Talisman is a party. This differentiates the instant case from Jota. In that case, plaintiffs made a sweeping demand for equitable relief:
The relief [plaintiffs] seek includes the following: undertaking or financing environmental cleanup, to include access to potable water and hunting and fishing grounds, renovating or closing the Trans-Ecuadorian Pipeline, creation of an environmental monitoring fund, formulating standards to govern future Texaco oil development, creation of a medical monitoring fund, [and] an injunction restraining Texaco from entering into activities that run a high risk of environmental or human injuries, and restitution.
Jota, 157 F.3d at 156 n. 2. It is obvious that much of this relief, such as the environmental cleanup, the access to water, and the shutting down of the pipeline would require the cooperation of the Ecuadorian government. In spite of that fact, the Second Circuit reversed a dismissal based on failure to join Ecuador, holding that the district court should have restructured the equitable relief to prevent the "ill effects of nonjoinder." Id. at 162 (citation omitted). In contrast to the comprehensive equitable relief sought in Jota, plaintiffs in this action seek a narrow and circumscribed injunction enjoining defendants from cooperating or assisting in committing certain gross human rights violations. In light of the fact that the Second Circuit reversed a Rule 19 dismissal where state cooperation was almost essential, this Court holds that, given the far more limited equitable relief sought here, Sudan's presence is not necessary as per Rule 19.
Another case directly on point is Nat'l Coalition Gov't of the Union of Burma v. Unocal, Inc., 176 F.R.D. 329 (C.D.Cal. 1997) ("Unocal"). In that case, Unocal owned a 28.26 % stake in an oil exploration project in Burma. Plaintiffs alleged that the Burmese government, also known as the State Law and Order Restoration Council ("SLORC") had, in conjunction with Unocal, committed various human rights violations. See id. at 334. As in the instant case, the SLORC was alleged to have committed these gross human rights violations, including destroying villages, burning homes, forced labor, and torture in furtherance of an oil venture, of which Unocal was a member. Defendants sought to dismiss the case under Rule 19 because the SLORC had not been named as a defendant. Despite the fact that the SLORC itself had allegedly committed these acts on behalf of the joint venture (and by extension Unocal), the Unocal court refused to dismiss the action. As here, the Unocal court held that the SLORC was a joint tortfeasor whose presence was not required under Rule 19. See Unocal, 176 F.R.D. at 357 (citing, inter alia, Temple v. Synthes Corp., 498 U.S. 5, 7, 111 S.Ct. 315, 112 L.Ed.2d 263 (1990) (per curiam) ("it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit.")). As here, the Unocal court noted that "there is no reason complete compensatory relief may not be accorded among the remaining parties." Id. at 357. The Unocal court also based its decision in part on the fact that any injunctive relief sought against the defendants would be effective even in the absence of the SLORC. As noted, the same is true in the instant action. For these *352 reasons, the joinder of Sudan is not required under Rule 19. See also Bodner v. Banque Paribas, 114 F.Supp.2d 117, 136-36 (E.D.N.Y.2000) (holding that France and Germany were not necessary parties under Rule 19 where plaintiffs sued French financial institutions for unlawful expropriations of Jewish customers' property during the Nazi occupation). Because the Court holds that Sudan is not a necessary party, and because at this point no ruling has been made regarding Sudan's immunity, the Court need not examine whether in "equity and good conscience" the action should proceed if Sudan were absent. FED. R. CIV. P. 19(b).
3. GNPOC is Not a Necessary Party
Finally, Talisman contends that GNPOC is a necessary party in this case. Talisman, through certain subsidiaries, is the owner of 25 percent of GNPOC. See Amended Complaint, at ¶ 7. Talisman argues that the Sudanese oil operations are conducted by GNPOC and that GNPOC is alleged to be cooperating with Sudan in committing the human rights violations complained of in the Amended Complaint. However, even a cursory reading of the Amended Complaint reveals otherwise. The Amended Complaint states that "Talisman is sued herein for its own actions and omissions as well as in its capacity as success in interest to Arakis [... ] and as a member of [GNPOC]." Amended Complaint, at ¶ 3. Moreover, plaintiffs allege that "[a]fter GNPOC was formed, each of its constituent members took on specific areas or tasks." Id. at ¶ 19. The Amended Complaint concerns acts that allegedly occurred in areas in which "Talisman was the principal entity in charge of exploration [...]." Id. at ¶ 19. It would appear that although Talisman may have been working under the auspices of GNPOC, the acts or omissions listed in the Complaint were, with few exceptions, committed by Talisman itself.[49] Indeed, nearly every paragraph describes alleged unlawful acts by Talisman, not GNPOC.[50]See, e.g., Amended Complaint at ¶¶ 26, 27, 29, 31, 32, 33, 36, 37, etc. Furthermore, plaintiffs seek damages and injunctive relief from Sudan and Talisman, not from GNPOC.
Talisman argues that any injunctive relief rendered against Talisman (and Sudan) would be meaningless in the absence of GNPOC. The Court disagrees. While GNPOC may be involved in human rights abuses in Sudan, the Amended Complaint alleges atrocities resulting from the cooperation of Sudan and Talisman, not Sudan and GNPOC qua GNPOC. The injunction sought by plaintiffs would terminate the Talisman-Sudan connection which is the source of the alleged harms outlined in the Amended Complaint. Talisman also argues that even if the Court could enjoin GNPOC, the relief sought would be incomplete because other energy companies have been granted concessions in Sudan. This objection is wholly academic because plaintiffs do not seek, nor need to seek, to enjoin GNPOC. Plaintiffs need not seek relief to remedy every potential human rights abuse in Sudan. The Amended Complaint identifies certain harms caused *353 by Sudan and Talisman, and requests remedies to address those injuries. The fact that other energy companies may be involved in oil exploration (or human rights abuses) does not make them necessary parties under Rule 19. Talisman also argues that GNPOC's interests will not be protected in this litigation. However, as noted, the Amended Complaint seeks redress for alleged acts of Talisman and Sudan, not of GNPOC, and the declaratory, compensatory, punitive, and injunctive relief sought by plaintiffs is against those entities, not GNPOC.
Talisman argues that it would be prejudiced by disposition of this action without GNPOC's presence because Talisman would be unable to compel GNPOC to provide evidence or access witnesses that would be vital to defend this claim. Beyond this general statement, Talisman provides no specific information as to what evidence or which witnesses it would not be able to procure. In Natl Coalition Gov't of the Union of Burma v. Unocal, Inc., 176 F.R.D. 329 (C.D.Cal.1997), Unocal made an identical argument, stating that without the joinder of certain parties, it would be unable to conduct full discovery. See id. at 358 n. 35. Citing the absence of any evidence of this fact, the court in Unocal denied Unocal's motion to dismiss. See id. at 358. Moreover, in this case, as in Unocal, plaintiffs' discovery will be similarly impeded. See id. at 358 n. 35.
Finally, Talisman argues that GNPOC's interests would be prejudiced if the action proceeds without it. Talisman fails to explain with particularity how GNPOC would be prejudiced, given that plaintiffs seek relief solely from Talisman and Sudan. Regardless, if GNPOC were concerned about being prejudiced by the instant action proceeding without it as a party, it could move to intervene under FED. R. CIV. P. 24. The fact that GNPOC has not sought to do so belies Talisman's claim of prejudice.
L. The Equitable Relief Sought Need Not be Dismissed
Talisman argues that the equitable relief sought by plaintiffs should be dismissed on the grounds that equity will not require the performance of a useless act. See, e.g.. New York Times Co. v. United States, 403 U.S. 713, 744, 91 S.Ct. 2140, 29 L.Ed.2d 822 (1971) (Marshall, J., concurring) ("It is a traditional axiom of equity that a court of equity will not do a useless thing [...]."). Talisman first argues that the Court lacks the power to enforce an injunction against Sudan. Given that Sudan has not yet entered an appearance, it is premature to consider this question. Moreover, as noted above, the proposed injunction would be effective even if it only bound Talisman.
Talisman's second argument is that Talisman "does not conduct business in Sudan and neither it nor its indirect subsidiary [... ] controls GNPOC, the company conducting the oil operations in Sudan." This argument, to the extent it has not been addressed supra, is not ripe to be made at this time. The Amended Complaint, which the Court is obligated to credit at this time, alleges that Talisman is responsible for committing various unlawful acts in Sudan. Talisman's argument would require resolving a question of fact against plaintiffs, which the Court may not do at this stage. Talisman's ancillary argument, that it already has a corporate responsibility program in place to deal with the situation, is irrelevant. First, the injunctive relief requested has nothing to do with creating a corporate responsibility program. Second, the obvious implication of the Amended Complaint is that the corporate responsibility program has been ineffective in eliminating either Sudan's or *354 Talisman's role in committing atrocities in Sudan.
IV. Conclusion
For the reasons set forth above, Talisman's motion to dismiss the Amended Complaint is DENIED.
SO ORDERED.
NOTES
[1] The facts are drawn from plaintiffs' Amended Class Action Complaint. For purposes of contemplating dismissal, the Court is obligated to accept plaintiffs' allegations as true.
[2] The term "ethnic cleansing" emerged from the tragedy in the former Yugoslavia and is a translation of the Serbo-Croatian term, etnicko cis cenje. It is commonly understood to be a euphemism for genocide. Unlike genocide, however, "ethnic cleansing" is not a legal term of art; therefore, the Court uses quotation marks when citing the term.
[3] Extrajudicial killing is "`a deliberate killing' not authorized by the judgment of a court `affording all the judicial guarantees which are recognized as indispensable by civilized peoples.'" Wiwa v. Royal Dutch Petroleum Co., 226 F.3d 88, 105 n. 11 (2d Cir.2000) (quoting 28 U.S.C. § 1350 App.).
[4] The information in this section is drawn from the CIA 2002 World Factbook, available at http://www.cia.gov/cia/publications/factbook/geos/su.html, and is presented solely for background purposes. See Chambers v. Time Warner, Inc., 282 F.3d 147 (2d Cir.2002) ("on a motion to dismiss, a court may consider [...] matters of which judicial notice may be taken [...].").
[5] In their Amended Complaint, plaintiffs estimate Sudan's population to be 32 million. In light of the ongoing civil war, no reliable estimate of the nation's population is available.
[6] The historical overview is drawn from the Amended Complaint, ¶¶ 10-15 and U.S. Department of State, Background Note: Sudan, available at http://www.state.gov/r/pa/ ei/bgn/ 5424.htm. The information gleaned from the Department of State's Background Note on Sudan is presented solely to place the allegations set forth in the Amended Complaint in context. See Chambers v. Time Warner, Inc., 282 F.3d 147 (2d Cir.2002) ("on a motion to dismiss, a court may consider [...] matters of which judicial notice may be taken [...].").
[7] The Department of State notes that while the appearance of a joint administration was maintained, the British formulated policies and supplied most of the top administrators.
[8] The civil war during this period was marked by several successive governments: a conservative coalition government, a military regime, a provisional government, a second coalition government, and a second military coup.
[9] Since 1997, Sudan has organized itself into twenty-six provinces. The Upper Nile province is located in southeastern Sudan and borders Ethiopia. The northern border of the Upper Nile state is approximately 300 kilometers south of Sudan's capital, Khartoum.
[10] Plaintiffs do not specify the particular acts that caused Gaduel to flee Sudan.
[11] Plaintiffs also claim jurisdiction against Sudan pursuant to 28 U.S.C. § 1330 and against both defendants pursuant to 28 U.S.C. § 133). These purported bases for jurisdiction are examined below.
[12] The term "law of nations" is synonymous with international law. In this context, it refers to customary international law (as opposed to codified international law which is found in treaties).
[13] The original statute read: "[The district courts] shall also have cognizance, concurrent with the courts of the several States, or the circuit courts, as the case may be, of all causes where an alien sues for a tort only in violation of the law of nations or a treaty of the United States." See Courtney Shaw, Uncertain Justice: Liability of Multinationals Under the Alien Tort Claims Act, 54 STAN. L. REV. 1359, 1364 (2002).
[14] The term "publicists" in ICJ STAT. art. 38(1)(d) refers to legal scholars.
[15] See ICJ STAT., art. 59 ("The decision of the Court has no binding force except between the parties and in respect of that particular case.").
[16] As noted infra, rape may be a form of torture.
[17] For an extended discussion of jus cogens violations, see Siderman de Blake v. Republic of Argentina, 965 F.2d 699, 714-19 (9th Cir. 1992).
[18] Of course, while jus cogens violations are actionable under the ATCA, a jus cogens violation is not required. Under the ATCA, any violation of a specific, universal, and obligatory international norm is actionable, whether it is jus cogens or not.
[19] Indeed, it would appear that the Supreme Court has only analyzed the ATCA in a single case, Argentine Republic v. Amerada Hess Shipping Corp., 488 U.S. 428, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989). Nothing in that case addresses the potential liability of a corporate defendant in a claim under the ATCA, although the Court did note that the ATCA "by ts terms does not distinguish among classes of defendants." Id. at 438, 109 S.Ct. 683.
[20] The analysis that follows sets forth precedent establishing that corporations may be sued for international law violations under the ATCA. The Court also notes that under Second Circuit precedent, a corporation may bring an action under the ATCA. See Amerada Hess Shipping Corp. v. Argentine Republic, 830 F.2d 421, 425 (2d Cir. 1987), rev'd on other grounds, 488 U.S. 428, 109 S.Ct. 683, 102 L.Ed.2d 818 (1989).
[21] Bigio was originally decided on December 7, 2000 and was amended on January 2, 2001. The amended decision, 239 F.3d 440, superceded an earlier decision, 235 F.3d 63.
[22] Unlike in the instant case, the Bigio complaint did "not allege that Coca-Cola acted together with state officials"; nor was Coca-Cola charged with "committing a violation of the law of nations with significant state aid." Bigio, 239 F.3d at 448.
[23] See also United States v. FMC Corp., 572 F.2d 902 (2d Cir. 1978) (extending criminal liability to a corporation for violating the Migratory Bird Treaty Act).
[24] By Order dated February 14, 2003, a majority of the Ninth Circuit voted to rehear the case en banc. In light of the fact that numerous courts have upheld ATCA actions against corporate defendants, there is no reason to suspect that this aspect of the vast Doe decision will be decided differently by the full Ninth Circuit. Even if the holding in Doe were to be reversed by the en banc court, overwhelming precedent (especially Second Circuit precedent) demonstrates that corporations are subject to jus cogens claims under the ATCA.
[25] The Fifth Circuit explicitly reserved decision on the question of whether a corporation could be held liable under the Torture Victim Protection Act.
[26] The international law violations alleged in Wiwa required state action. Judge Wood held that the corporate defendant could be liable for state action because of a "substantial degree of cooperative action" between them. Id. at *13. Although the Court in the instant action finds that plaintiffs have set forth such a substantial degree of cooperative action, there is no state action requirement here because unlike in Wiwa, plaintiffs here allege that the acts of summary execution and torture were committed in the course of the commission of genocide and war crimes. See id. at *12.
[27] This section draws on analysis contained in Steven R. Ratner, Corporations and Human Rights: A THEORY OF LEGAL RESPONSIBILITY. 111 Yale L.J. 443 (2001). SEE ALSO International Council on Human Rights Policy, Beyond Voluntarism: Human Rights and The Developing International Legal OBLIGATIONS OF COMPANIES (2002), available at http://www.ichrp. org/ac/excerpts/41.pdf.
[28] Talisman's experts claim that a corporation cannot have the specific intent to commit genocide. See, e.g., Declaration of James Crawford, S.C., at ¶ 11(a). It is well-established, however, that corporations may be criminally liable for offenses requiring a specific intent. "We think that a corporation may be liable criminally for certain offenses of which a specific intent may be a necessary element. There is no more difficulty in imputing to a corporation a specific intent in criminal proceedings than in civil." New York Cent. & Hudson River R.R. Co. v. United States, 212 U.S. 481, 493, 29 S.Ct. 304, 53 L.Ed. 613 (1909) (citation omitted). Corporations may be held criminally liable under a myriad of statutes. See, e.g., 18 U.S.C. §§ 1961 et seq. (Racketeer Influenced and Corrupt Organizations Act); 18 U.S.C. § 610 (coercion of political activity); 18 U.S.C. § 1512 (witness tampering).
[29] Plaintiffs in this case allege violations of "the law of nations and customary international law [...]." Amended Complaint, at ¶ 75. Thus, even if corporations are not liable under extant codified international law, they may be liable under customary international law.
[30] The jurisprudence of the ICTY and the ICTR is increasingly being consulted by courts to determine standards of international human rights law under the ATCA. See Wiwa v. Royal Dutch Petroleum Co., No. 96 Civ. 8386, 2002 WL 319887, at *9-10 (S.D.N.Y. Feb. 28, 2002); Cabello Barrueto v. Fernandez Larios, 205 F.Supp.2d 1325, 1333 (S.D.FIa. 2002); Mehinovic v. Vuckovic, 198 F.Supp.2d 1322 (N.D.Ga.2002).
[31] The other case cited by Talisman, Jafari v. Islamic Republic of Iran, 539 F.Supp. 209, 215 (N.D.Ill.1982) is also not on point, because that case involved expropriation without any underlying allegations of genocide or war crimes.
[32] For example, Kristalnacht represented far more than property loss; it represented part of a systematic attempt by Nazis and others to eliminate Jewish life and culture in Germany.
[33] It is notoriously difficult, if not impossible, to find a "smoking gun" revealing a concrete plan for "ethnic cleansing." Researchers have searched unsuccessfully for years to find a single document in which Hitler explicitly authorized the Holocaust, or in which Milosevic explicitly authorized the slaughter of Muslim civilians.
[34] Rape can constitute torture. See, e.g., Kadic v. Karadzic, 70 F.3d 232, 242 (2d Cir.1995) (describing allegations of "murder, rape, forced impregnation, and other forms of torture [...].").
[35] See supra, note 2.
[36] Because the Court finds that plaintiffs have made a prima facie showing of personal jurisdiction, the Court need not consider whether personal jurisdiction might exist by virtue of the universality principle. See RESTATEMENT (THIRD) OF FOREIGN RELATIONS § 702 (1987).
[37] Tasini, it should be noted, was not a class action.
[38] This fact is underscored by the fact that a central case cited by Talisman for support in its Reply Memorandum of Law in Further Support of Defendant Talisman Energy Inc.'s Motion to Dismiss, Caridad v. Metro-North Commuter R.R., 191 F.3d 283 (2d Cir.1999), concerns class certification under Rule 23, not standing.
[39] The Court also notes that "Canada does not have a well-developed class action procedure." Derensis v. Coopers & Lybrand Chartered Accountants, 930 F.Supp. 1003, 1007 (D.N.J.1996).
[40] The quoted language was in reference to the Torture Victim Protection Act, promulgated under the ATCA, 28 U.S.C. § 1350.
[41] Although the Court finds no merit in Talisman's assertion of Sudanese and Canadian interests in this case, it also notes that Talisman has provided no evidence (or even asserted) that Sudan and Canada would defer to a United States executive, legislative, or judicial decision if the situation were reversed. Such reciprocity is often an important factor in determining whether to extend comity to the acts of a foreign state. See Hilton v. Guyot, 159 U.S. 113, 16 S.Ct. 139, 40 L.Ed. 95 (1895). But see Cunard S.S. Co. v. Salen Reefer Servs. AB, 773 F.2d 452, 460 (2d Cir. 1985) (holding that reciprocity, while it may be a factor, is not an essential element in granting comity).
[42] Certainly, as a sovereign country, Sudan is potentially entitled to immunity under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602 etseq. ("FSIA"). However, Talisman lacks standing to raise an FSIA defense on Sudan's behalf. Moreover, sovereign nations have been named as defendants in innumerable cases. In certain cases, the sovereign defendants are entitled to immunity; in others they are not. The issue of sovereign immunity is not squarely before the Court at this time, and it therefore need not make a determination of whether Sudan is immune from suit under the FSIA.
[43] As noted above, plaintiffs do not even enjoy full legal personality in Sudanese courts.
[44] Talisman also argues that exhaustion of local remedies is required under the ATCA. Whether or not the ATCA generally requires exhaustion of local remedies, the Court is aware of no case, nor does Talisman cite any, in which plaintiffs were required to exhaust local remedies in the courts of an allegedly genocidal state, where doing so would be futile and would put plaintiffs in great danger.
[45] The Court is also in receipt of a letter from the Government of Sudan stating, inter alia, that the "adjudication in the United States Court will definitely compromise the serious efforts of the Sudanese Government to guarantee the safety of millions of civilians, and thus will adversely affect workers and those who are working to secure economic recovery [...]." Letter of Ambassador Khidir Haroun Ahmed dated December 26, 2002, appended to the Letter of Ambassador Omer Bashir Mohamed Manis dated December 27, 2002.
[46] Lasting peace appears unlikely in the near future regardless of the actions of this Court. For example, a recent truce in Sudan was apparently violated ten minutes after it came into force. See Sudan's "10 Minute Truce", BBC News, Oct. 17, 2002, available at http://news.bbc.co.Uk/2/hi/Africa/2337085.stm.
[47] The SPLM/A is the main rebel group engaged in an armed struggle against the Sudanese government.
[48] Plaintiffs also raise the question of whether the SPLM/A is an entity capable of being sued. Because the Court finds that it is not a necessary party, it need not answer that question.
[49] Talisman's argument that Garbang in fact lived near an oil concession operated by Swedish and Austrian energy companies (and not Talisman) raises a factual question which cannot be resolved at this time.
[50] To the extent that the Amended Complaint alleges acts by GNPOC, see, e.g., Amended Complaint, at ¶¶ 31, 35, 39, Talisman may potentially be held liable for the acts of other GNPOC members under a theory of joint venture liability. See, e.g., Itel Containers Int'l Corp. v. Atlanttrafik Express Service Ltd., 909 F.2d 698, 701 (2d Cir.1990). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2525061/ | 428 F.Supp.2d 4 (2005)
Jackeline HERNÁND-EMEJÍAS, Plaintiff,
v.
GENERAL ELECTRIC, et al., Defendants.
No. CIV. 03-1289(JAF).
United States District Court, D. Puerto Rico.
October 7, 2005.
*5 Maria S. KortrightSoler, M.S. Kortright Soler Law Office, San Juan, PR, Pedro R. Vazquez, III, Pedro R. Vazquez Law Office, Guaynabo, PR, for Plaintiff.
Carl E. Schuster, Mariela Rexach-Rexach, Schuster Usera & Aguilo LLP, San Juan, PR, for Defendants.
OPINION AND ORDER
FUSTE, Chief Judge.
Plaintiff, Jackeline HernándezMejláas, filed the present complaint against Defendants, General Electric Products ("GE") and Caribe GE Distribution Components ("Caribe GE"), alleging discrimination and unlawful termination in violation of Title VII of the Civil Rights Act of 1964 ("Title VII"), 42 U.S.C. §§ 2000e to 20003-17 (1994 & Supp.2005), as augmented by the Pregnancy Discrimination Act of 1978 ("PDA"), 42 U.S.C. § 2000e(k). Docket Document Nos. 1, 13.
I.
Factual and Procedural Synopsis
Our determination based upon the Magistrate Judge's disposition is de novo. FED. R. CIV. P. 72(b). As required, we *6 will review and weigh the evidence presented to the magistrate judge, Docket Document No. 78, 89, rather than merely relying on the magistrate judge's Report and Recommendation. LaCedra v. Donald W. Wyatt Det. Facility, 334 F.Supp.2d 114, 125 (D.E.:1.2004).
However, we exercise our discretion in accepting those parts of the Report and Recommendation to which Defendant does not object. Id.
Plaintiff worked as a temporary contract employee for Defendant Caribe. Her first employment contract was for December 21, 1998 to January 30, 1999. She signed another employment contract on January 29, 1999 for a period ending on July 30, 1999, and continued to sign either one-, four- or six-month contracts, consecutively, through November 30, 2000. Plaintiff became pregnant in August 2000 and informed Defendant of her condition. On September 21, 2000, Plaintiff took medical leave from work due to a pregnancy-related health complication. Plaintiff received statutory disability payments during her leave. Plaintiffs employment contract had expired during her medical absence, on November 30, 2000, and when she returned to work on December 11, 2000, she signed a new, one-month contract. Plaintiff again left work due to a pregnancy-related complication on March 10, 2001. She gave birth on April 12, 2001, and received disability benefits through June 14, 2001.
Two days prior to the expiration of her disability benefits' term, Plaintiff spoke with human resources Manager Awilda Rios regarding her return to work. According to Plaintiff, Plaintiff called Rios, who informed Plaintiff that due to a lack of work, Defendant would be unable to renew Plaintiff's work contract.
Ríos insists that she had tried to contact Plaintiff regarding a position in Defendant Caribe's Molding Department that was available to her, but that Plaintiff did not accept the position. Rios sent a letter to Plaintiff memorializing a June 27, 2001 conversation in which Plaintiff refused an offer for a Molding Department position, but that the letter was returned to Rios as "unclaimed/refused" on July 26, 2001. Docket Document No. 109.
Plaintiff filed the present complaint on March 17, 2003, alleging that she was discharged because of her pregnancy in violation of Title VII and the PDA. Docket Document No. 1. On November 29, 2004, Defendants moved for summary judgment, claiming that: (1) Plaintiff's discrimination claims are not sustainable under the burden-shifting framework applicable in Title VII cases; and (2) Plaintiff did not exhaust her administrative remedies against Defendant GE. Docket Document Nos. 78, 97. On December 29, 2004 Plaintiff opposed the motion. Docket Document No. 89.
On April 6, 2005, this court referred Defendants' summary judgment motion to Magistrate Judge Aida M. Delgado-Colón for a Report and Recommendation. Docket Document No. 107. On August 18, 2005, the Magistrate Judge issued a Report and Recommendation, granting Defendants' motion with regards to the exhaustion of administrative remedies against Defendant GE and denying Defendants' motion with regards to the underlying discrimination claims. Docket Document No. 111.
On September 16, 2005, Defendant Caribe filed an objection to the Report and Recommendation, requesting that we decline to adopt the Magistrate Judge's disposition with regards to the discrimination claims. Docket Document No. 115.
II.
Analysis
As a preliminary matter, we ADOPT the Magistrate Judge's factual synopsis and *7 also her recommendation regarding exhaustion of administrative remedies against Defendant GE. Docket Document No. 111. All claims against Defendant GE are DISMISSED. Judgment shall be entered accordingly.[1]
We will first consider the two arguments raised in Defendant's objection regarding Plaintiff's discrimination allegations: (1) Plaintiff failed to establish a prima facie case of discrimination; and (2) Plaintiff failed to reveal Defendant's proffered nondiscriminatory reasons for termination as pretextual. Docket Document No. 115. Additionally, we will consider whether the present case may survive summary judgment as a disparate impact claim, an issue only indirectly addressed in the pleadings and Magistrate Judge's Report and Recommendation. Docket Document Nos. 1, 78, 89, 111.
We proceed according to the analytical roadmap articulated in the Magistrate Judge's opinion, Docket Document No. 111, which relies on McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802-05, 93 S.Ct. 1817, 36 L.Ed.2d 668 (1973), the case that established the burden-shifting framework commonly used for analyzing Title VII discrimination cases. Smith v. F.W. Morse & Co., 76 F.3d 413, 420 (1st Cir. 1996).
A. Prima Facie Claim
The McDonnell Douglas framework first requires that a plaintiff establish a prima-facie case by demonstrating that: (1) she was pregnant or had indicated an intention to become pregnant; (2) she met the employer's legitimate performance expectations; (3) she experienced an adverse employment decision by her employer; and (4) the employer had a continuing need for the services that plaintiff had been rendering. Smith, 76 F.3d at 421. Defendant contends that contrary to the Magistrate Judge's recommendation, Plaintiff has established neither that she experienced an adverse employment action nor that Defendant had a continuing need for her services, and so fails to put forward a prima facie discrimination claim. Docket Document No. 115.
1. Adverse Employment Action
Plaintiff's final employment contract with Defendant expired on April 20, 2001. Docket Document No. 89, Exh. 11. Plaintiff left work on disability leave prior to the expiration date, on March 10, 2001, due to pregnancy-related complications. Docket Document No. 89. Plaintiff alleges that when she returned to work on June 12, 2001, she was not offered a position. Indisputably, her employment contract was not renewed. Docket Document No. 78. Defendant claims the failure to renew Plaintiff's contract was not an adverse employment action. Id.
For support, Defendant relies upon Gourdine v. Cabrini Medical Center, 307 F.Supp.2d 587, 595 (S.D.N.Y.2004), in which the court found that an employer-defendant's failure to renew an employee-plaintiff contract does not constitute an adverse employment action if the contract makes no guarantee of further employment. As Defendant notes, the Second Circuit affirmed this finding, while vacating other portions of the district court's decision. 128 Fed.Appx. 780, 782 (2d Cir. 2005). However, the appellate decision is not to be cited as precedential authority, id., and, therefore, we place no weight on its holding.
Other courts, meanwhile, have treated-and sometimes explicitly found the failure to renew an employment contract as an adverse employment action cognizable under *8 Title. VII. See, e.g., Kassaye v. Bryant College, 999 F.2d 603, 607 (1st Cir.1993) (noting that refusal to renew employment contract may provide grounds for Title VII complaint); Mateu-Anderegg v. Sch. Dist. Of Whitefish Bay, 304 F.3d 618, 625 (7th Cir.2002), (finding, in contract-renewal Title VII case, "it is undisputed that [plaintiff] . . . suffered an adverse employment action"); Walker v. Bd. of Regents of Univ. of Wis. Sys., 300 F.Supp.2d 836, 851-52 (W.D.Wis.2004) (Title VII applies "equally to both termination decisions and the refusal to re-hire."); Flores-Suarez v. Turabo Med. Ctr. P'ship, 165 F.Supp.2d 79, 91 (D.P.R.2001); Meadows v. State Univ. of N.Y. at Oswego, 160 F.R.D. 8, 12 (N.D.N.Y.1995) (considering decision not to renew contract as adverse employment action); Castro v. United States, 584 F.Supp. 252, 258 (D.P.R.1984) (dismissing failure-to-renew-contract claim on other grounds).
As even at-will employees and job applicants are entitled to Title VII protection, see Williams v. Raytheon Co., 220 F.3d 16, 19 (1st Cir.2000); Costa v. Markey, 706 F.2d 1, 2 (1st Cir.1982), we agree with the overwhelming majority of courts that nonrenewal of an employment contract constitutes an adverse employment action.
2. Continuing Need for Services
Establishing a prima facie case under Title VII and the PDA requires Plaintiff to show that Defendant continued to have Plaintiffs duties performed by a comparably-qualified person after Plaintiffs discharge. Smith, 76 F.3d at 421.
The present case does not fit neatly into this element of the burden-shifting framework because Plaintiffs discharge was caused by her contract's termination and the subsequent lapse in time before she requested a renewal. Docket Document No. 111. Nevertheless, entirely relevant to this inquiry is whether Defendant needed Plaintiffs services at the time that it allegedly declined to extend her a position in June 2001. See Weston-Smith v. Cooley Dickinson Hosp., Inc., 282 F.3d 60, 64 (1st Cir.2002) (noting that "the McDonnell Douglas framework is a flexible evidentiary standard whose requirements vary depending on the context").
Plaintiff claims that Defendant did have a continuing need for her services, but that she was not re-hired because of pregnancy-based discrimination. Docket Document No. 89. Defendant avers that Plaintiff has failed to present any supportable claim that there was a continuing need for her services in the Assembly Department at the time that she requested to be rehired on June 12, 2001. Docket Document No. 115. While paying lip service to the prima facie standard which sets forth Plaintiffs burden to establish a continuing need for services, the Magistrate Judge failed to address this issue in her analysis. Docket Document No. 111, p. 21.
Reviewing the record, we find nothing that could be construed as supporting Plaintiffs prima facie burden to establish a continuing need for her services. Plaintiff presents no allegations or evidence to guide us. In deposition, Rios maintained that depending on product demand cycles, the personnel demand in various plant departments (i.e., Molding versus Assembly) would vary drastically, and employees would be laid off or hired accordingly. Docket Document No. 89, Exh. 3. Rios also stated that it was common for fewer employees to be needed in the Assembly Department during slower cycles. Id.
Nothing in Rios' statement could be construed as suggesting that Plaintiff was discharged despite a continuing personnel need in the Assembly Department. To the contrary, the record suggests that a position was offered to Plaintiff in the Molding Department, but that Plaintiff refused the *9 ffer. Docket Document No. 109. There is no evidence in the record to suggest a demand for personnel in the Assembly Department. Because Plaintiff has not shown that Defendant had a continued need for her services after her termination, she has failed to establish a prima facie case for discrimination under Title VII and the PDA.
B. Defendant's Rebuttal
Had Plaintiff successfully presented a prima facie discrimination claim, the burden of production would shift back to the employer-defendant who must rebut the inference of discrimination by articulating some legitimate, non-discriminatory reason for the adverse employment action. Domínguez-Cruz v. Suttle Caribe, Inc., 202 F.3d 424, 430 (1st Cir.2000).
Assuming, arguendo, that Plaintiff fulfilled her prima facie burden, we find that Defendant successfully rebuts any presumption that it unlawfully discriminated against her. Fennell v. First Step Designs, Ltd., 83 F.3d 526, 535 (1st Cir.1996).
First, Defendant renewed Plaintiffs contract after she had announced her pregnancy, in January 2001. Docket Document No. 89, Exh. 11. In contrast, the decision not to renew Plaintiffs contract in June 2001 was made after Plaintiffs pregnancy term was over and she was ready to return to work in a full-time capacity. Docket Document No. 115. The timing of these personnel decisions strongly suggests that they were tied to "legitimate reasons unrelated to her pregnancy." Smith, 76 F.3d at 424.
Defendant's reason for the discharge is altogether convincing. In accordance with Defendant's policy for all employees on leave of absence, once Plaintiffs employment contract had expired, her position was filled by another employee and she was taken off the records. Because Defendant claims that it could not "renew a contract with a person that is not there," when Plaintiffs contract lapsed, she lost her Assembly Department position. Docket Document No. 89, Exh. 3. Defendant submits evidence supporting its contention that Plaintiff was offered a position in the Molding Department, but that Plaintiff would not accept the position, presumably because she only wanted a position in the Assembly Department. Docket Document No. 109.
Plaintiff avers that her discharge is linked to the issue of her seniority status, because more senior employees are given priority during hiring and firing decisions. Docket Document No. 89. Plaintiff ascribes the decision not to renew her contract on June 12, 2001 to an alteration of her seniority status that had occurred six months earlier. Id.; Docket Document No. 115.[2] Plaintiff claims that her lack of seniority, itself a product of discriminatory treatment, contributed to the June 12, 2001 decision not to rehire her, as there was a continuing need for her services but she was not given preference because of her low seniority. Docket Document No. 89. Although Plaintiff concedes that her final employment contract had already lapsed on April 20, 2001, she maintains that she complied with all criteria in order *10 to keep her employment active beyond the April 20 expiration. Id.
Defendant argues that Plaintiffs seniority status had no impact upon Plaintiffs employment rights at the time that her contract expired in April 2001 or when she sought reinstatement in June 2001. Instead, Defendant avers that Plaintiffs contract expired in accordance with temporary contract employee policy, a position in the Assembly Department could not be offered, and Plaintiff refused an offer for a position in the Molding Department. Docket Document Nos. 78, Exh. 17; 97, 115.
As Defendant has articulated a legitimate reason for Plaintiffs discharge of her contract expired so she lost her Assembly Department position, and she refused an offer to work in the Molding Departmentwe are satisfied that Defendant has proffered a compelling rebuttal to any inference that Plaintiff suffered an adverse employment action because of her pregnancy.
C. Defendant's Rebuttal as Pretext
As Defendant has satisfied its burden of production by "articulating not necessarily proving some legitimate, nondiscriminatory reason" for Plaintiffs discharge, Plaintiff now must "carry her burden of proof by demonstrating that the legitimate reasons offered by the defendant were not its true reasons, but were a pretext for discrimination." Cumpiano v. Banco Santander P.R., 902 F.2d 148, 153 (1st Cir.1990)(citing Texas Dep't of Cmty. Affairs v. Burdine, 450 U.S. 248, 253, 101 S.Ct. 1089, 67 L.Ed.2d 207 (1981)). Throughout the entire analysis, the plaintiff must, prove that she would not have suffered the adverse employment action but for her membership in a protected class. See Freeman v. Package Mach., 865 F.2d 1331, 1335 (1st Cir.1988).
Plaintiff attempts to satisfy her burden by asserting that Defendant "experienced busy work periods with high volume in sales during the middle of . . . 2001[and] was in need of such employees and they had evidence of such need." Docket Document No. 89. In support, Plaintiff cites to Rios' deposition, in which Rios stated that she had voiced objections in the past to Defendant's policy regarding temporary employees. Id., Exh. 3. Nothing in Rios' deposition suggests a need for Assembly Department employees in June 2001. In response to a question regarding the need for temporary employees in 2001, Rios stated, "I don't remember. . . . [I]t would come up like at the middle of the year or so on that we would need temps employees, that would be regarding our sales. If our sales would go up, we needed temps. . . ." Id., p. 93. In response to a question about whether the cycles were higher midyear, Rios said, "it all depends . . . We had . . . three different processes. So we could have one of the areas having a high need for employees, and then one of the areas not having that high need." Id. Rios' answer does not support Plaintiffs contention that an Assembly Department position was not extended to her despite its availability. To the contrary, Rios stated that Defendant implemented lay-offs in June or July 2001. Id., p. 102.
Plaintiff offers no evidence or argument suggesting that Defendant's stated reason for discharge is merely pretextual. Taking some distance from the McDonnell Douglas burden-shifting framework, we note that "the critical determination in any Title VII suit is whether the complainant has proven by a fair preponderance of the evidence that an impermissible consideration . . . was a substantial motivating factor in the adverse employment decision." Cumpiano, 902 F.2d at 155. Plaintiff has failed in this endeavor.
D. Disparate Impact
Under Title VII, employment discrimination claims can arise in two different *11 ways. Id. Above, we have assessed Plaintiffs claim as it was articulated in the complaint, as a "disparate treatment" claim that is, one that "arises when an employer treats an employee less favorably than others because of her" protected status. Id. (citing Int'l Bhd. Of Teamsters v. United States, 431 U.S. 324, 335-36 n. 15, 97 S.Ct. 1843, 52 L.Ed.2d 396 (1977)). However, elements of Plaintiffs complaint and responsive pleadings suggest that Plaintiff also relies on disparate impact. Disparate impact stems from employment practices, "often facially neutral, which (1) cannot be justified by business necessity and (2) in fact impose harsher burdens on employees who share a protected characteristic." Cumpiano, 902 F.2d at 156.
Plaintiff cites to four other instances in which temporary employees had taken leave for pregnancy and were subsequently unable to renew their expired employment contracts. Docket Document No. 89. Interpreted favorably, Plaintiff could be construed as arguing that Defendant's temporary employment renewal policy unfairly and disparately impacts pregnant employees. However, nowhere in the complaint or in response to Defendant's motion for summary judgment does Plaintiff argue for the necessary elements of a disparate impact claim. Docket Document No. 1, 89. Specifically absent is an argument for why Defendant's contract renewal policy is unjustifiable by business necessity, a necessary element of a disparate impact claim. Cumpiano, 902 F.2d at 156. As Plaintiff has failed to "set forth specific facts showing that there is a genuine issue for trial," FED. R. Civ. P. 56(e), we find that the disparate impact claim must fail.
E. Supplemental Jurisdiction
Because all of Plaintiffs federal claims have been dismissed, we decline to exercise supplemental jurisdiction over Plaintiff's associated state-law claims. Rivera v. Murphy, 979 F.2d 259, 264 (1st Cir. 1992) (quoting Cullen v. Mattaliano, 690 F.Supp. 93 (D.Mass.1988) ("[I]t is the settled rule in this Circuit that in a nondiversity case, where pendent state claims are joined with a federal cause of action and that the federal cause of action is [dismissed] . . . the pendent state claims should be dismissed.")).
III.
Conclusion
In accordance with the foregoing, we decline to adopt the Magistrate Judge's report and recommendation, and GRANT Defendant's motion for summary judgment. Docket Document No. 78. Plaintiffs PDA and Title VII claims are DISMISSED WITH PREJUDICE. Plaintiffs state law causes of action are DISMISSED WITHOUT PREJUDICE. Judgment shall be entered accordingly.
IT IS SO ORDERED.
NOTES
[1] Henceforth, "Defendant" will refer to the single remaining Defendant, Caribe GE.
[2] Defendant's seniority system is based upon an employee's start date, and the start date is reset when an employee allows a contract to lapse and then initiates a new contract at a later date. Docket Document No. 89, Exh. 2, ¶¶ 30-33. Plaintiff's seniority was altered because her work contract had lapsed, without renewal, for ten days between November 30 and December 11, 2000. In accordance with the company's seniority policy, Plaintiff's start date was designated as December 11, 2000, the day that she initiated a new contract after her prior contract had lapsed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1605803/ | 778 F. Supp. 1515 (1991)
SOUTH DAKOTA STATE CEMENT PLANT COMMISSION, d/b/a South Dakota Cement Plant, for the Use and Benefit of the STATE OF SOUTH DAKOTA, Plaintiff,
v.
WAUSAU UNDERWRITERS INSURANCE COMPANY, a Member of Wausau Insurance Companies, Defendant.
Civ. No. 91-3027.
United States District Court, D. South Dakota.
November 27, 1991.
*1516 Ronald W. Banks, Banks, Johnson, Johnson, Colbath & Huffman, P.C., Rapid City, S.D., for plaintiff.
James C. Robbennolt, Olinger, Lovald, Robbennolt & McCahren, P.C., Pierre, S.D., and Patricia St. Peter, Brooks F. Poley, Zelle & Larson, Minneapolis, Minn., for defendant.
AMENDED MEMORANDUM OPINION
DONALD J. PORTER, District Judge.
On June 20, 1991, plaintiff sued Employers Insurance of Wausau,[1] in the Sixth Judicial Circuit Court of South Dakota. Plaintiff seeks judicial determination of the extent of the liability coverage provided by defendant and recovery for breach of defendant's alleged contractual duty to defend plaintiff in an action brought against the Cement Plant in Wyoming.
Under 28 U.S.C. § 1441, defendant removed the case to this Court, alleging that this Court has jurisdiction under 28 U.S.C. § 1332 on the ground that diversity of citizenship exists between plaintiff and defendant and that the amount in controversy exceeds $50,000.00.
Plaintiff has moved to remand the case to the State court, contending the Cement Plant is not a citizen of the State of South Dakota for diversity purposes and this Court thus lacks jurisdiction under 28 U.S.C. § 1332.
DISCUSSION
The issue before this Court is one of subject matter jurisdiction. A U.S. district court may accept a case upon removal from a State court only if the case is one that originally could have been brought in federal court. Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S. Ct. 2425, 2429, 96 L. Ed. 2d 318 (1987) (citing 28 U.S.C. § 1441(a)). The governing removal statute reads in part:
Except as otherwise expressly provided by Act of congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.
28 U.S.C. § 1441(a). In this case, the defendant removed the suit to this Court under 28 U.S.C. § 1332, which grants federal district courts original jurisdiction over:
(a) ... all civil actions where the matter in controversy exceeds the sum or value of $50,000, exclusive of interest and costs, and is between
(1) citizens of different States; ...
28 U.S.C. § 1332(a)(1).
Neither side disputes the amount in controversy requirement. The diversity of citizenship requirement is, however, at the heart of the parties' disagreement. Plaintiff contends that, as an arm of the executive branch of the South Dakota State government, it brought suit against defendant in the name of the State of South Dakota. Defendant maintains that the Cement Plant is in fact a commercial entity independent of the State of South Dakota and thus a "citizen" for diversity purposes.
A State is not a "citizen" for the purposes of diversity jurisdiction. Moor v. County of Alameda, 411 U.S. 693, 717, 93 S. Ct. 1785, 1799, 36 L. Ed. 2d 596 (1973). And if an agency, commission, or political subdivision that is party to a suit is an arm of the State, that entity similarly does not qualify as a "citizen" who can sue and be sued in federal court under 28 U.S.C. § 1332. Id. at 693, 93 S.Ct. at 1785. Thus, if the Cement Plant is an alter ego of the *1517 State of South Dakota, this Court lacks diversity jurisdiction.
This Court considered a somewhat similar question in Board of Regents v. Hoops, 624 F. Supp. 1179 (D.S.D.1986). In Hoops, the status of the State Board of Regents, which governs the state-supported educational institutions, was examined upon removal of the case from state court. The several factors considered in determining whether this agency was a "citizen" included the agency's right to hold and use property; its authority to sue and be sued in its corporate name; the extent of its independent management authority; the treatment of the agency by the State's courts; whether the State was responsible for the agency's debt; the agency's concern with statewide, as opposed to local problems; and the degree of financial autonomy of the agency. Id. at 1181 (citing Tradigrain Inc. v. Mississippi State Port Auth., 701 F.2d 1131, 1132 (5th Cir. 1983)). No one factor standing alone is conclusive as to the citizenship status of a state agency or commission. Rather, the relative weight of each of these listed factors is considered by examining the state constitution, applicable statutes, and pertinent case law. See Tradigrain, 701 F.2d at 1132.[2]See also Peter Kiewit Sons Co. v. South Dakota State Highway Comm'n, 269 F. Supp. 333, 337 (D.S.D.1967) (in deciding that South Dakota Highway Commission is "arm of the state," district court stated "[a]lthough the federal court makes an independent determination of the character and status of a state agency, it is influenced by state decisions").
The Cement Plant's management powers granted by the statute suggest that it enjoys a certain degree of autonomy. The South Dakota Cement Plant Commission controls the management of the Plant, SDCL 5-17-2.3, and its members are compensated from the cement plant fund. SDCL 5-17-4. The Commission also has the power to hire employees and other professionals, including attorneys. SDCL 5-17-5. The Cement Plant Commission can acquire property, SDCL 5-17-8, can sell or lease real and personal property, SDCL 5-17-18, and can borrow money and issue bonds, SDCL 5-17-19. The legislature has also given the Commission the specific authorization to operate the Rapid City Plant, including the power to sell the cement products, to establish the prices, to repair, maintain, and improve the facilities, and to purchase equipment. SDCL 5-7-10. Indeed, the statutory provisions appear to grant the Commission, comprised of persons expert in a variety of skills,[3] a significant degree of autonomy to make management decisions regarding the efficient operation of the State Cement Plant. To a great extent, the State Cement Plant enjoys significant "independent management authority."
The applicable statutory provisions, while granting the Commission freedom to manage and operate the Plant, also provide *1518 substantial links to the State government.[4] For example, the Cement Plant's proprietary powers are qualified by significant State involvement. Specifically, the Plant has the power of eminent domain. SDCL 5-17-8. When the Commission deems it necessary, the Attorney General institutes the condemnation proceedings in the name of the State. Id. The Cement Plant Commission has the general authority to purchase real property; but when it sells, leases, or exchanges surplus real property, those transactions must be made in the name of the State of South Dakota and approved by the Governor. SDCL 5-17-8; SDCL 5-17-17. And if the Commission acquires property outside the State, title is to be held in the name of the State of South Dakota. SDCL 5-17-8.
In determining the Cement Plant's status in relation to the State, the extent of the Plant's financial autonomy is an influential factor. See Tradigrain Inc. v. Mississippi State Port Auth., 701 F.2d 1131 (5th Cir. 1983); Board of Regents v. Hoops, 624 F. Supp. 1179 (D.S.D.1986). The Plant can borrow money and issue bonds. These bonds, however, "shall be executed in the name and on behalf of the state," must be imprinted with the words "Internal Improvement Bonds of South Dakota," and will have affixed to them the State seal. SDCL 5-17-19. Furthermore, the state constitution authorizes the State to pledge the Cement Plant its credit to provide for the operation of the Plant and the manufacture of cement products. S.D.Const. art. XIII, § 11. The State not only pledges its "good faith and credit" to the redemption of the bonds, but also authorizes a tax to be levied to pay the bonded indebtedness. SDCL 5-17-23. The Commission is further authorized to issue "negotiable coupon general obligation bonds of the state" for the specific purpose of enlarging the Rapid City plant. SDCL 5-17-23. These bonds are, in the first instance, to be secured by the revenues of the Cement Plant. SDCL 5-17-24. But the State again pledges its full faith and credit to make up the difference whenever those revenues are insufficient to meet the immediate payments of principal and interest. Id. Financially, the Cement Plant enjoys significant State support.
Examination of the general characteristics of the Cement Plant also suggests that the Plant is ultimately closely linked to the State of South Dakota in its governmental capacity. Both the South Dakota Constitution and corresponding statutory provisions declare that the operation of the Cement Plant is considered a governmental function as well as a public necessity. The South Dakota Constitution states that "[t]he manufacture, distribution and sale of cement and cement products are hereby declared to be works of public necessity and importance in which the state may engage...." S.D.Const. art. XIII, § 10. Furthermore, this section grants the legislature the authority to empower the state "to acquire, by purchase or appropriation, all lands, easements, rights of way, tracks, structures, equipment, cars, motive power, implements, facilities, instrumentalities and material, incident or necessary to carry the provisions of this section into effect...." Id. In accordance with this grant of authority, the legislature also determined that "the manufacture, distribution, and sale of cement and cement products are public purposes *1519 impressed with a public use and as such governmental functions subject to regulation by the state." SDCL 5-17-1.
These constitutional and statutory declarations indicate that South Dakota and its people consider the production of cement to be a governmental function that alleviates a "state wide," and not simply a "local," problem. See Tradigrain Inc. v. Mississippi State Port Auth., 701 F.2d 1131 (5th Cir.1983); Board of Regents v. Hoops, 624 F. Supp. 1179 (D.S.D.1986). See also Reeves, Inc. v. Stake, 447 U.S. 429, 430, 100 S. Ct. 2271, 2274, 65 L. Ed. 2d 244 (1980) (project to build state cement plant was "initiated in response to recent regional cement shortages that `interfered with and delayed both public and private enterprises,' and that were `threatening the people of this state'") (quoting Eakin v. South Dakota State Cement Comm'n, 44 S.D. 268, 183 N.W. 651, 652 (1921)).[5]
The history of the South Dakota Cement Plant's creation also suggests an association between the Cement Plant and the State of South Dakota in its governmental capacity. The Plant was established during the Progressive era, when the public was in favor of state ownership of business to avoid the high prices of, and the concentration of wealth in, monopolies. Reeves, 447 U.S. at 430 n. 1, 100 S. Ct. 2274 n. 1. Private industry, at least in the area of cement production, was seen as largely incapable of serving the "public needs." Id. Not only had the sole cement plant in the State recently closed, there was also a "fervent desire to make the services of the state government available to agriculture." Id. Furthermore, the South Dakota Supreme Court, shortly after the establishment of the Plant, found specifically:
[T]he manufacture of cement, under the conditions existing in the state of South Dakota, is the carrying out of a public purpose ... [and] the manufacture, distribution, and sale of cement and cement products by the state will tend to promote the public welfare, prosperity, and contentment of all the citizens of the state, and will tend to secure equality of economic opportunity.
Eakin, 183 N.W. at 651-52. In this atmosphere, the State Cement Plant and a corresponding Commission were established.
The statutory provisions governing the Cement Plant do not explicitly address the Plant's "power to sue and be sued," another helpful factor in determining the status of a state agency or commission for federal jurisdiction purposes. See Tradigrain Inc. v. Mississippi State Port Auth., 701 F.2d 1131 (5th Cir.1983); Board of Regents v. Hoops, 624 F. Supp. 1179 (D.S.D.1986). The South Dakota Supreme Court has, however, decided the Plant's amenability to suit in the limited contexts of breach of contract under the Uniform Commercial Code, Arcon Constr. Co. v. South Dakota Cement Plant, 349 N.W.2d 407 (S.D.1984), and commercial torts, L.R. Foy Constr. Co., Inc. v. South Dakota State Cement Plant Commission, 399 N.W.2d 340 (S.D.1987). These cases held that, under the circumstances presented, the Cement Plant could be sued. These cases do not, however, support the general finding that the Cement Plant is an independent entity distinct from the State of South Dakota. The majority in Arcon began its analysis with a description of the Cement Plant as "clearly an arm of the state," Arcon, 349 N.W.2d at 410, and then proceeded to determine whether the immunity that accompanied the sovereign status of the State had effectively been waived. The conclusion was that "when the legislature enacted the U.C.C. it expressly waived sovereign immunity for the cement plant whenever *1520 the cement plant enters into contracts for the sale of goods." Id. Thus, the Cement Plant would apparently have been entitled to sovereign immunity had the legislature not expressly waived it for those instances in which it enters contracts that are governed by the U.C.C.
Defendant Wausau focuses on language in L.R. Foy, the other South Dakota Supreme Court case that addresses the Plant's amenability to suit, to support its position in favor of removal. In L.R. Foy, a majority of the court[6] stated:
The Cement Plant was created solely for the purpose of engaging in a commercial function and is wholly unrelated to any governmental function of the State. Where the State elects to operate a business enterprise solely for commercial purposes, it ought not be permitted to avoid its legal responsibility by invoking the doctrine of governmental immunity. The Cement Plant should be amenable to suit for mismanagement, bad faith actions and negligent conduct, just as the private sector is made responsible.
L.R. Foy, 399 N.W.2d at 346. This statement, read in isolation, contradicts the South Dakota Constitution and corresponding statute that declare the sale and manufacture of cement a public and governmental function, the earlier Arcon case, and the remainder of the L.R. Foy opinion itself, which extends the Cement Plant's waiver of sovereign immunity to include commercial torts.
Although inconsistent on its face, the language in L.R. Foy need not be interpreted as contradictory to any of these authorities. When read in light of the L.R. Foy dissent, the description of the Plant given by the L.R. Foy majority may be read as serving a different purpose. The dissent, written by Justice Fosheim, distinguishes the waiver of immunity for breach of contract claims, as found by the majority in Arcon,[7] from a waiver of immunity for commercial torts, which the majority found in L.R. Foy. Specifically, the L.R. Foy dissent explains:
[T]here is a fundamental difference between Cement Plant's contractual and tort liability which makes it logical to interpret Art. XIII, § 11 as waiving immunity for the former but not for the latter. As the Arcon majority stated:
How can the state pledge its credit for cement plant operations if its credit obligations are not legally enforceable, or what business would contract with the cement plant if the cement plant is shielded from satisfying its contractual obligations? There can be no pledge of state credit without an obligation which is legally enforceable against the state.
349 N.W.2d at 411 (citations omitted). This basis which dictates the Cement Plant be amenable to its contracts does not exist regarding the plant's tort liability.
L.R. Foy, 399 N.W.2d at 352 (Fosheim, J., dissenting).
The language in the L.R. Foy majority reads, in this context, as a rationale for the extension of the waiver of immunity to include commercial torts, not necessarily as a description of the Cement Plant's degree of independence from the State for the purposes of diversity jurisdiction. An opinion must be read as a whole, not as solitary *1521 phrases or paragraphs. The L.R. Foy case should be interpreted in light of the fact that none of the state supreme court justices, in either Arcon or L.R. Foy, expressed the view that sovereign immunity was entirely inapplicable to the Cement Plant.[8] They simply disagreed on the extent and origins of the waiver of that immunity in the specific contexts discussed. To rely upon the disputed language, as does defendant Wausau, to support the assertion that the Cement Plant is a citizen for the purposes of diversity jurisdiction is to apply dicta to the wrong proposition.
This Court is aware of the United States Supreme Court's decision that the Commerce Clause does not bar the State of South Dakota from favoring its own citizens when it sells cement and cement products. Reeves Inc. v. Stake, 447 U.S. 429, 100 S. Ct. 2271, 65 L. Ed. 2d 244 (1980). South Dakota was categorized as a "market participant" in its actions regarding the Cement Plant. Yet the goals that the creation of the Cement Plant was designed to meet are described as governmental. Specifically, the majority states:
In establishing the plant, South Dakota sought the most unstartling governmental goal: improvement of the quality of life in that State by generating a supply of a previously scarce product needed for local construction and governmental improvements. A cement program, to be sure, may be a somewhat unusual or unorthodox way in which to utilize state funds to improve the quality of residents' lives. But `[a] State's project is as much a legitimate governmental activity whether it is traditional, or akin to private enterprise, or conducted for profit. ... A State may deem it as essential to its economy that it own and operate a railroad, a mill, or an irrigation system as it does to own and operate bridges, street lights, or a sewage disposal plant. What might have been viewed in an earlier day as an improvident or even dangerous extension of state activities may today be deemed indispensable.'
Id. at 442 n. 16, 100 S. Ct. 2280 n. 16 (citation omitted). And as Judge Lay, in Reeves, Inc. v. Kelley, 586 F.2d 1230 (8th Cir.1978),[9] had earlier asserted:
While a state is similar to private business when it participates in the market in a purely proprietary capacity, it is also somewhat different. As a government providing a public service and utilizing the money and resources of its residents, it has a right and perhaps even an obligation to consider their common good and conserve their resources so long as it does not do so by attempting to regulate or control commerce among the states.
Id. at 1233 (citing Toomer v. Witsell, 334 U.S. 385, 409, 68 S. Ct. 1156, 92 L. Ed. 1460 (1948) (Frankfurter, J., concurring)).[10]*1522 Never at issue in Reeves at the Supreme Court level was whether the actions of the Cement Plant were to be attributed to the State. Once that attribution was made, the question was whether the Commerce Clause applied to those actions. The United States Supreme Court held that it did not. Reeves, 447 U.S. 429, 100 S. Ct. 2271.
Similarly, this Court is faced with the initial question of attribution: Are the Cement Plant's activities of such a nature that any suit in which the Plant is involved regarding those activities is in effect a suit involving the State? This Court holds that, for the limited purposes of determining this Court's jurisdiction under 28 U.S.C. § 1332, they are. The State Cement Plant is an arm of the State and not a "citizen" for the purposes of diversity jurisdiction.
Plaintiff also alleges that the Eleventh Amendment of the United States Constitution bars federal jurisdiction in this case. The Eleventh Amendment provides as follows:
The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.
U.S. Const. amend. XI. In this case, the State is the plaintiff, not the defendant: the South Dakota Cement Plant filed suit against defendant Wausau, a Wisconsin corporation. The contention that the Eleventh Amendment nevertheless has bearing upon this Court's jurisdiction is not supported by any authority cited by either party. Accordingly, this Court will address the Eleventh Amendment claim no further.
This Court's holding is narrow: it resolves the instant issue of federal diversity jurisdiction. This decision does not address the related issues of sovereign immunity and any waivers thereof, as discussed in Arcon and L.R. Foy and as relied upon by the litigants. A majority of the South Dakota Supreme Court has found reasonable justifications for waiving the Cement Plant's sovereign immunity. The rationale for waiving immunity, however, does not necessarily apply to an analysis to determine federal diversity jurisdiction.
Because this Court lacks jurisdiction under 28 U.S.C. § 1332, the case is hereby remanded to the Sixth Judicial Circuit Court of the State of South Dakota.
NOTES
[1] In the initial complaint, defendant was erroneously named as Wausau Underwriters Insurance Company.
[2] In Tradigrain, the Fifth Circuit stated that "[i]n determining whether the agency is an alter ego of the state or an independent agency, the essential question is whether the state is the real party in interest in the lawsuit. The resolution of this question is a matter of state law." Tradigrain, 701 F.2d at 1132 (citations omitted). The Fifth Circuit recognized "[i]n a typical situation, some factors will suggest that the agency is `citizen' while others will just as strongly suggest that the agency is merely an alter ego of the state. The court must balance these against each other in reaching its conclusion. It must never, however, lose sight of the primary question involved: whether the state is the real party in interest in the lawsuit nominally brought against the agency." Id. at 1133. In the case before this Court, the Cement Plant, whose independent status is at issue, brought suit as plaintiff against defendant Wausau; yet the analysis remains the same. See State of Missouri ex rel Webster v. Best Buy Co., 715 F. Supp. 1455 (E.D.Mo.1989) (where State is the true party in interest, the State is not a citizen for diversity purposes and cannot bring suit in federal court); State of Connecticut v. Levi Strauss & Co., 471 F. Supp. 363 (D.Conn.1979) (to the extent that Connecticut initiates lawsuit in its sovereign capacity, it is not a citizen for the purposes of federal diversity jurisdiction).
[3] Of the seven member board, one member is to be an expert in business management, one in personnel management, one in private or public finance, and one in marketing management. Another member shall be a commercial user of the products produced by the cement plant; and the final two shall be chosen from the public at large. SDCL 5-17-2.2.
[4] In determining whether a California county was a citizen for federal diversity jurisdiction, the United States Supreme Court closely examined the applicable State statutory provisions. Moor v. County of Alameda, 411 U.S. 693, 93 S. Ct. 1785, 36 L. Ed. 2d 596 (1973). The Supreme Court emphasized the fact that the county was given "corporate power" and was designated a "body corporate and politic." Id. at 719, 93 S.Ct. at 1801. The county was further deemed a "`local public entity' in contrast to the State and state agencies." Id. It was liable for all judgments against it, had its own independent powers of taxation, and was authorized to provide public services for its residents. Id. These counties, like the Cement Plant, could also issue bonds. But, unlike the South Dakota Cement Plant, the California counties did not have the financial backing of the State. In addition, the California Supreme Court had stated that "counties have [] been declared public corporations or quasi-corporations...." Id. at 720, 93 S.Ct. at 1801. The South Dakota Cement Plant is, in contrast, not a corporation. Instead, the legislature created the Commission to operate and manage a Plant for the production of cement and cement products. See SDCL 5-17-1, et seq.
[5] The South Dakota Supreme Court in Eakin v. South Dakota State Cement Comm'n, 44 S.D. 268, 183 N.W. 651, 652 (1921), found "[t]hat cement and its products are commodities that are necessary to the people of this state; [and] that they cannot be procured through individual effort." Similarly, the Cement Plant does not, at least in recent years, appear to have limited its commercial activity to any specific area of the State. See Arcon Constr. Co. v. South Dakota Cement Plant, 349 N.W.2d 407 (S.D.1984) (suit involving contracts for a project on Interstate 29 north of Watertown, South Dakota, and a project on Highway 281 near Aberdeen, South Dakota); L.R. Foy Constr. Co., Inc. v. South Dakota State Cement Plant Comm'n, 399 N.W.2d 340 (S.D.1987) (suit involved contract to build new high school in Spearfish, South Dakota).
[6] Three of the five justices joined in the part of the opinion that addressed the Cement Plant's sovereign immunity from commercial torts claims.
[7] Justice Fosheim, who wrote the dissenting opinion in L.R. Foy, also dissented from the majority opinion in Arcon. The basis for his dissent in Arcon was his view that any waiver of sovereign immunity found in the enactment of the U.C.C. was superfluous. The South Dakota constitution, Article XIII, § 11, had already waived this immunity. Because he found the waiver of immunity for commercial contracts originated in the state constitution, not in the U.C.C., Justice Fosheim asserted that the appropriate statute of limitations was the one year limitation generally applicable to contract and tort claims against the State. See SDCL 21-32-2. Fosheim believed that sovereign immunity had been waived in this context, making the Cement Plant amenable to suit. Yet unlike the majority who, finding the waiver in the U.C.C., applied the U.C.C.'s four year statute of limitations and thus treated the action as timely, Justice Fosheim believed that the applicable statute of limitations had run.
[8] Specifically, four of the justices concurred in the majority opinion in the Arcon decision, with Justice Fosheim the sole dissenter. See supra note 6. The L.R. Foy decision consisted of three written opinions. Two justices concurred in the main opinion, finding "that Cement Plant may be held liable for its commercial torts and thus, has waived sovereign immunity." L.R. Foy, 399 N.W.2d at 349. One justice concurred separately, stating "I concur, totally, in the sovereign immunity aspect of this writing of the majority opinion." Id. at 351 (Henderson, J. concurring in part; concurring in result in part; and specially concurring in part). The dissent, written by Justice Fosheim and joined by Justice Wuest, disagreed with the majority decision to extend the waiver of sovereign immunity found in Arcon to include a waiver of immunity for commercial torts. Id. at 351-52.
[9] Reeves originated in the Western division of the District of South Dakota and was appealed to the 8th Circuit as Reeves, Inc. v. Kelley, 586 F.2d 1230 (8th Cir.1978). The 8th Circuit decision, written by Judge Lay, was appealed to the United States Supreme Court who remanded the decision to allow the 8th Circuit to reconsider its decision in light of the recent opinion in Hughes v. Oklahoma, 441 U.S. 322, 99 S. Ct. 1727, 60 L. Ed. 2d 250 (1979) (holding that Oklahoma law prohibiting the shipment of Oklahoma minnows out of the State violates the Commerce Clause). On remand, the 8th Circuit reaffirmed its position, deciding that the facts in Hughes were sufficiently different from those in Reeves to justify finding a violation in the former case but not in the latter. Reeves, Inc. v. Kelley, 603 F.2d 736 (8th Cir.1979). The United States Supreme Court decision affirmed this 8th Circuit opinion. Reeves, Inc. v. Stake, 447 U.S. 429, 100 S. Ct. 2271, 65 L. Ed. 2d 244 (1980).
[10] The South Dakota Cement Plant appears to have been largely self-supporting over the years. Reeves, 447 U.S. at 452, n. 3, 100 S.Ct. at 2285, n. 3 (dissenting opinion). But the fact remains that the State of South Dakota has, through its constitution and statutes, pledged its credit and a limited taxing power to help finance the Plant's debts. S.D.Const. art. XIII, § 11; SDCL 5-17-20; SDCL 5-17-24. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1197856/ | 184 Ariz. 296 (1995)
908 P.2d 1081
STATE of Arizona, Plaintiff-Appellee,
v.
L.Z. (Jack) JACKSON, dba A-Jax Bond Company, Real Party in Interest-Appellant.
No. 1 CA-CV 94-0302.
Court of Appeals of Arizona, Division 1, Department D.
December 19, 1995.
*297 William J. Ekstrom, Jr., Mohave County Attorney by James J. Zack, Deputy County Attorney, Kingman, for Plaintiff-Appellee.
Danny L. Cowser, Flagstaff, for Real Party in Interest-Appellant.
OPINION
LANKFORD, Judge.
In this case, we hold that the procedures for forfeiture of a bail bond are governed by Arizona Rule of Criminal Procedure ("Ariz. R.Crim.P.") 7.6(d) and not by Ariz. Rev. Stat. Ann. ("A.R.S.") section 13-3973. We also hold that appellant Jackson ("A-Jax Bond Company") has failed to establish that the failure to set a forfeiture hearing within the time required by Rule 7.6(d) warrants reversal of the trial court's forfeiture judgment.
A-Jax issued a $10,000 bail bond to secure the appearance of criminal defendant Paul Allen Bowling, who is not a party to this appeal. Bowling failed to appear for his arraignment on November 12, 1994. At the State's request, the trial court immediately issued a bench warrant for Bowling's arrest and ordered the clerk to send a copy of its minute entry order to A-Jax. Two and one-half months later, on January 26, 1994, A-Jax filed a motion to exonerate the bond. In response, the State filed a motion for bond forfeiture. The court initially set a hearing on the motions for February 14, 1994, but later postponed it to April 19, 1994. After considering memoranda and oral argument of counsel, the trial court ordered the bond forfeited. We have jurisdiction over the appeal by A-Jax pursuant to A.R.S. section 12-2101(B).
Rule 7.6(d), Arizona Rules of Criminal Procedure, effective September 1, 1973, provides:
Forfeiture. If at any time it appears to the court that a condition of an appearance bond has been violated, it shall require the parties and any surety to show cause why the bond should not be forfeited, setting a hearing thereon within 10 days. If at the hearing, the violation is not explained or excused, the court may enter an appropriate order of judgment forfeiting all or part of the amount of the bond, which shall be *298 enforceable by the prosecutor as any civil judgment.
A.R.S. section 13-3973 provides:
If at any time it appears to the court that a condition of the appearance bond has been violated, the court shall require the parties and any surety to appear and show cause why a warrant should not issue for the arrest of the defendant, setting a hearing on the alleged violation within ten days. If at the hearing, the violation is not explained or excused, the court may issue a warrant for the arrest of the defendant and shall set a date not less than ninety nor more than one hundred eighty days thereafter for a forfeiture hearing.
A-Jax contends that section 13-3973 is controlling, and that because the trial court failed to follow the statutory procedure, the court lacked jurisdiction to forfeit the bonds.
We agree that the superior court did not follow the statutory procedure in issuing the arrest warrant and in forfeiting the bond. The statute contemplates a hearing within ten days, at which time the surety may appear to show cause why a warrant should not issue for the defendant's arrest. If the defendant's violation is not explained or excused, the court may issue a warrant and must set a forfeiture hearing on a date not less than 90 nor more than 180 days from the show cause hearing. Here the trial court issued a bench warrant immediately instead of setting a hearing within ten days. Also, the court did not set a date for the forfeiture hearing after issuing the arrest warrant but waited for nearly three months to set a forfeiture hearing.
However, we need not address the effect of noncompliance with the statute on the trial court's forfeiture order because we conclude that Rule 7.6(d), and not the statute, governs the forfeiture procedures. The statute is preempted by the supreme court's constitutional rule-making authority.
The Arizona State Constitution confers on our supreme court the "[p]ower to make rules relative to all procedural matters in any court." Ariz. Const. Art. 6, § 5(5). The rule-making power is vested in the supreme court exclusively. State v. Blazak, 105 Ariz. 216, 217, 462 P.2d 84, 85 (1969); Arizona Podiatry Association v. Director of Insurance, 101 Ariz. 544, 546, 422 P.2d 108, 110 (1966).
Statutory procedures adopted by the legislature which are inconsistent with procedural rules adopted by the supreme court have been held unconstitutional. See, e.g., State v. Fowler, 156 Ariz. 408, 413, 752 P.2d 497, 502 (App. 1987), approved, State v. Bejarano, 158 Ariz. 253, 254, 762 P.2d 540, 541 (1988); see also Daou v. Harris, 139 Ariz. 353, 358, 678 P.2d 934, 939 (1984) (holding that a statutory rule requiring medical malpractice actions to be referred to a medical review panel could not operate to extend the time provided in the Arizona Rules of Civil Procedure for answering a civil complaint).
The procedures adopted by the Legislature in A.R.S. section 13-3973 conflict with those adopted by the Arizona Supreme Court in Rule 7.6(d). The statutory procedure requires the court to hold a show-cause hearing before the trial court may issue a bench warrant for the arrest of a non-appearing criminal defendant. The supreme court's rule does not so limit the power of a court to issue a bench warrant.[1] Moreover, the statutory procedure requires the trial court to set a forfeiture hearing no less than ninety days and no more than 180 days after the show cause hearing. In comparison, the supreme court's rule allows indeed requires the forfeiture hearing to be held *299 much sooner, within ten days of the defendant's failure to appear.
A-Jax argues that we should nevertheless apply the statute because it is substantive rather than procedural. Section 13-3973 is a statute of limitations, A-Jax contends, and thus it is a substantive provision that does not usurp the supreme court's authority to make rules of procedure.
We disagree because section 13-3973 is not a statute of limitations. In State v. Fowler, 156 Ariz. at 413, 752 P.2d at 502, we rejected a claim that a legislative rule requiring criminal defendants to file petitions for post-conviction relief within one year of conviction was a statute of limitation. In doing so, we distinguished "[t]ime limits prescribed for steps to be taken subsequent to the commencement of a case" from criminal statutes of limitation, which limit the State's right to commence the case. Id. at 411, 752 P.2d at 500.
In Fowler we held that the one-year deadline for post-conviction relief petitions was procedural because it prescribed procedures to be followed after the State initiates criminal proceedings against a defendant. Because the legislature's rule was procedural and conflicted with a rule of procedure adopted by the supreme court allowing motions for post-conviction relief to be filed at any time, we held that the supreme court's rule prevailed. Id. at 413, 752 P.2d at 502.
Similarly, the time requirements in A.R.S. section 13-3973 are procedural because they govern the methods by which the courts enforce the State's substantive right to ask that a bail bond be forfeited. See Heat Pump Equipment Co. v. Glen Alden Corp., 93 Ariz. 361, 363, 380 P.2d 1016, 1017 (1963) (defining a procedural rule as one which governs the judicial process for enforcing rights and duties recognized by substantive law, but does not abridge, enlarge or modify the rules of decision by which the court will adjudicate those rights and duties). Section 13-3973 does not limit the time in which a motion to forfeit a bond may be brought; rather, it provides time limits for the orderly disposition of a forfeiture action after the action has been commenced.
Furthermore, the statutory language does not support A-Jax's position. A true statute of limitations fixes a concrete limit within which an action must be brought. See Hall v. Romero, 141 Ariz. 120, 126, 685 P.2d 757, 763 (App. 1984). Section 13-3973 does not contain an express bar against a forfeiture action, and therefore cannot be interpreted to be a statute of limitation:
The legislature must expressly declare that a statute of limitations bars an action before it can be given effect.... The legislature is perfectly capable of expressing a statutory bar when it so intends and we will not read such a result into a statute absent a clear expression.
Matter of Estate of O'Connor, 139 Ariz. 450, 453, 679 P.2d 96, 99 (App. 1984) (citations omitted). The Legislature uses clear and consistent language in expressing its intent to provide a limitations period that bars actions not brought within the period.[2] In contrast, section 13-3973 contains no language of limitation.
We also reject A-Jax's argument that the statutory 90 to 180 day hearing parameters are substantive "jurisdictional" requirements for bond forfeiture. A-Jax cites State v. Nunez, 173 Ariz. 524, 844 P.2d 1174 (App. 1992) for this argument. In Nunez, the State moved for forfeiture of a bond after the criminal charges against the defendant had been dismissed. The State argued that forfeiture was proper even after criminal charges were dismissed. Its theory was that only post-dismissal forfeiture was possible under A.R.S. section 13-3973 because that statute permitted a forfeiture hearing only after 90 days elapsed since the show cause *300 hearing, and in Nunez the charges were dismissed before the 90-day period expired. Id. at 527, 844 P.2d at 1177.
We agreed with the State that section 13-3973 "precludes the state from obtaining a bond forfeiture for ninety days after a warrant issues" and that the statute "clearly requires the court to hold the forfeiture hearing within the window period of 90 to 180 days" after the warrant is issued.[3]Id. However, we also held that the statutory limit was "of no help to the state" because the statute had not been followed: The court failed to hold a hearing within 180 days after the arrest warrant issued, instead holding the hearing 210 days later. Id.
A-Jax's interpretation of Nunez is that the State is not entitled to forfeiture if a forfeiture hearing is not held within the 90 to 180 day period listed in section 13-3973.[4] We do not agree that Nunez indicates that the 90 to 180 day limit is "jurisdictional." Nunez merely declined to allow the State to take advantage of the provisions of a statute that had not been followed.
Moreover, a time limit is not necessarily "jurisdictional" or substantive even if failure to comply with it results in dismissal of a claim. In many cases, rules of procedure adopted by the Arizona Supreme Court allow for dismissal of a claim for violation of the procedural rules. See, e.g., Ariz.R.Civ.P. Rules 4(i), 16(f), 26(f), 26.1(g), 37(b)(2)(C) and 41(b); Ariz.R.Crim.P. Rules 8.6, 13.1(c), 15.7(a)(5) and 16.6(b); Ariz.R.Civ.App.P. Rules 9(a), 12(c) and 15(c) (providing for dismissal for breach of various procedural rules). A procedural rule does not become substantive or "jurisdictional" merely because the sanctions available for violation of the rule affect the viability of a claim. In this case, even if the sanction for violating the 90 to 180 day limits in section 13-3973 is dismissal of the State's forfeiture claim, the statute is a procedural rule governing the disposition of forfeiture actions. We therefore hold that section 13-3973 must yield to Rule 7.6(d) under Article 6, section 5 of our Constitution.
Having held that Rule 7.6(d) of the Arizona Rules of Criminal Procedure governs bail bond forfeiture actions, we now decide whether the trial court's failure to comply with the rule requires us to reverse the trial court's judgment granting forfeiture. We agree with A-Jax that the trial court did not comply with the terms of Rule 7.6(d). Rule 7.6(d) requires forfeiture hearings to be set within ten days of the day the trial court learns that a condition of the appearance bond has been violated, but here the trial court did not set a hearing until more than 90 days after it learned that Bowling had failed to appear. Nevertheless, we affirm the forfeiture judgment because the trial court's failure to strictly comply with Rule 7.6(d) did not prejudice A-Jax and because A-Jax had an opportunity to contest the forfeiture.
State v. Rogers, 117 Ariz. 258, 261, 571 P.2d 1054, 1057 (App. 1977) supports our decision. In that case, we held that the trial court's order of partial rather than total forfeiture of a bail bond could not be justified merely because the forfeiture hearing was not held within ten days after the defendant's failure to appear. We wrote:
The 10 day time period is not jurisdictional but is designed as a prompt enforcement for the benefit of the State as obligee and not for the benefit of the surety. Like any other debtor, the surety cannot complain if his creditor does not demand payment immediately when due. Under the new rule there is a requirement that the surety be given notice of the forfeiture hearing.
Notice was given [in this case] and the surety has shown no prejudice by the delay. Under these circumstances it would appear that the delay would accrue to the *301 surety's benefit in providing more time to find the defendant and explain his absence.
Id. (citations omitted).[5]
Similarly, in State v. Rocha, 117 Ariz. 294, 297, 572 P.2d 122, 125 (App. 1977), we rejected an argument that the trial court's failure to comply with the ten-day time limit in Rule 7.6(d) warranted reversal of a forfeiture order. We said that "[t]he purpose of the rule is to give the parties and any surety an opportunity to be heard." Id. Because the party opposing forfeiture in that case had an opportunity to contest forfeiture, although outside the ten-day limit in Rule 7.6(d), we refused to reverse the forfeiture order for failure to strictly comply with Rule 7.6(d). Id.
In this case, A-Jax was immediately notified of Bowling's failure to appear and was given an opportunity to contest the forfeiture. The trial court received memoranda and conducted a hearing, allowing A-Jax the opportunity to contest the forfeiture. Although it is true that the forfeiture hearing was not held ten days after Bowling's failure to appear, as required by Rule 7.6(d), A-Jax has shown no prejudice to it from the failure to hold the hearing within ten days. When, as in this case, a surety is afforded an opportunity to contest forfeiture, and when the surety does not establish prejudice from the untimely hearing, dismissal of the State's forfeiture action is not a required sanction for violation of the time provision of Rule 7.6(d).
The judgment is affirmed.
GARBARINO and SULT, JJ., concur.
NOTES
[1] Rule 7.6(d) does not address the issuance of a bench warrant. However, Ariz.R.Crim.P. Rule 7.4(a) authorizes the superior court to issue a bench warrant immediately on a breach of a criminal defendant's conditions of release. Rule 7.4(a) provides:
a. Initial Decision. At the initial appearance before a magistrate, a determination of the conditions of release shall be made. The court shall issue an order containing the conditions of release and shall inform the accused of the conditions, the possible consequences of their violation, and that a warrant for his or her arrest may be issued immediately upon report of a violation.
(Emphasis added). The trial court's immediate issuance of a bench warrant upon learning of Bowling's failure to appear was precisely in accord with this rule.
[2] When creating a statute of limitation, the Legislature often provides that an "action" must or shall be "commenced within" or "brought within" a specified time period "and not afterwards" or "not thereafter." See, e.g., A.R.S. §§ 12-522 et seq. (1992 and Supp. 1995), 28-1868 (1989), 38-602(A) (1985), 47-2725(A) (1988). Another method of creating a limitation period is to state that no civil action or suit may be brought unless commenced within a specified time frame. See, e.g., A.R.S. §§ 6-153(C), 6-943(H), 6-975(B), 6-1112(C) (1989 and Supp. 1995). Other statutes merely state the time-period during which an action "may" be brought. See, e.g., A.R.S. § 12-2453(F) (Supp. 1995). Still another method is to simply provide that an action is "barred" unless "commenced" within a specified time period. See, e.g., A.R.S. § 44-1410 (1994).
[3] The court in Nunez did not address the conflict between section 13-3973 and Rule 7.6(d).
[4] Neither section 13-3973 nor any other statute provides a sanction for violation of the 90 to 180 day limit. We do not understand why the rule from State v. Rogers, 117 Ariz. 258, 261, 571 P.2d 1054, 1057 (App. 1977) cannot apply to violation of section 13-3973 just as it applies to violation of the time limits in Rule 7.6(d). The parties have not briefed the question of whether the rule from Rogers which was that violation of the time limits in Rule 7.6(d) is not grounds for dismissal of a forfeiture action unless the surety can show prejudice from the violation also applies to section 13-3973, so we do not address that question here.
[5] The requirement that the surety receive notice of the defendant's failure to appear does, of course, protect the surety. See Louisiana v. Bullock, 412 So. 2d 1059, 1060 (La. 1982) ("Requiring prompt and adequate notice to the surety enhances the surety's chances of locating the defendant and surrendering him to the court for trial, a desirable objective from the point of view of both the surety and the state."). Here, A-Jax does not complain that it did not receive notice of Bowling's failure to appear. The trial court sent a copy of its minute entry arrest warrant to A-Jax. A-Jax complains that the forfeiture hearing was not held within ten days after Bowling's failure to appear. We fail to see any prejudice that might accrue to the surety from failure to hold a forfeiture hearing within the required ten day period when the surety knows that the defendant has failed to appear. We agree with the statement in Rogers that delay in holding the forfeiture hearing benefits the surety who has notice of the defendant's failure to appear because the delay gives the surety more time to locate the defendant to bring him to trial or to explain the defendant's breach of the conditions of release. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2414172/ | 432 F. Supp. 2d 768 (2006)
BROTHERHOOD OF LOCOMOTIVE ENGINEERS AND TRAINMEN, GENERAL COMMITTEE OF ADJUSTMENT, CENTRAL REGION, Plaintiffs,
v.
UNION PACIFIC RAILROAD, and National Railroad Adjustment Board, Defendant.
No. 05 C 2401.
United States District Court, N.D. Illinois.
May 15, 2006.
*769 Thomas Howard Geoghegan, Carol Tran Nguyen, Despres Schwartz & Geoghegan, Chicago, IL, for Plaintiffs.
Donald J. Munro, Matthew M. Hoffman, Goodwin Proctor LLP, Washington, DC, Thomas William Cushing, Union Pacific Railroad Company, Chicago, IL, for Defendants.
MEMORANDUM OPINION AND ORDER
KENDALL, District Judge.
The Brotherhood of Locomotive Engineers and Trainmen (the "BLET" or the "Organization") brings this action under Section 3 First (q) of the Railway Labor Act ("RLA" or "Act"), 45 U.S.C. § 153 First (q), to vacate a set of awards issued on March 15, 2005 by the National Railroad Adjustment Board (the "NRAB" or the "Board"). In those awards, the NRAB dismissed each of five grievance claims against Union Pacific Railroad (the "Carrier") upon its finding that "since no evidence of conference was set forth in the on-property record, the Board is without authority to assume jurisdiction over the claim." Before the Court now is the Carrier's Motion to Dismiss the Organization's Petition to Review and to Vacate Awards. Accepting all well-pled facts in the Petition and drawing all reasonable inferences in favor of the Organization, this Court holds that: (1) the RLA requires conferencing even if a collective bargaining agreement ("CBA") does not require conferencing, (2) the Board did not unlawfully limit its jurisdiction by refusing to consider evidence of conferencing outside of the on-property record and (3) the Board's procedure did not violate due process. Accordingly, the Carrier's Motion to Dismiss is granted.
The Railway Labor Act
Congress enacted the RLA in 1926 to promote the speedy and peaceful resolution of railroad labor disputes.[1]See Union Pacific Railroad v. Sheehan, 439 U.S. 89, 94, 99 S. Ct. 399, 58 L. Ed. 2d 354 (1978); Kulavic v. Chicago & Illinois Midland Ry., 1 F.3d 507, 515 (7th Cir.1993). The RLA established a "mandatory, exclusive, and comprehensive system for resolving grievance disputes" between railroads and their employees. Brotherhood of Locomotive Engineers v. Louisville & Nashville R.R., 373 U.S. 33, 38, 83 S. Ct. 1059, 10 L. Ed. 2d 172 (1963). As part of this system, the RLA called for unsettled minor disputes to be referred to local boards of adjustment. These early adjustment boards, however, were established by voluntary agreement of the parties and lacked the authority to bind the parties. See Brotherhood of Railroad Trainmen v. *770 Chicago River & LR. Co., 353 U.S. 30, 36, 77 S. Ct. 635, 1 L. Ed. 2d 622 (1957). These boards also were "composed of equal numbers of management and labor representatives and deadlocks over particular cases became commonplace. Since no procedure for breaking such deadlocks was provided, many disputes remained unsettled." Union Pacific Railroad Co. v. Price, 360 U.S. 601, 610, 79 S. Ct. 1351, 3 L. Ed. 2d 1460 (1959). Congress amended the RLA in 1934 to deal with these early difficulties, abolishing the voluntarily-created local boards of adjustment in favor of a national board and providing that [u]pon failure of any division to agree upon an award because of a deadlock or inability to secure a majority vote of the division members . . . then such division shall forthwith agree upon and select a neutral person, to be known as `referee,' to sit with the division as a member thereof, and make an award." 45 U.S.C. § 153 First (1); see Brotherhood of Railroad Trainmen v. Chicago River & I.R. Co., 353 U.S. 30, 36-37, 77 S. Ct. 635, 1 L. Ed. 2d 622 (1957) (National Railroad Adjustment Board "mak[es] it unnecessary for parties to agree to establish their own boards"). The current National Railroad Adjustment Board is composed of four divisions, each division having jurisdiction over disputes involving different classes or crafts of employees. See 45 U.S.C. § 153(h).
Among its roles, the RLA provides the machinery for resolving minor disputes between individual employees and their employers, where such disputes arise out of grievances or the interpretation of agreements concerning rates of pay, rules or working conditions. The first steps in the dispute resolution process take place on the railroad property. See Ryan v. Union Pacific R.R., 286 F.3d 456, 458 (7th Cir.2002). The parties' CBA here provides for an "on-property" process that includes a series of investigations, hearings and appeals up to the designated Labor Relations officer. See Petition, Exhibit B at 34 to A-36. Disputes that cannot be resolved on the property may be referred to the NRAB. See 45 U.S.C. § 153 First (i); Ryan, 286 F.3d at 458. In between these two stages, and at the center of the controversy in this case, is so-called "conferencing." The RLA discusses conferencing in two provisions:
All disputes between a carrier or carriers and its or their employees shall be considered, and, if possible, decided, with all expedition, in conference between representatives designated and authorized so to confer, respectively, by the carrier or carriers and by the employees thereof interested in the dispute.
45 U.S.C. § 152, Second.
In case of a dispute between a carrier or carriers and its or their employees, arising out of grievances or out of the interpretation or application of agreements concerning rates of pay, rules, or working conditions, it shall be the duty of the designated representative or representatives of such carrier or carriers and of such employees, within ten days after the receipt of notice of a desire on the part of either party to confer in respect to such dispute, to specify a time and place at which such conference shall be held: Provided, (1) That the place so specified shall be situated upon the line of the carrier involved or as otherwise mutually agreed upon; and (2) that the time so specified shall allow the designated conferees reasonable opportunity to reach such place of conference, but shall not exceed twenty days from the receipt of such notice: And provided further, That nothing in this Act shall be construed to supersede the provisions of any agreement (as to conferences) then in effect between the parties. *771 45 U.S.C. § 152, Sixth (emphasis added). This statutory text, read in light of the historical purpose of the RLA, ultimately must guide this Court's resolution of the questions presented. See Burlington N.R.R., Co. v. Brotherhood of Maintenance of Way Employees, 481 U.S. 429, 444, 107 S. Ct. 1841, 95 L. Ed. 2d 381 (1987) ("The Railway Labor Act `cannot be appreciated apart from the environment out of which it came and the purposes which it was designed to serve'"), quoting Elgin, J. & E. Ry. Co. v. Burley, 325 U.S. 711, 751, 65 S. Ct. 1282, 89 L. Ed. 1886 (1945) (Frankfurter, J., dissenting).
The Organization's Allegations
The Organization's petition seeks review of five awards issued by the First Division of the NRAB on March 15, 2005. (Compl.ś1.) The BLET and Union Pacific are parties to several agreements covering employees in the territory designated by Union Pacific as the Central Region. (Compl.ś 8.) The Organization filed five claims with the Carrier relating to discipline decisions that the Carrier allegedly made in violation of one of the collective bargaining agreements. (Compl.ś11.) Pursuant to the terms of the collective bargaining agreement, the parties then engaged in an on-property investigation of the claims. (Compl.ś12.) After these on property proceedings, the Organization alleges that it held a conference with the Carrier regarding the claims. (Compl.ś14.) Failing to resolve the claims at the conference, the Organization sent a letter of intent to the NRAB to initiate hearings on the claims. (Compl.ś14.) In the letter of intent, the Organization did not allege that conferencing had occurred. (Compl.ś15.) The Carrier did not raise an objection regarding the lack of conferencing prior to or when the Organization filed its letter of intent. (Compl.ś18.) Indeed, neither party discussed conferencing in any of their pleadings or papers filed with the NRAB. (Compl.ś 19.) The Carrier Board Member first raised an objection based on the lack of conferencing at the executive session of the NRAB held just prior to a March 18, 2004 hearing on these claims. (Compl.ś20.) The Organization argued that the Carrier's objection was untimely, but nevertheless offered to submit evidence that conferencing had, in fact, occurred. (Compl.ś 22.) The neutral member of the NRAB panel, Referee Goldstein, initially said he would allow the submission of evidence on whether conferencing occurred but later refused to consider the evidence. (Compl.śś23, 25.) The NRAB then issued awards dismissing the five disciplinary claims, explaining in each:
The Board emphasizes that all evidence of the statutorily required conference is entirely absent from the on-property record where, in order to be considered by the Board, it must reside. Therefore, the Organization's belated production of support evidence, post-hearing in this case, no matter how convincing, cannot be entertained by the Board, given its function as an appellate tribunal, we stress.
See, e.g., Petition, Exhibit A, Award No. 26089, at 3.
DISCUSSION
When considering a motion pursuant to Rule 12(b)(6), a court must take as true all facts alleged in the complaint and construe all reasonable inferences in favor of the plaintiff. See Murphy v. Walker, 51 F.3d 714, 717 (7th Cir.1995). A Rule 12(b)(6) motion will not be granted "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claims which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957).
*772 Section 3 First (q) of the RLA allows this Court to set aside a NRAB award in whole or in part, or to remand a matter, when the Board: (1) fails to comply with the requirements of the RLA; (2) fails to confine itself to matters within its jurisdiction; or (3) a member of the board engages in fraud or corruption in making the award. See 45 U.S.C. § 153 First (q); Union Pacific Railroad v. Sheehan, 439 U.S. 89, 93, 99 S. Ct. 399, 58 L. Ed. 2d 354 (1978) ("Only upon one or more of these bases may a court set aside an order of the Adjustment Board"). In this circuit, an award also may be vacated if the NRAB denied a party due process. See Steffens v. BRAG, 797 F.2d 442, 448 and n. 5 (7th Cir.1986).
The Organization argues that, in issuing its awards, the NRAB failed to comply with the Act, failed to conform to its jurisdiction and violated due process. Specifically, the Organization challenges the Board's ruling that it lacked jurisdiction to review the merits of the claims because "all evidence of the statutorily required conference is entirely absent from the on property record." From this holding thus arise the two principle questions that this Court must answer. First, does the RLA require conferencing when the parties' CBA does not require conferencing and second, must evidence of the conference be contained in the on-property record.
"Conferencing" Requirement
This Court begins its analysis with the language of the statute itselfâ § 152 Second states that "all disputes . . . shall be considered . . . in conference." 45 U.S.C. § 152, Second; see Leocal v. Ashcroft, 543 U.S. 1, 9, 125 S. Ct. 377, 160 L. Ed. 2d 271 (2004) (statutory construction starts with text of the statute). Standing alone, this section is unequivocal that conferencing shall occur in all disputes. The Organization, however, argues that to be understood properly the prescription in § 2 Second must be read in conjunction with §§ 2 Sixth and 3 First (i). Taking into account these other sections, the Organization argues that the RLA does not mandate conferencing prior to referring a dispute to the NRAB when the parties' collective bargaining agreement does not require a conference to be held as part of its grievance process.
The NRAB's decisions on conferencing uniformly hold that "the failure to hold a conference on the property deprives the Board of jurisdiction to hear [a] dispute." Third Division Award No. 30260 (July 19, 1994), at 2; see Third Division Award No. 30114 (Apr. 4, 1994), at 2 ("It is well settled by the board that such a conference between the parties is mandatory and is a jurisdictional requirement"). Speaking more directly to the Organization's interpretation of the RLA, the Board held that: "Section 2, Second of the National Railway Labor Actâ in clear, concise languageâ calls for a conference of the parties on the property prior to submission of a claim to this Board. Section 2, Sixth, of this Act does not in any way alter the mandatory provision of Section 2, Second; it merely gives to either party the right of requesting a conference and imposes a time limit within which to confer after a request has been made." Fourth Division Award No. 4931 (Sept. 22, 1994), at 2, quoting Third Division Award 14873 (October 21, 1966), at 5.
As the body created to administer the RLA, deference usually is given to the NRAB's construction of the Act[2]See *773 Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 843, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). An agency's determination of its own jurisdiction must be reviewed de novo, however. See Northern Illinois Steel Supply Co. v. Secretary of Labor, 294 F.3d 844, 846-47 (7th Cir.2002). The NRAB's decisions requiring that a conference be held on all disputes appear to fall within the Seventh Circuit's proscription on giving deference to an agency's determination of its own statutory jurisdiction.[3]See McCarthy v. Madigan, 503 U.S. 140, 144, 112 S. Ct. 1081, 117 L. Ed. 2d 291 (1992) (judicially imposed exhaustion requirements are prudential while statutory exhaustion requirements are jurisdictional). In the end, such deference is unnecessary since the Court agrees with the NRAB's reading of the RLA.
Section 2 Sixth states "[t]hat nothing in this Act shall be construed to supersede the provisions of any agreement (as to conferences) then in effect between the parties." At first glance, this admonition indicates that § 2 Second's conferencing requirement should not be construed supercede the dispute resolution process negotiated in the parties' collective bar gaining agreement. But such an interpretation would ignore the context of the quoted sentence. See Barmes v. U.S., 199 F.3d 386, 389 (7th Cir.1999) ("[A] particular section or sentence of a statute must be interpreted in the context of related sections and the purpose of the statute as a whole"). Section 2 Sixth deals with the time, place and manner that a conference shall be held. Id. It first requires that within 10 days of notice from either party of a desire to confer, the parties' representatives must "specify the time and place at which a conference shall be held." The subsequent sentences in § 2 Sixth then limit the time and place of such conference. The final sentence concluding "[t]hat nothing in this Act shall be construed to supersede the provisions of any agreement (as to conferences) then in effect between the parties." In context, the last sentence of § 2 Sixth logically reads as an additional limit on the time and place of the conference rather than an allowance for the parties to bargain as to whether a conference is held at all. In the same way, § 2 Sixth does not prevent the parties from negotiating the company level procedures leading up to the conference, but it does not permit them to displace the conferencing requirement itself. See Pawlowski v. Northeast Illinois Commuter Railroad Corp., 186 F.3d 997, 1002-03 (7th Cir.1999) (interpreting § 2 Sixth to mean that "railroads and unions remain free to establish by agreement the procedures for investigative and disciplinary proceedings at the company level . . . so long as the right to confer over disputes arising from them is preserved, the RLA is not offended").
Section 153 First (i) states that "[t]he disputes between . . . a group of employees and a carrier . . . shall be handled in the usual manner up to and including the chief operating officer of the carrier designated to handle such disputes," and if no *774 resolution is reached the matter may be submitted to the Adjustment Board. 45 U.S.C. § 153, First (i). "[T]he `usual manner' provision allows the railroad and the union to prescribe in the collective bargaining agreement the manner in which grievance proceedings shall be conducted on the property." Ryan v. Union Pacific R.R., 286 F.3d 456, 459 (7th Cir.2002) (holding that the usual manner is defined by the terms of the collective bargaining agreement) (emphasis in original). The conference described in § 2 Second, however, is a separate, intermediate step that follows the other on-property proceedings. See Pawlowski, 186 F.3d at 1003 (holding that "where a[CBA] is in place, the invocation of that agreement's grievance procedure is a necessary pre-requisite to any statutory right to a conference with union representation under § 152 Second"). As such, § 3 First (i)'s "usual manner" provision does not subject the conferencing requirement to the terms of the parties' collective bargaining agreement. See Ryan, 286 F.3d at 459 ("[T]he proceeding on the property, is to be conducted in the usual manner, that is, in the manner agreed upon by the railroad and the union. That stage is for them to design as well as to administer") (emphasis in original).
Finally, the statutory requirement of a conference facilitates the purpose of the RLAâ that is, to create a comprehensive and mandatory process for the prompt and orderly settlement of railway labor disputes. See 45 U.S.C. § 151a; 45 U.S.C. § 152 First ("It shall be the duty of all [parties] to exert every reasonable effort .. to settle all disputes"). As explained in one Board decision:
The mandatory conference not only permits an in-depth discussion of each party's evidence to avoid undue surprise at the later, formal adjudicatory stage (if necessary) but it also encourages the parties to explore all avenues of possible settlement to promote the voluntary resolution of disputes. Had Claimants and the Carrier held a conference, they might have been able to reach a mutually satisfactory accommodation on this claim. The Railway Labor Act's dispute resolution process is designed to force the parties to attempt to reach a settlement even if one party perceives little likelihood of successfully resolving the case before resorting to the Board.
Third Division Award No. 28896 (July 30, 1991), at 1-2; see Third Division Award No. 18964 (Jan. 27, 1972) ("[I]t is the intent of the Railway Labor Act that issues in a dispute before this Board shall have been framed by the parties in conference on the property"). The United States Supreme Court has spoken similarly:
[O]ne of the statute's primary commands, judicially enforceable, is found in the repeated declaration of a duty upon all parties to a dispute to negotiate for its settlement. This duty is not merely perfunctory. Good faith exhaustion of the possibility of agreement is required to fulfill it.
Elgin, J. & E. Ry., 325 U.S. at 712 n. 12, 65 S. Ct. 1282.
While the §§ 2 Sixth and 3 First (i) permit the parties, in their collective bargaining agreement, to set terms regarding the time and place of conference and prescribe the manner in which grievance proceedings shall be conducted on the property, they do not allow the parties to eliminate § 2 Second's requirement that a conference actually be conducted prior to referring the dispute to the NRAB.
Evidence of Conferencing in the On-Property Record
After determining that the RLA required the parties to confer before it could have jurisdiction to hear their dispute, the NRAB refused to consider evidence *775 outside of the on-property record that the conference occurred. The NRAB held that "the requirement that proof of conference exist within the on-property record is a statutory prerequisite to this Board's jurisdiction." The NRAB reasoned that its function was similar to an appellate tribunal and it therefore was restricted from considering new evidence or arguments not contained in the on-property record. The opinion also concluded that the Carrier's objection was timely raised. The Board cited numerous awards as precedent for each holding in its opinion.
This Court may provide the Organization relief only if the NRAB's refusal to consider evidence of conferencing outside of the on-property record was motivated by bad faith or misconduct or deprived the Organization of its due process right to a fundamentally fair hearing.[4]See United Paperworkers Int'l Union v. Misco, 484 U.S. 29, 108 S. Ct. 364, 98 L. Ed. 2d 286 (1987) (holding that NRAB's procedural and evidentiary rulings must be upheld absent bad faith or misconduct); National Post Office v. U.S. Postal Service, 751 F.2d 834, 841 (6th Cir.1985) (due process requires arbitrator to provide "a fundamentally fair hearing"); Transportation Communications Int'l Union v. Chicago, West Pullman & S.R.R., 1992 WL 229545, *3, 1992 U.S. Dist. LEXIS 13693, *8-9 (N.D.Ill.1992) (stating that "labor arbitrators are free to decide whether to consider any piece of evidence and such decisions are not subject to judicial review"). The Organization does not allege that the NRAB decision was actuated by bad faith or misconduct, but does feel that the decision denied it due process. As to due process, the Organization argues that no precedent existed for the Board's decision, the decision applies a hyper-technical rule of procedure and the Carrier's untimely objection was unfair.
To begin, the Court respectfully disagrees with the Organization's assertion that "[u]ntil the awards issued in this case, `conferencing' of discipline cases has never been deemed a `jurisdictional issue' in discipline cases." Plfs Opp. at 4-5. The Board's jurisprudence has long been settled that conferencing is a prerequisite to its exercise of jurisdictional over a dispute.[5]See Third Division Award No. 30114 (Apr. 4, 1994), at 2 ("It is well settled by the board that such a conference between the parties is mandatory and is a jurisdictional requirement"). Beyond this first point, the Organization argues that even if conferencing were required, it violates *776 due process not to allow them to submit evidence on the issue outside of the on-property record. The Organization first charges that the rule limiting the evidence of conferencing to the record was "made up on the spot, and applied retroactively to a party which had no reason to anticipate its application in this way." Admittedly, no Board opinion expressly states that the Board will not consider evidence of conferencing outside of the record. At the same time, Board precedent on conferencing cites the lack of evidence in the record as the basis for its decision. See Second Division Award No. 12475 (Nov. 4, 1992), at 3 ("[T]here is nothing in the record to establish that a conference was held on the property"); Third Division Award No. 30821 (Apr. 27, 1995), at 1 ("Nowhere does the record indicate that a conference was ever held or requested on the property"). And the Board's precedent that it will not consider evidence or arguments not contained in the on-property record is quite clear. See Third Division Award No. 30862 (May 10, 1995), at 8-9 (citing numerous awards applying this rule); Second Division Award No. 6883 (June 25, 1975), at 2 (noting that "[a]wards of all divisions of the National Railroad Adjustment Board upholding this principle are legion"). The Organization does not challenge the reasoning or authority of this latter precedent, only its application to the facts in this case. The Organization asserts that the NRAB's limitation on considering new evidence and arguments relates only to new evidence and arguments on the merits of the case, not evidence of conferencing. The Court does not disagree with the Organization's reading of the precedent or the logic of its distinction but the question is whether the refusal to accept evidence outside of the on-property record is a violation of due process.
Despite the Organization's well-taken arguments, the Organization concedes at several points that it easily could have included such evidence in the record submitted to the Board.[6]See, e.g., Plf's Opp. at 17-18 ("[T]he Organization could have responded in the opening brief (`yes, conferencing did occur') and these cases would not now be before this Court"). Thus, the Organization does not allege that it could not present evidence of conferencing to the Board through its notice of intent or opening submission but instead that it did not present such evidence "[s]ince conferencing is not required by the system wide agreement, and was never disputed by the Carrier prior to the hearing on March 18, 2004." (Compl.ś 15); see 45 U.S.C. § 153 First (i) ("[D]isputes may be referred by petition of the parties or by either party to the appropriate division of the Adjustment Board with a full statement of the facts and all supporting data bearing upon the disputes"). Under its limited scope of review, the Court cannot find that the NRAB proceedings were fundamentally unfair when the Organization had the ability to submit evidence of conferencing, Board precedent made clear that it considered conferencing a jurisdictional requirement and Board precedent indicated that the record should contain evidence of such *777 conferencing. See Pierce v. Commonwealth Edison Co., 1996 WL 374129, *4 (N.D.Ill.1996) (rejecting argument that "the arbitration panel exceeded their powers and refused to hear evidence material to the controversy").
The final element of the Organization's due process argument involves the belated nature in which the absence of conferencing was raised to the Board. But the Board regularly has considered such late challenges to their jurisdiction in the past.[7] In Award No. 4931, the Carrier Member at the Referee Hearing claimed the Board lacked jurisdiction to hear the case because a conference was not held. In dismissing the claims, the Board relied on precedent that "jurisdictional issues can be raised at any time." Fourth Division Award No. 4931(Sept. 22, 1994), at 2; see Second Division Award No. 12517 (May 3, 1993), at 3 ("With regard to the jurisdictional issue, even though the Organization argues that it comes late, this Board has uniformly held, on all Divisions, that issues of jurisdiction may be raised at any time"); Third Division Award No. 27575 (Sept. 29, 1988), at 3 ("The Board has over the years held the jurisdictional issues can be raised at any time"); Fourth Division Award No. 3203 (July 7, 1975), at 2 ("[I]t is universally recognized that such jurisdictional challenges may be presented at any stage of the proceeding"). Accordingly, the Board did not unfairly or arbitrarily consider the jurisdictional issue and due process was not violated.
Conclusion and Order
Construing the plain language of § 2 Second, and taking into consideration the history of the RLA, this Court holds that the parties are required to conference all disputes before they are referred to the NRAB. The provisions of §§ 2 Sixth and 3 First (i) permit the parties to set the terms and conditions for a conference to be held in their collective bargaining agreement, but those sections do not permit the parties to eliminate the conferencing step altogether. This Court also finds that the NRAB did not violate due process by refusing to consider evidence of conferencing outside of the on-property record. Wherefore, the Carrier's Motion to Dismiss is granted.
So ordered.
NOTES
[1] The purposes of the chapter are: (1) To avoid any interruption to commerce or to the operation of any carrier engaged therein; (2) to forbid any limitation upon freedom of association among employees or any denial, as a condition of employment or otherwise, of the right of employees to join a labor organization; (3) to provide for the complete independence of carriers and of employees in the matter of self-organization to carry out the purposes of this chapter; (4) to provide for the prompt and orderly settlement of all disputes concerning rates of pay, rules, or working conditions; to provide for the prompt and orderly settlement of all disputes growing out of grievances or out of the interpretation or application of agreements covering rates of pay, rules, or working conditions. 45 U.S.C. § 151a.
[2] The parties briefly reference the regulations implementing the conferencing requirement and other provisions of the RLA. See 29 C.F.R. 301, et seq. Since these regulations simply parrot the statutory language they provide no help in interpreting the statute.
[3] Given Congress' delegation of authority to the NRAB and the NRAB's expertise in the labor dispute process, it seems anomalous not to afford its decisions on conferencing the usual deference. See Mississippi Power & Light Co. v. Mississippi ex rel. Moore, 487 U.S. 354, 380-82, 108 S. Ct. 2428, 101 L. Ed. 2d 322 (1988) (Scalia, J., concurring) (reasoning that Chevron deference should apply to an agency's interpretation of its own statutory jurisdiction); California Dental Ass'n v. F.T.C., 526 U.S. 756, 765, 119 S. Ct. 1604, 143 L. Ed. 2d 935 (1999) (citing numerous cases in which Supreme Court has given an agency's interpretation of its own jurisdiction deference). Nevertheless, this Court, bound by Seventh Circuit precedent, reviews de novo the question of the NRAB's jurisdiction.
[4] The Seventh Circuit, like the Second, Fifth, Eighth and Ninth Circuits, allows federal courts to review due process claims under the RLA. See Pokuta v. Trans World Airlines, Inc., 191 F.3d 834, 839 (7th Cir.1999); Goff v. Dakota, Minnesota & E.R.R. Corp., 276 F.3d 992, 997 (8th Cir.2002); Atchison, Topeka and Santa Fe Ry. Co. v. United Transp. Union, 175 F.3d 355, 357 (5th Cir.1999); Shafii v. PLC British Airways, 22 F.3d 59, 64 (2d Cir.1994); English v. Burlington N.R.R. Co., 18 F.3d 741, 744 (9th Cir.1994).
The Third, Sixth, Tenth and Eleventh Circuits have held that federal courts are precluded from reviewing due process claims arising from NRAB decisions. See Kinross v. Utah Ry. Co., 362 F.3d 658, 662 (10th Cir. 2004); United Steelworkers of Am. Local 1913 v. Union R.R. Co., 648 F.2d 905, 911-12 (3d Cir.1981); Henry v. Delta Air Lines, 759 F.2d 870, 873 (11th Cir.1985); Jones v. Seaboard Sys. R.R., 783 F.2d 639, 642 n. 2 (6th Cir. 1986).
[5] See also Third Division Award No. 30260 (July 19, 1994), at 2 ("Following a long line precedents, the Board concludes that the failure to hold a conference on the property deprives the board of jurisdiction to hear the dispute"); Fourth Division Award No. 3203 (July 7, 1975), at 2 ("[T]he lack of on-property conference and/or lack of request for same is generally recognized as presenting a question of this Board's jurisdiction to handle the claim")
[6] The Organization makes several analogies to the judicial system's appellate process and concludes that requiring a party to plead jurisdiction in its opening submission would be "unheard of and unconscionable in any modern court proceeding." The Court disagrees with this conclusion and notes also that "parties that have chosen to remedy through arbitration rather than litigation should not expect the same procedures they find in the judicial area." Generica Ltd. v. Pharmaceutical Basics, Inc., 125 F.3d 1123, 1130 (7th Cir.1997); see, e.g., Seventh Circuit Rule 28(a) (requiring a jurisdictional statement by appellant); Fed. R.App. P. 28(a)(4) (same).
[7] A proposition familiar to this Court. See Fed.R.Civ.P. 12(h)(3) ("Whenever it appears by suggestion of the parties or otherwise that court lacks jurisdiction of the subject matter, the court shall dismiss the action"); Mansfield, C. & L.M.R. Co. v. Swan, ś1 U.S. 379, 382, 4 S. Ct. 510, 28 L. Ed. 462 (1884) (jurisdictional challenges may be raised at any stage of the proceedings by any party or the court itself). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2251664/ | 507 F. Supp. 2d 342 (2007)
William WASHINGTON, Petitioner,
v.
Thomas POOLE, Superintendent, Five Points Correctional Facility, Respondent.
No. 06 Civ. 2415(JGK).
United States District Court, S.D. New York.
August 28, 2007.
*343 Malancha Chanda, Office of Atty. Gen. of State of New York, New York City, for respondent.
Jonathan M. Kirshbaum, New York City, for petitioner.
*344 OPINION AND ORDER
JOHN G. KOELTL, District Judge.
The petitioner William Washington seeks a writ of habeas corpus pursuant to 28 U.S.C. § 2254 to set aside his conviction and sentence in the New York State Supreme Court, New York County, for grand larceny in the fourth degree, a violation of N.Y. Penal Law § 155.30(5), for taking a person's wallet. The petitioner was sentenced pursuant to' New York's persistent felony offender statute, N.Y. Penal Law § 70.10, to an indeterminate prison term of twenty years to life, but the term was reduced by the Appellate Division to fifteen years to life. The petitioner is currently serving his term of imprisonment at the Five Points Correctional Facility in Romulus, New York.
The petitioner raises two arguments: (i) that he was deprived of his Sixth Amendment right to counsel because the trial court prohibited defense counsel from arguing in summation that the People's evidence supported the defense theory that the petitioner found the wallet he was charged with stealing, and (ii) that his sentence under the persistent felony offender statute was unconstitutional in light of Apprendi v. New Jersey, 530 U.S. 466, 490, 120 S. Ct. 2348, 147 L. Ed. 2d 435 (2000), and its progeny.
Because the petitioner's sentence violated his constitutional right to a jury trial, the petition is granted.
I.
A.
The evidence at trial showed that the petitioner took a wallet from the pocket of William Carelis, a seventy year old man, at the Port Authority Bus Terminal in Manhattan on April 16, 2002.
Abdoulaye Sakho, an employee of a bus company at the terminal, testified for the People at trial. (See Petr.'s App. ("PA") 32-33.) Sakho was getting coffee when he noticed Carelis walking down the stairs to the lower level and the petitioner walking behind him. (PA 36-38.) Sakho saw the petitioner bump into Carelis causing him to stumble down the flight of stairs. (PA 39-41.) The petitioner approached Carelis and asked whether he was "okay." (PA 40-41, 63.) Sakho testified that as the petitioner helped Carelis up he reached into Carelis's right pocket and removed his wallet, and the petitioner snatched it away when Carelis resisted. (PA 41-42, 64-66.) Carelis called for help, and Sakho pursued the petitioner as he ran away, following him up an escalator. (PA 42, 67-70.) At the top of the escalator, Sakho grabbed the petitioner, and the petitioner threw the wallet from the top of the escalator toward Carelis. (PA 42, 43-44, 46, 55-56, 68-71.) Sakho held the petitioner while the Port Authority Police were contacted and until the police arrived. (PA 45.)
Carelis also testified for the People. Carelis's account differed from Sakho's in that Carelis recalled feeling someone "brush against" the left pocket of his pants as he was walking. (PA 9, 16-18, 28-29.) Carelis discovered that his wallet, which contained $90, was missing, and he noticed the petitioner in the vicinity. (PA 5-7, 10, 17-19, 22, 27.) Carelis said to the petitioner, "stop . . . you have my wallet," but the petitioner kept walking. (PA 10-11.) Carelis followed the petitioner down the stairs, but stumbled, and he yelled, "Hey, stop that guy, he's got my wallet." (PA 8-9, 11-12, 19-21, 25.) Carelis's account of the petitioner's apprehension by Sakho largely mirrors Sakho's testimony summarized above. (See PA 11-13, 22-28.) Carelis testified that when the petitioner tossed his wallet to Carelis he told Carelis that, he "found" the wallet. (PA 13, 24.)
*345 The petitioner presented no witnesses at trial. During summation, defense counsel argued that the People had failed to prove that the petitioner had used physical force to steal Carelis's wallet, emphasizing that Sakho and Carelis's testimony conflicted on this point. (PA 73-77.) Defense counsel claimed that according to Carelis's own testimony, there was "no way" the wallet could have been positioned so that the petitioner could take it because Carelis's left pocket was buttoned and covered by a sweater. (PA 78.) When defense counsel said, "Is it possible that his wallet fell out of his pocket and [the petitioner] picked it up?" the prosecutor objected, and the court instructed defense counsel that he could not ask the jury to speculate on that subject because there was no evidence that the wallet fell out of Carelis's pocket. (PA 78-79.) Later in the summation, defense counsel asked without objection whether it was "reasonable to believe that [the petitioner] returned the wallet and he did so because he found it" and stated that the alleged victim provided facts demonstrating that "there could be an innocent explanation for why [the petitioner] had the wallet." (PA 81.)
After an adjournment until the next day, the defense counsel raised again with the Court the subject of the prior objection that was sustained. (See PA 91-92.) The defense counsel claimed that he should have been allowed to argue the possibility that Carelis had dropped the wallet. (PA 91.) The court responded that in sustaining the prosecutor's objection, the court had instructed the jurors that only their recollection of the evidence would control and that they could not speculate on things not in evidence, and it refused a request for more time to sum up. (PA 92.)
On October 31, 2002, the jury convicted the petitioner of grand larceny in the fourth degree in violation of N.Y. Penal Law § 155.30(5), but it acquitted him of a charge of robbery in the third degree. Grand larceny in the fourth degree is a non-violent, class "E" felony which, because of the defendant's undisputed status as a second felony offender, would result in an indeterminate sentence with a maximum range of two to four years imprisonment without the application of the persistent felony offender statute. See N.Y. Penal Law § 70.06.
The prosecution moved to enhance the sentence pursuant to the persistent felony . offender statute, N.Y. Penal Law § 70.10. That statute defines a "persistent felony offender" as "a person, other than a persistent violent felony offender as defined in section 70.08, who stands convicted of a felony after having previously been convicted of two or more felonies." Id. § 70.10(1). The statute also provides that when a defendant has been found to be a persistent felony offender, and when the court "is of the opinion that the history and character of the defendant and the nature and circumstances of his criminal conduct indicate that extended incarceration and life-time supervision will best serve the public interest," the court may impose an enhanced sentence of imprisonment defined as the sentence that a defendant who committed an "A-I" felony would receive under the relevant sentencing statute. See id. § 70.10(2). The term of imprisonment for an A-I felony is an indeterminate sentence with a minimum of fifteen to twenty-five years and a maximum of life imprisonment. N.Y. Penal Law § 70.00. The associated criminal procedure law, N.Y.Crim. Proc. Law § 400.20, specifies procedures the court must follow to impose a persistent felony offender sentence, including the necessity of a hearing and the burden of and standard of proof imposed upon the prosecutor.
*346 On December 17, 2002, the court ordered a hearing to determine whether the enhancement should apply. See N.Y.Crim. Proc. Law § 400.20(3)-(4). The petitioner submitted a memorandum in advance of the hearing arguing that the persistent felony offender provisions violated the Sixth and Fourteenth Amendments under Apprendi and Ring v. Arizona, 536 U.S. 584, 122 S. Ct. 2428, 153 L. Ed. 2d 556 (2002). At a hearing on January 23, 2003, the petitioner admitted two of his prior felony convictions, rendering him a persistent felony offender as defined by N.Y. Penal Law § 70.10(1)(a).
When the court sentenced the defendant on January 30, 2003, the court found that the petitioner qualified as a persistent felony offender, reviewed his criminal history, and concluded that his history and character and the nature and circumstances of his criminal conduct warranted extended incarceration and lifetime supervision. The court explained that it relied on the extensive number of his prior convictions, the fact that he repeated the same sorts of theft crimes at the same location, and the court's conclusion that he was beyond rehabilitation and would continue to steal "as long as he is physically able." (See PA 154-161.) Specifically, the court stated:
The [petitioner] has twelve theft related misdemeanor convictions in New York City alone. . . . He also has three theft related felony convictions between 1990 and 1999 in New York City, not including this one. . . . Before he came to New York City, he was arrested fifty-seven times, as I said earlier, in various states for just about every crime imaginable. . . . After he is released from committing one crime he seems to go right back and commit another crime and is brought back to jail. On his New York record alone, not even considering anything he `did before he came to this city, he should receive a lifetime supervision sentence. In my judgment he is far beyond any rehabilitation and as long as he is physically able to steal, he will. This is someone who is not going to stop committing crimes.
(PA 161.) The court sentenced the petitioner, who was 58 years old, to an indeterminate term of twenty years to' life imprisonment.
B.
On appeal to the Appellate Division, First Department, the petitioner argued (i) that the trial court improperly prohibited defense counsel from arguing in summation that the petitioner had merely found the wallet, not taken it from Carelis, (ii) that his sentence was unconstitutional because it was enhanced beyond the prescribed statutory range based on factual findings by the court that were not submitted to the jury or found beyond a reasonable doubt, and (iii) that his sentence was excessive. On August 4, 2005, the Appellate Division affirmed the conviction but modified the sentence to fifteen years to life in the interest of justice. See People v. Washington, 21 A.D.3d 253, 799 N.Y.S.2d 217, 217 (App.Div.2005). The Appellate Division agreed with the trial court that it was speculative to argue that the wallet fell out of the victim's pocket, and that the defense had been able to make essentially the same argument in any event, so there was no denial of the right to counsel. Id. The Appellate Division cited the New York Court of Appeals decision in People v. Rivera, 5 N.Y.3d 61, 800 N.Y.S.2d 51, 833 N.E.2d 194 (2005), and its earlier decision in People v. Rosen, 96 N.Y.2d 329, 728 N.Y.S.2d 407, 752 N.E.2d 844 (2001), in finding that the persistent felony offender sentencing procedure was not unconstitutional. Washington, 799 N.Y.S.2d at 218.
The petitioner sought leave to appeal to the New York Court of Appeals, arguing *347 both that the restriction on defense summation denied his Sixth Amendment right to counsel and that his sentence was unconstitutional. The Court of Appeals denied leave on September 12, 2005. People v. Washington, 5 N.Y.3d 834, 804 N.Y.S.2d 48, 837 N.E.2d 747 (2005) (table). The petitioner sought a writ of certiorari from the United States Supreme Court only on the Apprendi sentencing question, but the Court denied certiorari on January 9, 2006. Washington v. New York, 546 U.S. 1104, 126 S. Ct. 1047, 163 L. Ed. 2d 878 (2006) (table).
This petition was filed on March 29, 2006. The Court held oral argument on the petition on May 8, 2007 and took the matter under advisement at that time.
II.
In this petition, the petitioner argues (i) that the trial court improperly limited defense counsel's summation, denying the petitioner his Sixth Amendment right to the assistance of counsel, and (ii) that his sentence as a persistent felony offender was unconstitutional under the Apprendi line of cases.
It is apparent that the petitioner has exhausted these two claims because he pursued both claims all the way to the New York Court of. Appeals citing the relevant constitutional amendments and the leading Supreme Court cases on the issues at hand. He also timely filed his petition because it came within one year of the conclusion of certiorari proceedings in the United States Supreme Court. See Williams v. Artuz, 237 F.3d 147, 151 (2d Cir.2001).
Because a state court previously adjudicated the petitioner's claims on the merits, this Court evaluates the petitioner's claims using the deferential standard of review established by the Antiterrorism and Effective Death Penalty Act of 1996 ("AEDPA") and set forth in 28 U.S.C. § 2254(d). That section provides, in relevant part:
An application for a writ of habeas corpus on behalf of a person in custody pursuant to the judgment of a State court shall not be granted with respect to any claim that was adjudicated on the merits in State court proceedings unless the adjudication of the claim (1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States . . .
28 U.S.C. § 2254(d); see Williams v. Taylor, 529 U.S. 362, 402-03, 120 S. Ct. 1495, 146 L. Ed. 2d 389 (2000); Lynn v. Bliden, 443 F.3d 238, 245-47 (2d Cir.2006); Graham v. Lape, 476 F. Supp. 2d 399, 402 (S.D.N.Y.2007).
A state court decision is contrary to clearly established Federal law "if the state court arrives at a conclusion opposite to that reached by [the Supreme Court] on a question of law" or "if the state court confronts facts that are materially indistinguishable from a relevant Supreme Court precedent and arrives at a result opposite to" the Supreme Court's result. Williams, 529 U.S. at 405, 120 S. Ct. 1495.
A state court decision involves "an unreasonable application of . . . clearly established Federal law" when the state court "correctly identifies the governing legal rule but applies it unreasonably to the facts of a particular prisoner's case." Williams, 529 U.S. at 407-08, 120 S. Ct. 1495. To meet that standard, "the state court decision [must] be more than incorrect or erroneous;" it "must be objectively unreasonable." Lockyer v. Andrade, 538 U.S. 63, 75, 123 S. Ct. 1166, 155 L. Ed. 2d 144 (2003).
The petitioner's two claims are addressed in turn.
*348 III.
The petitioner first argues that the trial court's ruling precluding defense counsel from making the argument that the wallet fell out of Carelis's pocket and that the petitioner merely found it violated the petitioner's Sixth Amendment right to the assistance of counsel. He argues, that this ruling was an unreasonable application of clearly established federal law in light of Herring v. New York, 422 U.S. 853, 95 S. Ct. 2550, 45 L. Ed. 2d 593 (1975). This argument has no merit.
In Herring, the Supreme Court held that the complete denial of defense summation at the close of evidence in a criminal bench trial pursuant to a state statute giving the judge the right to deny summations was an unconstitutional denial of the right to assistance of counsel. Id. at 865, 95 S. Ct. 2550. But the court noted that while the judge cannot deny summation absolutely, he "must be and is given great latitude in controlling the duration and limiting the scope of closing summations. . . . He may ensure that argument does not stray unduly from the mark, or otherwise, impede the fair and orderly conduct of the trial. In all these respects he must have broad discretion." Id. at 862, 95 S. Ct. 2550. Because defense counsel presented a summation in this case but was merely precluded from making a speculative argument that Carelis's wallet fell out of his pocket, the court's ruling was not contrary to any clearly established Supreme Court holding on the basis of the Herring decision.
The petitioner also relies on cases from the Courts of Appeals for the Ninth Circuit and the D.C. Circuit that stand for the proposition that the right to assistance of counsel is denied when defense counsel is not allowed to make arguments relating to its main defense theory or a point essential to the defense. See United States v. Miguel, 338 F.3d 995, 1000-04 (9th Cir.2003); United States v. Kellington, 217 F.3d 1084, 1101 (9th Cir.2000); Conde v. Henry, 198 F.3d 734, 739 (9th Cir.1999); United States v. Sawyer, 443 F.2d 712, 713 (D.C.Cir. 1971). However, none of these decisions supports the petitioner's position.
In Sawyer, the Court of Appeals for the D.C. Circuit found that the trial judge erred in preventing defense counsel from explaining the legal difference between an "inference" and a "presumption" in a case where the prosecution asked the jury to infer that the defendant stole certain items that had previously been in a locked car. 443 F.2d at 713. However, the court found the error harmless because defense counsel was allowed to make effectively the same argument in a different form. See id. at 714 & n. 12.
Miguel was a felony murder case involving several friends who were outside a cabin when one of them shot a man who came out onto the cabin's porch. The physical evidence and the testimony of some participants placed the defendant Miguel and the shooter in different locations. When Miguel's counsel tried to argue in summation that another participant might have fired the gun, the trial judge precluded the argument, finding that there was not "a shred, of evidence" to support the idea that anyone other than Miguel fired the gun. Miguel, 338 F.3d at 997-98, 999. The Ninth Circuit Court of Appeals found this ruling to be in error, and grounds for reversal, because the physical evidence and testimony allowed a permissible inference that would support the defense theory. Id. at 1001-02.
The Miguel decision cited Kellington, in which the Ninth Circuit Court of Appeals held that a trial judge erred in preventing the defense from arguing the importance of a legal ethics expert's testimony to the defense of an attorney charged with obstruction *349 of justice. The court found that the legal ethics expert's testimony was "obviously relevant to negate criminal intent," and it therefore held that the defendant's right to the assistance of counsel was violated. 217 F.3d at 1090-91, 1099-01.
The Conde case involved a defendant convicted of kidnapping to commit robbery because he held a former coworker in her car and used her keys to steal from a restaurant. 198 F.3d at 736-37. The trial judge precluded the defense from arguing that there was no robbery or intent to rob because the restaurant money was not on the kidnapping victim's person or under her control. Id. at 738. On habeas review, the Ninth Circuit Court of Appeals found that this limitation on argument denied the defendant his right to assistance of counsel because it precluded his attorney from arguing the defense theory of the case and it relieved the prosecution of its burden of proving its case beyond a reasonable doubt. Id. at 739.
In contrast to these cases, the petitioner's trial court only prevented his counsel from making a factual assertion that Carelis's wallet could have fallen out of his pocket because there was no evidence to support that factual assertion in the record and it was therefore mere speculation. The trial court correctly instructed the jury that it was not permitted to speculate and that its own recollection of the evidence governed. (PA 79.) The lack of evidence that the wallet fell from Carelis's pocket is in contrast to the Miguel case, where the combination of testimony regarding the defendant's position and physical evidence of a shell casing supported the defendant's contention that someone else fired the gun. This case is more akin to United States v. Bautista, 252 F.3d 141 (2d Cir.2001) (per curiam), in which the Court of Appeals for the Second Circuit found no abuse of discretion when the trial judge sustained objections to defense counsel's speculative argument that the lack of certain evidence in the case meant that such evidence did not exist. See id. at 144-45.
Moreover, the trial court in this case ultimately did not prevent the petitioner's trial counsel from arguing that the petitioner "found" the wallet. For example, defense counsel presented this theory without objection by asking the jury whether it was "reasonable to believe that [the petitioner] returned the wallet and he did so because he found it." (PA 81.) Defense counsel also argued without objection that Carelis "can't tell you for sure whether his wallet came out of his pocket at that moment." (Id. at 78.) The petitioner therefore was not prevented from presenting his defense theory to the jury, in contrast to Kellington and Conde. Cf. Sawyer, 443 F.2d at 714 (finding no prejudice to the defendant because his counsel "subsequently made the argument in a form that the trial court found acceptable").
Therefore, the cases the petitioner relies on do not support a finding that the trial court's response to an objection during defense summation was either "contrary to, or involved an unreasonable application of, clearly established Federal law." The trial court's limitation of defense summation was well within its "broad discretion" and consistent with the "great latitude" it is given to limit the scope, of closing summations. Herring, 422 U.S. at 862, 95 S. Ct. 2550.
IV.
The petitioner next argues that his sentence pursuant to New York's persistent felony offender statute, N.Y. Penal Law § 70.10, constituted an unconstitutional denial of his right to a jury trial *350 under the Sixth and Fourteenth Amendments under Apprendi and its progeny. In particular, he argues that the statute's requirement that the sentencing judge be "of the opinion that the history and character of the defendant and the nature and circumstances of his criminal conduct indicate that extended incarceration and lifetime supervision will best serve the public interest" before imposing an enhanced sentence shows that the enhanced sentence could not be imposed unless the sentencing court made some additional findings that were not submitted to the jury. N.Y. Penal Law § 70.10(2).
After this petition was fully briefed the Court has had the opportunity to consider the United States Supreme Court's recent decisions in Cunningham v. California, ___ U.S. ___, 127 S. Ct. 856, 166 L. Ed. 2d 856 (2007), and Rita v. United States, ___ U.S. ___, 127 S. Ct. 2456, 168 L. Ed. 2d 203 (2007), as well as recent decisions of district courts in this circuit confronting the same question, including Judge Gleeson's grant of a writ of habeas corpus in Portalatin v. Graham, 478 F. Supp. 2d 385 (E.D.N.Y.2007),[1] and Judge Sweet's, denial of habeas relief in, Morris v. Artus, 06 Civ. 4095, 2007 WL 2200699 (S.D.N.Y. July 30, 2007). While Cunningham and Rita were decided after the relevant state court decisions in this case they provide helpful guidance on how the Supreme Court characterizes the law established in its prior decisions that existed at the time of the state court decisions in this case.
A.
At the time the Appellate Division affirmed the petitioner's conviction and modified his sentence and at the time his conviction became final, Apprendi and Ring, as well as Blakely v. Washington, 542 U.S. 296, 124 S. Ct. 2531, 159 L. Ed. 2d 403 (2004), and United States v. Booker, 543 U.S. 220, 125 S. Ct. 738, 160 L. Ed. 2d 621 (2005), had all been decided. Therefore, each of these decisions is relevant to determining the "clearly established Federal law, as determined by the Supreme Court of the United States," against which the petitioner's sentence must be judged.[2] This chronology is important because the Court of Appeals for the Second Circuit has previously denied habeas challenges to the constitutionality of New York's persistent felony offender statute, but those challenges arose in cases where the court had occasion to consider only Apprendi, see Brown v. Greiner, 409 F.3d 523, 533 n. 3 (2d Cir.2005) ("Brown I"), or only Apprendi and Ring, see Brown v. Miller, 451 F.3d 54, 57 n. 1 (2d Cir.2006) ("Brown II"), for the purpose of determining the contemporaneous "clearly established Federal law, as determined by the Supreme Court." This Court is bound by the conclusion of the Court of Appeals in Brown I and Brown II that New York's persistent felony offender statute was not contrary to or an unreasonable application of federal law as it existed after Apprendi and Ring were decided but before Blakely was decided. However, because the Court of Appeals for the Second Circuit did not consider the effect of either Blakely or Booker in *351 either Brown I or Brown II, those decisions do not require the denial of the petitioner's Apprendi claim. See Brown II, 451 F.3d at 59 n. 3; Brown I, 409 F.3d at 533 n. 3.
A review of the Apprendi line of cases through Booker is thus in order. The Apprendi Court held that "[o]ther than the fact of a prior conviction, any fact that increases the penalty for a crime beyond the prescribed statutory maximum must be submitted to a jury, and proved beyond a reasonable doubt." 530 U.S. at 490, 120 S. Ct. 2348. The Court found unconstitutional a New Jersey "hate crime" sentencing statute that provided an extended term of imprisonment where a judge found, by a preponderance of the evidence, that the criminal had "acted with a purpose to intimidate an individual or group of individuals because of race, color, gender, handicap, religion, sexual orientation or ethnicity." Id. at 468-69, 120 S. Ct. 2348. The Court noted that, in determining whether a finding left to the judge is an "element" of the offense or a "sentencing factor," "the relevant inquiry is one not of form, but of effect does the required finding expose the defendant to a greater punishment than that authorized by the jury's guilty verdict?" Id. at 494, 120 S. Ct. 2348; see also id. at 494 n. 19, 120 S. Ct. 2348 ("[W]hen the term `sentence enhancement' is used to describe an increase beyond the maximum authorized statutory sentence, it is the functional equivalent of an element of a greater offense than the one covered by the jury's guilty verdict."). The Court also stated that "nothing in [the history of the common law of sentencing] suggests that it is impermissible for judges to exercise discretion taking into consideration various facts relating both to offense and offender in imposing a judgment within the range prescribed by statute." Id. at 481, 120 S. Ct. 2348.
In 2002, Ring expanded upon the Apprendi rule by finding unconstitutional the Arizona sentencing scheme for capital defendants that set death as the statutory maximum penalty for first-degree murder but allowed a judge to sentence a defendant to death only after determining the presence of an enumerated "aggravating circumstance" at a sentencing hearing. Ring, 536 U.S. at 609, 122 S. Ct. 2428. The sentencing judge in Ring's case had found that Ring committed felony murder (as found by the jury) in expectation of something of pecuniary value and in an especially heinous, cruel or depraved manner two of the statutorily enumerated aggravating circumstances. Id. at 594-95, 122 S. Ct. 2428. The Court held: "Because Arizona's enumerated aggravating factors operate as the functional equivalent of an element of a greater offense,' the Sixth Amendment requires that they be found by a jury." Id. at 609, 122 S. Ct. 2428 (quoting Apprendi, 530 U.S. at 494 n. 19, 120 S. Ct. 2348).
In 2004, Blakely clarified the Apprendi rule still further by holding that Washington State's sentencing regime was unconstitutional because it authorized a certain sentencing range based only on the jury's findings and a potentially higher range if the judge found "substantial and compelling reasons justifying an exceptional sentence." Blakely, 542 U.S. at 299, 305, 124 S. Ct. 2531. The sentencing statute listed certain aggravating factors justifying an exceptional sentence, but the list was illustrative rather than exhaustive. Id. at 299, 124 S. Ct. 2531. The Court found that for Apprendi purposes, "the relevant `statutory maximum' is not the maximum sentence a judge may impose after finding additional facts, but the maximum he may impose without any additional findings." Id. at 303-04, 124 S. Ct. 2531. The existing statutory regime did not allow a higher sentence *352 based only on the jury's findings, but rather required the judge to justify the enhancement based on factors "other than those which are used in computing the standard range sentence for the offense." Id. at 304, 124 S. Ct. 2531 (quoting State v. Gore, 143 Wash.2d 288, 21 P.3d 262, 277 (2001)). The Court observed:
Whether the judge's authority to impose an enhanced sentence depends on finding a specified fact (as in Apprendi), one of several specified facts (as in Ring), or any aggravating fact (as here), it remains the case that the jury's verdict alone does not authorize the sentence. The judge acquires that authority only upon finding some additional fact.
Id. at 305, 124 S. Ct. 2531. Any such additional factfinding by the judge even generalized factfinding that is required to impose an enhanced sentence is thus unconstitutional after Blakely.
Booker followed in 2005, holding that the Sixth Amendment applied to the Federal Sentencing Guidelines and therefore concluding that the provisions making the Guidelines mandatory should be excised, rendering the Guidelines advisory. See United States v. Booker, 543 U.S. 220, 226-27, 245-46, 125 S. Ct. 738, 160 L. Ed. 2d 621 (2005). By making the Guidelines advisory, the Court eliminated the requirement that a judge rather than a jury find the facts required to trigger Guideline ranges:within broader maxima and minima that were specified by statute.
Recently, in Cunningham, the Court invalidated California's determinate sentencing law ("DSL"), which established for most crimes three sentencing terms, with a sentence in the "upper term" only authorized when the judge, by a preponderance of the evidence, found "circumstances of aggravation," meaning "facts which justify the imposition of the upper prison term." Cunningham v. California, ___ U.S. ___, ___, 127 S. Ct. 856, 860, 862, 166 L. Ed. 2d 856 (2007).[3] Rules adopted by the state's Judicial Council to guide judges' discretion provided a nonexhaustive list of aggravating circumstances such as "[f]acts relating to the crime," "[f]acts relating to the defendant," and "[a]ny other facts statutorily declared to be circumstances in aggravation"; the Rules required that "a fact that is an element of the crime shall not be used to impose the upper term." Id. at 862 (quoting Judicial Council Rules 4.421(a), 4.421(b), 4.421(c), and 4.420(d)); see also id. at 862 n. 4 (explaining composition and authority of the Judicial Council).
The Cunningham Court overruled the California Supreme Court's decision in People v. Black, 35 Cal. 4th 1238, 29 Cal. Rptr. 3d 740, 113 P.3d 534 (2005), and held that, because the DSL required the middle term to be imposed unless the judge found an aggravating circumstance beyond the elements of the charged offense, the middle term was the statutory maximum for Apprendi `purposes and any sentence above the middle term violated "Apprendi' bright-line rule." Id. at 868-71. The Court specifically rejected California's argument that the DSL merely provided judges with the power to engage in the discretionary fact finding "that traditionally *353 has been incident to the judge's selection of an appropriate sentence within a statutorily prescribed sentencing range." Id. at 868 (quoting Black, 29 Cal. Rptr. 3d 740, 113 P.3d at 543). The Court relied primarily on the Blakely decision in explaining why the upper term in the California sentencing regime could not be the statutory maximum, and it distinguished the California sentencing regime from the post-Booker federal sentencing regime under the merely advisory Federal Sentencing Guidelines. See id. at 868-70. The Court also quoted Blakely to suggest that Apprendi had established a "bright-line rule" that the California Supreme Court had failed to follow. Id. at 869 (quoting Blakely, 542 U.S. at 307-08, 124 S. Ct. 2531).
Most recently, in Rita the Supreme Court held that it was not a violation of the Sixth Amendment right to a jury trial for a Court of Appeals to consider an applicable Federal Sentencing Guideline Range to be presumptively reasonable. For this case, the significance of Rita is its reiteration of the Supreme Court's view of its holding in Blakely:
The Sixth Amendment question, the Court has said, is whether the law forbids a judge to increase "a defendant's sentence unless the judge finds facts that the jury did not find (and the offender did not concede). Blakely, supra, at 303-304, 542 U.S. 296, 124 S. Ct. 2531, 159 L.E d.2d 403 ("When a judge inflicts punishment that the jury's verdict alone does not allow, the jury has not found all the facts which the law makes essential to the punishment and the judge exceeds his proper authority" (internal quotation marks and citation omitted)); see Cunningham, supra, at ___, 127 S.Ct., at 865, 866 (discussing Blakely) ("The judge could not have sentenced Blakely above the standard range without finding the additional fact of `deliberate cruelty," "[b]ecause the judge in Blakely's case could not have imposed a sentence outside the standard range without finding an additional fact, the top of that range . . . was the relevant" maximum sentence for Sixth Amendment purposes) . . .
Rita, 127 S.Ct. at 2466.
B.
New York's persistent felony offender law comprises two subsections. First, N.Y. Penal Law § 70.10(1) defines a "persistent felony offender" as "a person, other than a persistent violent felony offender as defined in section 70.08, who stands convicted of a felony after having previously been convicted of two or more felonies." Next, subsection (2), specifies the conditions under which a sentencing court can impose an enhanced sentence. It provides as follows:
When the court has found, pursuant to the provisions of the criminal procedure law, that a person is a persistent felony offender, and when it is of the opinion that the history and character of the defendant and the nature and circumstances of his criminal conduct indicate that extended incarceration and lifetime supervision will best serve the public interest, the court, in lieu of imposing the sentence of imprisonment authorized by section 70.00, 70.02, 70.04 or 70.06 for the crime of which such person presently stands convicted, may impose the sentence of imprisonment authorized by that section for a class A-I felony. In such event the reasons for the court's opinion shall be set forth in the record.
N.Y. Penal Law § 70.10(2). The second subsection distinguishes the persistent felony offender law from New York's persistent violent felony offender law, which states that the court "must impose" an *354 enhanced sentence when it finds that the defendant is a persistent violent felony offender. N.Y. Penal Law § 70.08(2). The persistent violent felony offender statute also differs from the persistent felony offender law at issue in this case in that the persistent violent felony offender law requires only that the defendant be convicted of a violent felony offense "after having previously been subjected to two or more predicate violent felony convictions." N.Y. Penal Law § 70.08(1)(a). In other words, a defendant convicted of a violent felony offense must be sentenced as a persistent violent felony offender solely upon a finding of the fact that the defendant has previously been convicted of two prior violent felony offenses.
New York Criminal Procedure Law § 400.20 establishes the procedures, incorporated by reference in N.Y. Penal Law § 70.10(2), which a judge must follow to impose a persistent felony offender sentence. See N.Y.Crim. Proc. Law § 400.20(1). It provides in part:
Such sentence may not be imposed unless, based upon evidence in the record of a hearing held pursuant to this section, the court (a) has found that the defendant is a persistent felony offender as defined in subdivision one of section 70.20 of the penal law, and (b) is of the opinion that the history and character of the defendant and the nature and circumstances of his criminal conduct are such that extended incarceration and lifetime supervision of the defendant are warranted to best serve the public interest.
N.Y.Crim. Proc. Law § 400.20(1). The procedural statute provides further details for how the court must conduct the required hearing, see id. § 400.20(2)-(4), and it specifies that the prosecution bears the burden of proof at the hearing and that "[m]atters pertaining to the defendant's history and character and the nature and circumstances of his criminal conduct may be established by any relevant evidence, not legally privileged, regardless of admissibility under the exclusionary rules of evidence, and the standard of proof with respect to such matters shall be a preponderance of the evidence." Id. § 400.20(5). Additional procedures are specified for cases where the defendant controverts allegations relating to his background and prior criminal conduct. See id. § 400.20(8)-(9). Finally, the judge may terminate the persistent felony offender hearing at any time without making any finding, in which event the defendant "may not be sentenced as a persistent felony offender." § 400.20(10).
The New York Court of Appeals has interpreted the persistent felony offender statute in two recent opinions, People v. Rosen, 96 N.Y.2d 329, 728 N.Y.S.2d 407, 752 N.E .2d 844 (2001), and People v. Rivera, 5 N.Y.3d 61, 800 N.Y.S.2d 51, 833 N.E.2d 194 (2005), which are discussed in detail below. In each decision, the court evaluated the constitutionality of the statute in light of the Apprendi line of Supreme Court authority. This Court is bound by the New York Court of Appeals' interpretation of New York statutes, see Johnson v. Fankell, 520 U.S. 911, 916, 117 S. Ct. 1800, 138 L. Ed. 2d 108 (1997) ("Neither this Court nor any other federal tribunal has any authority to place a construction on a state statute different from the one rendered by the highest court of the State."); see also Mullaney v. Wilbur, 421 U.S. 684, 691, 95 S. Ct. 1881, 44 L. Ed. 2d 508 (1975). However, the highest state court's determination whether a statute (as construed) complies with the federal constitution is not immune from review; this Court examines the state court's interpretation of federal constitutional law through the deferential lens provided by AEDPA. In other words, the New York *355 Court of Appeals' view of what the persistent felony offender law provides is definitive, but its conclusion about its constitutionality need not be so.
1.
In Rosen, a defendant convicted of first degree sexual abuse and endangering the welfare of a child challenged his sentence of twenty-five years to life imprisonment as a persistent' felony offender in light of Apprendi. The New York Court, of Appeals distinguished the case from Apprendi because in Rosen "it was `defendant's prior felony convictions an explicitly noted exception to the general rule in Apprendi that initially subjected defendant to enhanced sentencing." Rosen, 728 N.Y.S.2d 407, 752 N.E.2d at 847. The court noted that only after the defendant was established to be a twice prior convicted felon did the sentencing court, based on a preponderance of the evidence, review "`[m]atters pertaining to the defendant's history and character and the nature and circumstances of his criminal conduct' . . . to determine whether actually to issue an enhanced sentence." Id. at 847 (quoting N.Y.Crim. Proc. Law § 400.20(5)). It further noted, "[i]t is clear from the . . . statutory framework that the prior felony convictions are the sole determinate of whether a defendant is subject to enhanced sentencing as a persistent felony offender," and that in considering whether other factors justify the enhanced sentence the court is merely "fulfilling its traditional role giving due consideration to agreed-upon factors in determining an appropriate sentence within the permissible statutory range." Id. The court did not dispute that a judge had to carry out the second task in order to impose an enhanced sentence, although it deemed that task a traditional exercise of discretion. The court concluded that the persistent felony offender statute was not problematic under Apprendi.[4]
2.
More recently, after the Supreme Court had decided Ring, Blakely, and Booker, the New York Court of Appeals revisited its Rosen holding in Rivera.[5] The court upheld Rosen, but added to its analysis. The court reiterated its view that a sentencing judge's finding of two or more prior felony convictions, which is clearly permitted under the Apprendi exception, *356 is the "sole determinant of whether a defendant is subject to recidivist sentencing." Rivera, 800 N.Y.S.2d 51, 833 N.E.2d at 197. The second prong of N.Y. Penal Law § 70.10, the court found, merely allows "the exercise of judicial discretion characteristic of indeterminate sentencing schemes." 800 N.Y.S.2d 51, 833 N.E.2d at 197-98. "Under our interpretation of the relevant statutes, defendants are eligible for persistent felony offender sentencing based solely on whether they had two prior felony convictions. Thus, as we held in Rosen, no further findings are required." Id. at 198. In an alternative formulation, the court stated that "the predicate felonies are both necessary and sufficient conditions for imposition of the authorized sentence for recidivism." Id. at 199.
While the plain language of N.Y.Crim. Proc. Law § 400.20 requires the judge to make certain findings before imposing an enhanced sentence, the Rivera court found that this procedural law "implements, but does not change, the Penal Law § 70.10 definition of who is and may be sentenced as a persistent felony offender." Id. at 198. In other words:
Criminal Procedure Law § 400.20, by authorizing a hearing on facts relating to the defendant's history and character, does not grant defendants a legal entitlement to have those facts receive controlling weight in influencing the court's opinion. The statutory language requiring the sentencing court to consider the specified factors and to articulate the reason for the chosen sentence grants defendants a right to an airing and an explanation, not a result.
Id. at 199. In characterizing the procedural statute this way, the court drew an analogy to the federal sentencing statute, which after the Booker remedial ruling still requires federal sentencing courts to consider various factors, including "the history and characteristics of the defendant." Id. (citing 18 U.S.C. § 3553(a)(1)). The court thus found that a defendant who has been adjudicated as a persistent felony offender "has a statutory right to present evidence that might influence the court to exercise its discretion to hand down a sentence as if no recidivism finding existed, while the People retain the burden to show that the defendant deserves the higher sentence." Id.
The court also found that the requirement to articulate findings with respect to the history and character of the defendant and the nature and circumstances of his criminal conduct merely serves to aid the Appellate Division's judicial review of sentences for undue harshness in the interest of justice. Id. at 199-200; see also id. at 200 n. 7 (noting that "there appears to be no analogue in the federal judiciary to our Appellate Division's authority to vacate or modify a sentence based on the interest of justice as opposed to on the law"). The court described the nature of that judicial review as follows: "[O]nce a defendant is adjudged a persistent felony offender, a recidivism sentence cannot be held erroneous as a matter of law, unless the sentencing court acts arbitrarily or irrationally." Id. at 199.
The court explained its understanding of the practical effect of the persistent felony offender statute and the associated procedural law:
If; for example, a defendant had an especially long and disturbing history of criminal convictions, a persistent felony offender sentence might well be within the trial justice's discretion even with no further factual findings. Once the defendant is adjudicated a persistent felony offender, the requirement that the sentencing justice reach an opinion as to the defendant's history and character is *357 merely another way of saying that the court should exercise its discretion.
Id. at 201.[6]
C.
As noted above, the Second Circuit Court of Appeals decisions in Brown I and Brown II concluded that New York's persistent felony offender statute was neither contrary to nor an unreasonable application of clearly established federal law as it existed after Ring was decided, but they did not address whether Blakely or Booker further clarified federal law in a way that would change this conclusion. Furthermore, neither decision reviewed the New York statute in view of the gloss given to it by the New York Court of Appeals in Rivera. See, e.g., Brown II, 451 F.3d at 59 n. 3.
Two district courts in this circuit recently have considered habeas challenges to New York's persistent felony offender statute in exactly the same chronological context that applies to the present petition namely, they reviewed sentences that became final after Booker and after the Rivera decision construed the statute.[7]
In Portalatin, Judge Gleeson granted habeas relief to a prisoner sentenced under the statute. He found that Rivera "leaves all of §§ 70.10 and 400.20 intact" and thus failed to remove the factfinding requirement embodied in N.Y.Crim. Proc. Law § 400.20(9), which provides that in order to impose an enhanced sentence, the court "must . . . make such findings of fact as it deems relevant to the question of whether a persistent felony offender sentence *358 is warranted." Portalatin, 478 F.Supp.2d at 403 (quoting N.Y.Crim. Proc. Law § 400.20(9)) (emphasis added). He rejected two arguments the Rivera decision made to explain this requirement away. First, he rejected Rivera's explanation that the factfinding was required only to assist the appellate review process, finding that "[i]t elevates form over substance to assert that the findings are required to facilitate appellate review but not to impose the sentence to begin with." Id. at 403. Second, he rejected Rivera's perpetuation of the distinction drawn earlier in Rosen between the kinds of facts necessary to impose sentences under the regimes the Supreme Court rejected in Apprendi, Ring, Blakely, and Booker, and the mere exercise of the "traditional discretionary sentencing role" that judges have always performed. Id. at 404 & n. 17. "No matter how distant the facts at issue may be from the elements of the offense or their `functional equivalents,' and no matter how `holistic' or `amorphous' the inquiry may be, if the sentencing court's authority to impose a persistent felony offender sentence is conditioned on factfinding that must be made by the court, such sentences cannot withstand Sixth Amendment scrutiny." Id. at 404.
Finally, Judge Gleeson found a "critical dissimilarity" between New York's sentencing regime and the post-Booker federal sentencing regime in that the New York statutes still condition an enhanced sentence on judicial factfinding rather than mere consideration of factors by the sentencing judge. Id. at 404-05. Hence, despite Rivera's description of the persistent felony offender law, Judge Gleeson found that its effect was contrary to clearly established federal law and an "unreasonable application of the Apprendi rule" in light of Blakely and Booker. Id. at 406.
In contrast, Judge Sweet denied habeas relief in Morris, 2007 WL 2200699 at *1. He found that Rivera's construction of the persistent felony offender law took it "out of the zone of the Sixth Amendment" because once a defendant is found to meet the statutory definition of a persistent felony offender, "the prescribed statutory maximum for Apprendi purposes becomes life imprisonment." Id. at *9. The second prong of the statute merely "constitutes the sentencing judge's exercise of her discretion to sentence the defendant within the expanded statutory range and requires that the sentencing judge state her reasoning for imposing the particular sentence." Id. Moreover, Judge Sweet agreed with several other courts that have concluded that "Blakely does not materially change the factfinding analysis," and therefore nothing in Blakely disturbs the Court of Appeals for the Second Circuit's view that the persistent felony offender law survives habeas review under Apprendi and Ring. Id. at *8.
D.
Having carefully considered the abundant authority discussed above, including the Supreme Court's holdings from Apprendi through Booker and the New York Court of Appeals' construction of the persistent felony offender law in Rivera, the Court concludes that the recidivist sentencing regime is both contrary to and an unreasonable application of clearly established federal law.
The Apprendi rule requires a definition of the boundary between "factfinding" necessary to impose a sentence under a given statutory regime and the exercise of judicial discretion to select a sentence within a statutorily defined range. The breadth of the factfinding prohibited by Apprendi in the sentencing process was somewhat unclear for years after that decision. Indeed *359 the Courts of Appeals uniformly held prior to Blakely that Apprendi did not render the mandatory Federal Sentencing Guidelines unconstitutional. See, e.g., United States v. Penaranda, 375 F.3d 238, 243 & n. 5 (2d Cir.2004), (en banc) (noting that "we have understood Apprendi to be limited, as the majority opinion in that case states, to `any fact that increases the penalty for a crime beyond the prescribed statutory maximum,' . . . and therefore have not required that any fact-finding necessary for application of the Guidelines be done by a jury. All other circuits have adopted a similar understanding of Apprendi" and collecting cases). The Supreme Court, based specifically on Blakely, then found the Federal Sentencing Guidelines to be unconstitutional in Booker to the extent that they were mandatory. In Blakely, the Supreme Court did more than repeat the holding of Apprendi. It clarified that the rule precluded an enhanced sentence conditioned on "any aggravating fact" found by the judge rather than jury, not just a "specified fact (as in Apprendi), [or] one of several specified facts (as in Ring)." Blakely, 542 U.S. at 305, 124 S. Ct. 2531; see also Cunningham, 127 S.Ct. at 869 ("We cautioned in Blakely, however, that broad discretion to decide what facts may support an enhanced sentence, or to determine whether an enhanced sentence is warranted in any particular case, does not shield a sentencing system from the force of our decisions."). The Court further explained that describing such a necessary finding of fact as an act of judicial discretion could not rescue it from the Apprendi rule: "Whether the judicially determined facts require a sentence enhancement or merely allow it, the verdict alone does not authorize the sentence." Id. at 305 n. 8, 120 S. Ct. 2348. Hence, at least after Blakely, Supreme Court precedents clearly show that a sentence that would not be statutorily authorized but for the finding of some aggravating fact, no matter how generalized or "amorphous," Brown I, 409 F.2d at 534, by a judge rather than a jury, is contrary to the Sixth Amendment right to a jury trial.[8]
It is exactly this sort of generalized finding of aggravating facts and circumstances that the New York persistent felony offender law requires the judge, rather than the jury, to perform before imposing an enhanced sentence. The New York Court of Appeals at several points in its Rivera decision states that a judicial finding of two prior felony convictions is alone sufficient to trigger an enhanced sentence under N.Y. Penal Law § 70.10. E.g., Rivera, 800 N.Y.S.2d 51, 833 N.E.2d at 199 ("As we explained in Rosen, the predicate felonies are both necessary and sufficient conditions for imposition of the authorized sentence for recidivism. . . ."); id. at 197 ("[T]he prior felony convictions are the sole determinant of whether is defendant is subject to recidivist sentencing. . . ."). But, in this instance at least, the general conclusion did not alter the requirements of the statute.
For, as Judge Gleeson correctly recognized, the New York Court of Appeals did not excise any requirements of N.Y. Penal Law § 70.10 or of N.Y.Crim. Proc. Law § 400.200. Portalatin, 478 F.Supp.2d at 403. It therefore did not remove the second requirement that an enhanced sentence "may not be imposed unless . . . the court . . . is of the opinion that the history and character of the defendant and the nature and circumstances of his criminal conduct are such that extended incarceration *360 and lifetime supervision of the defendant are warranted to best serve the public interest." N.Y.Crim. Proc. Law § 400.20(1); see also N.Y. Penal Law § 70.10(2). There can be no question after Blakely that such an "opinion" constitutes a proscribed judicial finding of aggravating facts, no matter how generalized, particularly in view of the procedural provisions imposing the burden of proof on the prosecution and specifying that such a "finding" "may be established by any relevant evidence" under a preponderance of the evidence standard. Id. § 400.20(5); see also Rivera, 800 N.Y.S.2d 51, 833 N.E.2d at 199 (noting burden of proof); id. at 203 (Kaye, C.J., dissenting) (noting that Blakely makes it clear that even an "opinion" required by statute constitutes a finding of fact). It is therefore no answer to describe the statutorily required finding as the mere "exercise of judicial discretion." Rivera, 800 N.Y.S.2d 51, 833 N.E.2d at 198.
The New York Court of Appeals' description of this requirement as an exercise aimed at developing the record for judicial review, see Rivera, 800 N.Y.S.2d 51, 833 N.E.2d at 200, is similarly insufficient because the requirement remains intact as a necessary step preceding the imposition of an enhanced sentence, and "the Apprendi principle . . . is one of effect, not form." Portalatin, 478 F.Supp.2d at 403.
It is clear, even after the Rivera decision, that before a persistent felony sentence is imposed the sentencing court must find two things. The court must find, first, that the defendant is a persistent felony offender because the defendant was convicted of a felony after having previously been convicted of two or more felonies. Second, the court must find that the sentencing court is of the opinion that the history and character of the defendant and the nature and circumstances of his criminal conduct indicate that extended incarceration and life-time supervision will best serve the public interest. N.Y. Penal Law § 70.10(2). It is not true that the finding of the two prior felony convictions is sufficient to trigger the ability of the court to sentence a defendant up to life imprisonment. Rather, the second finding is still necessary to open the possibility for the court to impose that enhanced sentence. As the Supreme Court recently explained in expounding on the holding in Blakely: "The Sixth Amendment question . . . is whether the law forbids a judge to increase a defendant's sentence unless the judge finds facts that the jury did not find (and the offender did not concede)." Rita, 127 S.Ct. at 2466 (citing Blakely). In this case, the sentencing court would have been forbidden under the Penal Law to impose a sentence in excess of four years unless the court found both the two prior convictions and the findings with respect to the defendant and his criminal conduct. The latter finding is precisely what the Supreme Court has determined the sentencing court cannot make in the absence of a jury finding or an admission by the defendant.
The concluding remarks of the Rivera majority in fact prove the point that more than a mere finding of two predicate felonies is required under the persistent felony, offender sentencing regime. The court notes that in a case involving a defendant with "an especially long and disturbing history of criminal convictions, a persistent felony offender sentence might well be within the trial justice's discretion even with no further factual findings." 800 N.Y.S.2d 51, 833 N.E.2d at 201. The example suggests that not only two predicate offenses, but also a "long and disturbing history" sufficient to satisfy the second prong of the sentencing court's analysis, would be necessary to justify the enhanced *361 sentence. In the court's example, it is not simply the fact of the prior convictions that triggers the possibility of imposing the enhanced sentence, but the nature of that criminal history. Of course, there may be other factors, apart from a lengthy and disturbing history of prior convictions, that could justify an enhanced sentence, but under the statute those facts must be found by the sentencing judge rather than a jury and it is the shift in factfinding from the jury to the judge for facts necessary to enhance the sentence that the Supreme Court has found to be unconstitutional.
Finally, the Court agrees with Judge Gleeson's conclusion that the judicial factfinding required at the second prong of analysis under the persistent felony offender law differs from the post-Booker federal sentencing regime, which requires the sentencing court to consider various factors including the history and characteristics of the defendant. See Portalatin, 478 F.Supp.2d at 404-05. The New York law does more than ask the sentencing judge to consider various factors; it requires a judicial factfinding based on those factors before imposing an enhanced sentence.
Because New York's persistent felony offender law requires the finding of aggravating facts, other than the finding of two predicate felonies, by the judge rather than the jury, the law is contrary to federal law clearly established in the holding of Blakely. Furthermore, the imposition of a sentence of fifteen years to life imprisonment in this case based on judicial factfinding, when the petitioner would otherwise have been subject to at most four years imprisonment as a class "E" second felony offender, constitutes an objectively unreasonable application of the Apprendi rule as it was clarified by Blakely and Booker.
CONCLUSION
For the reasons explained above, petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2254 is granted. The respondent is ordered to release the petitioner from custody unless within sixty (60) days of the date of this Opinion and Order, .the petitioner is resentenced by the New York State Supreme Court, New York County.
SO ORDERED.
NOTES
[1] The respondent filed a notice of appeal of the Portalatin decision on April 4, 2007, and the judgment is stayed pending appeal. See 478 F.Supp.2d at 407.
[2] The Supreme Court has given unclear guidance as to the precise time in the state court sentencing and appellate review process to which a federal court should look to assess what was "clearly established Federal law," but the Court of Appeals for the Second Circuit has indicated that the relevant time is either "the time [the petitioner's] state-court conviction became final" or "the time of the relevant state-court decision." Brown v. Greiner, 409 F.3d 523, 533 n. 3 (2d Cir.2005).
[3] Cunningham had not been decided at the " time the Appellate Division rendered its decision or when the petitioner's conviction became final, and it therefore does not fall within the spectrum of Supreme Court holdings that comprised "clearly existing Federal law, as determined by the Supreme Court," at the relevant time. Nonetheless, the Court is obligated to consider Cunningham to the extent that it applies or explains principles that were "clearly established" in previous Supreme Court cases. See Portalatin, 478 F.Supp.2d at 397 n. 10.
[4] In Brown I, the Court of Appeals, for the Second Circuit reversed grants of the writ of habeas corpus in two district court cases, including a habeas petition filed by the defendant in Rosen. See Brown I, 409 F.3d at 528-30, 535. The court found the New York Court of Appeals' holding was not contrary to or an unreasonable application of Apprendi. The court described the "second determination" under the persistent felony offender statute, i.e. the inquiry into "the history and character of the defendant and the nature and circumstances of his criminal conduct," as a "vague, amorphous assessment," and therefore found that the New York Court of Appeals' holding' that this exercise differed from the "precise finding of a specific fact, as in the cases culminating in Apprendi" passed muster under. AEDPA's deferential standard. Id. at 534-35, 120 S. Ct. 2348.
Brown II, which also considered the effect of Ring on the persistent felony offender law, similarly relied on the Rosen court's interpretation of the law, and it found that Ring did not change the outcome. See Brown II, 451 F.3d at 59. The Court of Appeals found that the statute at issue in Ring, like Apprendi, required the sentencing court to find "specified facts," and not the kind of "`amorphous' determination required by New York's statute." Id.
[5] Rivera represents the New York Court of Appeals' most recent interpretation of the persistent felony offender law. Because it was issued before and relied upon in the Appellate Division's review of the petitioner's appeal, see Washington, 799 N.Y.S.2d at 218, it is Rivera's interpretation of the New York statute that the Court must take as authoritative for the purposes of this petition.
[6] Two judges dissented from the majority opinion in Rivera. Chief Judge Kaye agreed that the statutory scheme would be constitutional if it were as the majority opinion described it, but she found that the plain language of the statute could not support the meaning the majority ascribed to it. 800 N.Y.S.2d 51, 833 N.E.2d at 202 (Kaye, C.J., dissenting). She noted that § 70.10 differs from New York's persistent violent felony offender statute, N.Y. Penal Law § 70.08, in that a finding that a defendant is a persistent felony offender is "necessary but not sufficient to render a defendant eligible for enhanced sentencing under CPL 400.20." Id. at 203 (emphasis added). Referring to the conjunctive "and" in § 400.20(1), Chief Judge Kaye could not "agree that the second prerequisite is merely optional." Id. She further found that the court could not evade Blakely by characterizing the second-prong factfinding as mere "opinion," because after Blakely any factfinding at all not left to the jury that is essential to the sentence is not constitutional. Id.
Chief Judge Kaye argued that the Rivera majority opinion reflected a change in New York law because, prior to the decision, the Appellate Division had regularly vacated enhanced sentences for failure to follow the procedures or make the findings required by § 400.20. Id. at 204. She also contended that the majority was wrong to imply that these vacaturs were made in the interest of justice because the decisions themselves often indicated that the sentence was being modified "on the laic" Id. She concluded:
By requiring that a court hold a hearing and make findings before it could impose a persistent felony sentence, the Legislature sought to limit the availability of enhanced punishment to a sub class of persistent offenders. Today, however, the majority announces that every three-time nonviolent felon is automatically eligible, without more, for a potential life sentence. That decision is for the Legislature, not the Court.
Id. at 205; see also id. at 205-10 (Ciparick; J., dissenting).
[7] Previously, several courts had concluded that the persistent felony offender statute survived habeas review even in light of Blakely. See Woods v. Haponick, 05 Civ. 4374, 2006 WL 2482022, at *10 n. 7 (E.D.N.Y. Aug.25, 2006) (adopted Report and Recommendation); Phillips v. Artus, 05 Civ. 7974, 2006 WL 1867386, at *6 (S.D.N.Y. June 30, 2006); Witherspoon v. Woods, 04 Civ. 5528, 2006 WL 721510, at *4 n. 2 (E.D.N.Y. March 6, 2006); Alston v. Woods, 04 Civ. 8017, 2005 WL 3312818, at *5 (S.D.N.Y. Dec.8, 2005) (Report and Recommendation).
[8] For this reason, the holdings of Brown I and Brown II do not dictate the outcome of the present petition. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2562998/ | 300 F. Supp. 2d 119 (2004)
Paul JUNG, M.D., et al., Plaintiffs,
v.
ASSOCIATION OF AMERICAN MEDICAL COLLEGES, et al., Defendants.
No. CIV.A.02-0873 PLF.
United States District Court, District of Columbia.
February 11, 2004.
*120 *121 *122 *123 *124 Ann D. White, Mager White & Goldstein LLP, Jenkintown, PA, Ann C. Yahner, Megan E. Jones, Richard A. Koffman, Cohen, Milstein, Hausfeld & Toll, PLLC, Joseph Martin Goldberg, Ammerman & Goldberg, Washington, DC, David E. Romine, Donald L. Perelman, Roberta D. Liebenberg, Fine, Kaplan and Black R.P.C., Philadelphia, PA, Mark A. Griffin, Raymond J. Farrow, Keller Rohrback LLP, Seattle, WA, Michael L. Goldberg, Paul & Janofsky, McLean, VA, Michael J. Kane, Mager White & Goldstein LLP, Jenkintown, PA, Susan B. White, Freedman Boyd Daniels Hollander Goldberg & Cline, P.A., Albuquerque, NM, for Plaintiffs.
Robert A. Burgoyne, Fulbright & Jaworski LLP, Frank R. Volpe, Sidley Austin Brown & Wood, Alicia Joyce Batts, Foley & Lardner, Stephen C. Leckar, Butera & Andrews, Paul A. Kaplan, Womble Carlyle Sandridge & Rice PLLC, Adrian Wager-Zito, Jones, Day, Reavis & Pogue, John E. Hall, Derek Ludwin, James R. Atwood, Covington & Burling, John David Taurman, Vinson & Elkins LLP, Kerry Alan Scanlon, Nicole Jelani Becton, Kay Scholer LLP, Edward Marcellus Williamson, Stephen J. Spiegelhalter, Latham & Watkins, Christopher H. Gordon, Amy L. Easton, Squire, Sanders & Dempsey, LLP, Frederick Robinson, Fulbright & Jaworski LLP, James Harris Sneed, Nicholas R. Koberstein, McDermott, Will & Emory, Fernando R. Laguarda, Mintz & Levin, Gerard P. Finn, Nora Cregan, Bingham McCutchen LLP, Robert Stephen Bennett, Skadden, Arps, Slate, Meagher & Flom LLP, Amy L. Bess, Sonnenschein Nath & Rosenthal, Carol Elder Bruce, Tighe Patton Armstrong Teasdale PLLC, Robert E. Bloch, Mayer, Brown, Rowe & Maw, Stephen M. Axinn, Axinn, Veltrop & Harkrider LLP, Washington, DC, Thomas Campbell, Roxane Busey, Peter Koch, Gardner, Carton & Douglas LLC, Jack R. Bierig, Sidley Austin Brown Wood, Shanna S. Williams, William K. McVisk, Johnson & Bell, Ltd., Gregory G. Wrobel, Vedder, Price, Kaufman & Kammholz, Stephen Jay Landes, Wildman, Harrold, Allen & Dixon, Chicago, IL, David B. Hamilton, Ober, *125 Kaler, Grimes & Shriver, Baltimore, MD, Peter A. Barile, III, Kaye Scholer LLP, New York, NY, J. Thomas Rosch, Lathan & Watkins, Los Angeles, CA, Claudia Y. Sanchez, Bingham McCutchen, LLP, San Francisco, CA, for Defendants.
OPINION
PAUL L. FRIEDMAN, District Judge.
Plaintiffs in this putative class action are medical school graduates currently or formerly enrolled in resident physician "residency" programs. The defendants can be categorized into two groups: the organizational defendants (organizations and associations that participate in the administration of graduate medical education in the United States) and the institutional defendants (universities, medical schools, foundations, hospitals, health systems and medical centers that sponsor medical residency programs). The defendants have filed three types of motions to dismiss: (1) motions to dismiss for lack of personal jurisdiction; (2) motions to dismiss for lack of subject matter jurisdiction and to compel arbitration; and (3) motions to dismiss for failure to state a claim upon which relief can be granted.
I. BACKGROUND
Plaintiffs filed suit charging that the defendants have violated Section 1 of the Sherman Act, 15 U.S.C. § 1. Plaintiffs allege that the defendants have contracted, combined and conspired among themselves to "displace competition in the recruitment, hiring, employment and compensation of resident physicians, and to impose a scheme of restraints which have the purpose and effect of fixing, artificially depressing, standardizing and stabilizing resident physician compensation and other terms of employment." Complaint ("Compl.") ¶ 2. Plaintiffs assert that there are three intertwining prongs to the antitrust conspiracy.
The first prong of the alleged conspiracy concerns the annual assignment of fourth-year medical students to the institutional defendants' residency programs by the National Resident Matching Program ("NRMP"). The NRMP, an Illinois not-for-profit corporation, is managed and operated by defendant American Association of Medical Colleges ("AAMC") from AAMC's principal office in Washington, D.C. See Compl. ¶ 15. The AAMC also is an Illinois not-for-profit corporation, whose membership includes all 125 accredited medical schools, including those medical schools named in the complaint, and approximately 375 major teaching hospitals and health systems, some of which also are named in the complaint. These hospitals and health systems are member hospitals of a subsection of the AAMC, the Council of Teaching Hospitals and Health Systems ("COTH") Section. See id. ¶ 17.
Plaintiffs allege that in order to effectuate the assignment, or the "Match," as it is commonly called, prospective medical residents enter into contracts with and submit to the NRMP a ranked list of desired medical resident positions with various institutions ("Student Match Contract"). The institutions themselves also enter into contracts with the NRMP and submit ranked lists of the medical students whom they are interested in hiring ("Institutional Match Contract"). On a date certain, the NRMP through an algorithm "matches" the students' lists against the institutions' rankings, resulting in the assignment of each prospective medical resident to one residency program. See Compl. ¶¶ 15, 83-86. Plaintiffs allege that this system eliminates a free and competitive market and substitutes a centralized, anticompetitive allocation system that assigns prospective resident physicians to a single, specific and *126 mandatory residency program. Plaintiffs further allege that defendants designed and implemented this system and collectively agree to comply with it in violation of the antitrust laws. See id. ¶ 83.
Several specific features of this assignment system allegedly serve to impose anticompetitive restraints on medical residency hiring. Plaintiffs allege that a medical student is required to enter into the Match if he or she wishes to gain employment in a residency program accredited by the Accreditation Council for Graduate Medical Education ("ACGME"). See Compl. ¶ 71. An individual's participation in an ACGME-accredited residency program in turn is allegedly a prerequisite for specialty certification upon completion of the residency by a member board of defendant American Board of Medical Specialties ("ABMS"), an Illinois not-for-profit corporation consisting of 24 recognized medical specialty certification boards. See id. ¶¶ 20, 69. Plaintiffs allege that eventual specialty certification by an ABMS board is considered critical to prospective residents inasmuch as they desire to be "certified" to practice within a specialty following the completion of their residencies. The practical effect of this structure, plaintiffs charge, is that the vast majority of medical students are compelled to participate in the Match, which is a substitute for all aspects of competitive individual negotiations and requires applicants to commit contractually to any assigned position as a condition of enrolling in the Match Program. See id. ¶¶ 69, 86. Furthermore, certain implementing policing mechanisms of the Match allegedly compel compliance with the foregoing restraints. These alleged mechanisms include the requirement that program participants immediately report suspected policy violations to the NRMP and advise the relevant organizational authorities of institution or resident physician violations. See id. ¶ 86(c).
In the second prong of the conspiracy, plaintiffs assert that certain aspects of the aforementioned ACGME accreditation standards, with which the institutional defendants allegedly voluntarily comply, function to further restrict residency employment. Specifically, plaintiffs allege that the ACGME (1) has the authority to regulate the number of employment positions in a residency program; (2) imposes substantial obstacles to the ability of a resident to transfer employment from one employer to another during the period of a residency, thereby effectively making NRMP assignments permanent for the duration of a residency; (3) encourages and/or requires participation in the Match by an institution as a condition of accreditation; and (4) directly reviews compensation and other terms of employment with the purposes of fixing and depressing them. See Compl. ¶ 88.
The third prong of the conspiracy concerns the exchange by defendants of information on resident compensation and other terms of employment through surveys and databases that plaintiffs allege has the purpose and effect of standardizing and stabilizing compensation and other terms of employment. See Compl. ¶¶ 73-82. This exchange allegedly occurs in two ways. First, the AAMC annually surveys members of its COTH Section seeking compensation levels for the employment year, aggregates the results into various categories and distributes its findings in an annual report (the "COTH Survey" or "Survey"). See id. ¶¶ 74-79. Second, hospitals and health systems access similar information through an electronic database known as the Fellowship and Residency Electronic Interactive Database ("FREIDA"), which is maintained by defendant American Medical Association ("AMA"). *127 See id. ¶ 80. Plaintiffs allege that this exchange of information allows institutional defendants to fix resident salaries and benefits each year at depressed, anticompetitive levels.
Plaintiffs charge that the execution of the Match program, the enforcement of the ACGME-accreditation standards, and the coordinated collection and distribution of residency program compensation information together produce a significant depression of residents' salaries and working conditions by removing residents' ability to achieve enhanced salaries and working conditions through competition. See Compl. ¶¶ 92-96. Plaintiffs allege that defendants have violated Section 1 of the Sherman Act by contracting, combining and conspiring to unreasonably restrain trade and commerce. Plaintiffs filed this antitrust action as a proposed class action and have moved to certify both plaintiff and defendant classes. See Motion for Class Certification, filed November 3, 2003.
II. DEFENDANTS' RULE 12(b)(2) MOTIONS TO DISMISS FOR LACK OF PERSONAL JURISDICTION
A. Rule 12(b)(2) Motions to Dismiss
Sixteen institutional defendants and two organizational defendants, the ABMS and the Council of Medical Specialty Societies ("CMSS"), filed motions to dismiss for lack of personal jurisdiction under Rule 12(b)(2) of the Federal Rules of Civil Procedure.[1] Plaintiffs argue that the Court has jurisdiction over these non-resident defendants on three separate bases: (1) jurisdiction under the District of Columbia long-arm statute; (2) jurisdiction under Section 12 of the Clayton Act, 15 U.S.C. § 22; and (3) jurisdiction pursuant to the long-arm statute under the "conspiracy jurisdiction" doctrine.
It is undisputed that plaintiffs bear the burden of establishing personal jurisdiction over each individual defendant and that in order to meet their burden, plaintiffs cannot rely on conclusory allegations. See GTE New Media Services Inc. v. Ameritech Corp., 21 F. Supp. 2d 27, 36 (D.D.C.1998), remanded on other grounds sub nom, GTE New Media Services Inc. v. BellSouth Corp., 199 F.3d 1343 (D.C.Cir.2000). Nor can plaintiffs aggregate factual allegations concerning multiple defendants in order to demonstrate personal jurisdiction over any individual defendant. See Rush v. Savchuk, 444 U.S. 320, 331-32, 100 S. Ct. 571, 62 L. Ed. 2d 516 (1980) (rejecting aggregation of co-defendants' forum contacts in determining personal jurisdiction because "the requirements of International Shoe must be met as to each defendant over whom a state court exercises jurisdiction"). In evaluating whether plaintiffs have established personal jurisdiction, the Court need not treat all of plaintiffs' allegations as true but instead "may receive and weigh affidavits and other relevant matter to assist in determining the jurisdictional facts." United States v. Philip Morris Inc., 116 F. Supp. 2d 116, 120 n. 4 (D.D.C.2000).
In this instance, plaintiffs bear a special, higher burden in order to demonstrate jurisdiction because the parties have engaged *128 in jurisdictional discovery. "[A]lthough ordinarily a plaintiff need only establish a prima facie case that personal jurisdiction exists to survive a motion to dismiss, ... in situations where the parties are permitted to conduct discovery on the jurisdictional issue a plaintiff must prove personal jurisdiction by a preponderance of the evidence." Shapiro Lifschitz & Schram, P.C. v. Hazard, 24 F. Supp. 2d 66, 69 (D.D.C.1998). See also In re Vitamins Antitrust Litigation, 270 F. Supp. 2d 15, 20 (D.D.C.2003) (citing In re Vitamins Antitrust Litigation, Misc. No. 99-0197, 2001 U.S. Dist. LEXIS 25073, at *22 (D.D.C. Oct. 21, 2001)) ("Because plaintiffs have conducted jurisdictional discovery, they must establish personal jurisdiction over defendants by a preponderance of the evidence.").
B. Section 13-423(a): The District of Columbia Long-Arm Statute
Plaintiffs assert that the Court has personal jurisdiction over the moving defendants under three separate subsections of the District of Columbia long-arm statute, Sections 13-423(a)(1), (3) and (4). While the long-arm statute is interpreted broadly and factual disputes are resolved in favor of plaintiffs, plaintiffs must allege some specific facts evidencing purposeful activity by the defendants in the District of Columbia by which they invoked the benefits and protections of the District's laws. See Edmond v. United States Postal Service General Counsel, 949 F.2d 415, 428 (D.C.Cir.1991); First Chicago Int'l v. United Exchange Co., Ltd., 836 F.2d 1375, 1378 (D.C.Cir.1988); United States v. Philip Morris, Inc., 116 F.Supp.2d at 121. In addition, because a court in the District of Columbia may exercise jurisdiction over a non-resident defendant "only [for] a claim for relief arising from the specific acts enumerated in [the statute] ...," D.C. CODE § 13-423(b), plaintiffs' jurisdictional allegations must arise from the same conduct of which they complain. See Willis v. Willis, 655 F.2d 1333, 1336 (D.C.Cir.1981); Dooley v. United Technologies Corp., 786 F. Supp. 65, 71 (D.D.C.1992); LaBrier v. A.H. Robins Co., Inc., 551 F. Supp. 53, 55 (D.D.C.1982).
1. "Transacting Business" under Section 13-423(a)(1)
Section 13-423(a)(1) of the long-arm statute provides that "a District of Columbia court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person's transacting any business in the District of Columbia." D.C. CODE § 13-423(a)(1). To establish personal jurisdiction under this subsection, plaintiffs must demonstrate that (1) the defendant transacted business in the District; (2) the claim arose from the business transacted in the District; (3) the defendant had minimum contacts with the District; and (4) the Court's exercise of personal jurisdiction would not offend "traditional notions of fair play and substantial justice." Dooley v. United Technologies, 786 F.Supp. at 71; see also Novak-Canzeri v. Saud, 864 F. Supp. 203, 206 (D.D.C.1994) (because of the "arising from" requirement of Section 13-423(b), "[t]he claim itself must have arisen from business transacted in the District or there is no jurisdiction"). Section 13-423(a)(1) of the long-arm statute permits the exercise of personal jurisdiction to the full extent permitted by the Due Process Clause of the Constitution. See First Chicago Int'l v. United Exchange Co. Ltd., 836 F.2d at 1377; Environmental Research Int'l, Inc. v. Lockwood Greene Eng'rs, Inc., 355 A.2d 808, 810-11 (D.C.1976) (en banc).
The constitutional touchstone of the due process determination is "whether the defendant purposefully established minimum *129 contacts in the forum state." Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 108-09, 107 S. Ct. 1026, 94 L. Ed. 2d 92 (1987) (internal citations and emphasis omitted). On the other hand, as the Supreme Court recognized in Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985) (emphasis in original), in today's commercial world business is often transacted solely by mail and wire communications across state lines and jurisdiction may sometimes exist even if a defendant "did not physically enter the forum state." The Court explained that in such cases it is necessary to determine whether the commercial actor that is the subject of the lawsuit "purposefully availed itself of the privilege of conducting business in the forum state," and whether the defendant's conduct in connection with that state is such that it "should reasonably anticipate being haled into court there." Id. at 474-75, 105 S. Ct. 2174 (internal citation and quotation omitted). When the "transacting business" analysis concerns a contractual relationship, factors that inform the analysis include the nature of the prior negotiations between the parties, the agreement's contemplated future consequences, the terms of the contract, the parties' actual course of dealing and how each party manifested a connection to the forum. See id. at 479, 105 S. Ct. 2174; Schwartz v. CDI Japan, Ltd., 938 F. Supp. 1, 6 (D.D.C.1996)
a. The Institutional Defendants
Plaintiffs generally allege that "each of the named Defendants and members of the Defendant Class illegally contract, combine and conspire with persons and entities that have committed, and continue to commit, overt acts within the District of Columbia in furtherance of the contract, combination and conspiracy alleged in this Complaint." Compl. ¶ 9. Plaintiffs then make the same generic claim with respect to each moving institutional defendant, alleging that the "[institutional defendant] is a [non-District of Columbia] not-for-profit corporation with its principal place of business [outside the District of Columbia]. [The institutional defendant] sponsors medical residency programs, employing members of the Plaintiff Class. [The institutional defendant] has contracted, combined and conspired with the named Defendants to restrain competition as alleged in this Complaint. Certain conspiratorial acts in which this Defendant participated took place in Washington, D.C." Id. ¶¶ 25-28, 30-32, 34, 40-43, 45-47, 49. The Court concludes that these generalized conclusory allegations alone are facially insufficient to meet plaintiffs' jurisdictional burden. See GTE New Media Services Inc. v. Ameritech Corp., 21 F.Supp.2d at 36.
In their opposition to defendants' motions to dismiss, plaintiffs attempt to re-sculpt and refine these generalized allegations, asserting that the institutional defendants, "through the intensely interactive NRMP web-site, [enter] into contracts in the District of Columbia to secure employment of a significant and important portion of their work force, provide a steady stream of information to the NRMP in order to effectuate the Match, and obtain Match Results," thereby transacting business in the District of Columbia. Plaintiffs' Corrected Memorandum of Points and Authorities in Support of Its Omnibus Opposition to Defendants' Motions to Dismiss Pursuant to Fed.R.Civ.P. 12(b)(2) ("Pls.' (b)(2) Opp.") at 36. It is undisputed that Barnes Jewish-Hospital, Baylor College of Medicine, Beth Israel Deaconess Medical Center, Inc., Boston Medical Center Corp., Cedars-Sinai Medical Center, The Cleveland Clinic Foundation, Emory University, Rhode Island Hospital, Rush-Presbyterian-St. Luke's Medical Center, St. Louis University, *130 Stanford Hospital & Clinics, Thomas Jefferson University Hospital, Inc., Administrators of the Tulane Educational Fund, University Hospitals of Cleveland, Inc. and Yale-New Haven Hospital, Inc. each annually participates in the Match by contracting to participate in the program, submitting its preference list to the NRMP, which operates from the AAMC's office in the District of Columbia, and receiving the results of the Match upon its completion.[2]
Six of these institutional defendants admit that they have "sporadic" contacts with the NRMP in connection with the Match in addition to the annual submission of the institution's Match list.[3] The remaining institutional defendants that participate in the Match assert that they interact with the NRMP only once a year when they transmit their preference lists to the organization. These assertions are contradicted, however, by plaintiffs' documentation of certain contacts with the NRMP in connection with the Match during 1999-2001. These additional contacts include the submission of quota change forms, updates of institutional information, information and association data forms and/or "reversion" of unfilled position forms. Plaintiffs concede that no one institution submitted more than ten of these communications to the NRMP in any given year. See Pls.' (b)(2) Opp., Ex. 11, Defendant NRMP's Objections and Answers to Plaintiff Paul Jung's First Set of Interrogatories on Jurisdiction; Schedule II.B., "Communications from Institutions/Programs to the NRMP 2001 Residency Match;" Schedule III.B, "Communications from Institutions/Programs to the NRMP 2000 Residency Match;" and Schedule IV.B, "Communications from Institutions/Programs to the NRMP 1999 Residency Match." It is these additional contacts on which plaintiffs base their assertion that in providing a steady stream of information into the District of Columbia in order to effectuate the Match, the moving institutional defendants "transacted *131 business" to an extent sufficient to provide jurisdiction under Section 13-423(a)(1) of the long-arm statute.
The Court concludes that the fact that the moving institutional defendants entered into the Institutional Match Contract and communicated information concerning their individual programs to the NRMP up to ten times a year in order to effectuate an accurate Match does not by itself form a basis for personal jurisdiction. See Far West Capital, Inc. v. Towne, 46 F.3d 1071, 1076-77 (10th Cir.1995) (non-forum defendant's phone calls and ten to twenty faxes to in-forum plaintiff during course of contract negotiation were insufficient to establish minimum contacts under transacting business prong of state long-arm); see also Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 213 (5th Cir.1999) (defendant's numerous communications into forum cannot serve as basis of jurisdiction if they do not themselves form basis of complaint).[4] The Court must focus on the quality of the contacts rather than their quantity. See Mouzavires v. Baxter, 434 A.2d 988, 995 (D.C.1981) (en banc) ("notions of fundamental fairness require that the defendant's contacts with the forum be evaluated qualitatively rather than quantitatively" in assessing "transacting business" prong of long-arm statute).
Upon consideration of the contacts alleged in plaintiffs' complaint, the Court concludes that the contacts simply are not of the quality that would support a conclusion that the institutional defendants have "purposefully availed [themselves] of the privilege of conducting business in the forum state," such that they "should reasonably anticipate being haled into court" here under Section 13-423(a)(1). Burger King Corp. v. Rudzewicz, 471 U.S. at 474-75, 105 S. Ct. 2174.[5] First, no prior negotiation of the Institutional Match Contract between any institution and the NRMP took place at all, let alone in the District of Columbia; the contract is a form contract into which the institutional defendants entered by listing their names and the number of residency positions they had available. See Omnibus Reply Memorandum in Support of Motions by Various Defendants to Dismiss the Complaint Pursuant to Fed.R.Civ.P. 12(b)(2), Ex. O, NRMP Institutional Agreement. Second, it is not contested that the future consequence of the Institutional Match Contract for the moving institutional defendants was the placement of residents with those defendants outside the District of Columbia; the execution of the contract did not result in any continuing connections with the District. Compare Burger King Corp. v. Rudzewicz, *132 471 U.S. at 480, 105 S. Ct. 2174 (contract executed in forum "envisioned continuing and wide-reaching contacts with [plaintiff] in the forum").
Third, no terms in the Institutional Match Contract itself indicate any special connection with the District of Columbia. The only indication at all that the Match occurred in the District of Columbia is the listing of the NRMP's Washington, D.C. address on the face of the contract. Fourth, the contract includes a choice-of-law provision designating Illinois law. While this by no means conclusively demonstrates that defendants are beyond the Court's jurisdictional reach, it does inform the assessment of whether the defendants could have reasonably foreseen being involved in litigation in the District of Columbia concerning the execution of the Institutional Match Contract. See Burger King Corp. v. Rudzewicz, 471 U.S. at 482, 105 S. Ct. 2174.
Finally, there is nothing in the parties' actual course of conduct that indicates that the moving institutional defendants should have reasonably foreseen being subject to the jurisdiction of this Court. There is no debate that the Match is very important to the institutional defendants' business of providing health care; it is the mechanism by which the institutional defendants hire resident doctors. The NRMP is not involved, however, in the hospitals' substantive process of evaluating potential residents prior to submission of the preference lists. Nor does the NRMP continue to play a role in the hospitals' business once the Match is completed or in any other fashion exert control over the rest of the hospitals' affairs. The mere fact that the NRMP, with its principal place of business in the District of Columbia, entered into a contract with others cannot "standing alone" provide jurisdiction over those other contracting parties. See Health Communications, Inc. v. Mariner Corp., 860 F.2d at 462 (citing Burger King Corp. v. Rudzewicz, 471 U.S. at 482, 105 S. Ct. 2174) (no jurisdiction absent demonstrated integration of parties' businesses or continued influence of forum resident over non-resident defendant, notwithstanding fact that contract was partially performed in forum); Mouzavires v. Baxter, 434 A.2d at 995 (proper application of minimum contacts formula requires consideration "not only of whether a nonresident defendant has sufficient contacts with the forum, but also of whether those contacts are voluntary and deliberate, rather than fortuitous").
Plaintiffs rely heavily on Schwartz v. CDI Japan, Ltd. in support of their jurisdictional argument. Plaintiffs are correct that the Court in Schwartz stated that "[t]he `transacting any business' provision of the District's long-arm statute embraces the contractual activities of a non-resident defendant that cause repercussions in the District" and that "[i]t is `therefore sufficient' ... that the suit [be] based on a contract that [has] [a] substantial connection with the District." Schwartz v. CDI Japan, Ltd., 938 F.Supp. at 5 (quoting Mouzavires v. Baxter, 434 A.2d at 992). Plaintiffs fail to recognize, however, that the defendant's contacts with the District of Columbia in Schwartz were much more extensive than those of the moving institutional defendants here. In Schwartz, the foreign defendant not only had assumed a contract with the Smithsonian Institution's National Museum of American Art ("NMAA"), but also had assumed any additional contracts entered into by the defendant's former agent with the museum, which indicated the defendant's continuing "[intention] to reap the financial benefits from transacting business [with the NMAA] in this forum." Schwartz v. CDI Japan, Ltd., 938 F.Supp. at 7. Furthermore, the assumed contract expressly designated *133 the District of Columbia as the site of the execution of the contract, called for the delivery of products to the Smithsonian in the District of Columbia, and required the defendant to make payments and reimbursements to the NMAA into a District of Columbia bank account. See id. at 6. In addition, an agent of the non-resident defendant had negotiated the assumed contract in the District. See id. at 8. No similar contacts with the forum of this quality exist in the instant circumstances.
The Court therefore concludes that the moving institutional defendants' entry into the Institutional Match Contract, and the accompanying electronic and/or mail correspondence those defendants sent into the District in support of the contract, do not and cannot provide a basis for personal jurisdiction under Section 13-423(a)(1) of the long-arm statute.
b. The Organizational Defendants
Aside from the conclusory, generalized allegations in the complaint concerning "defendants," which the Court already has found insufficient to meet the pleading standards for personal jurisdiction over the institutional defendants in Section II(B)(1)(a), supra, plaintiffs provide scant additional support for their jurisdictional claim that the ABMS or the CMSS transacts business in the District of Columbia for the purposes of the long-arm statute. In their complaint, plaintiffs introduce the ABMS as "an Illinois not-for-profit corporation whose membership consists of 24 recognized medical specialty certification boards in the United States" that "develop and apply professional and education standards for the evaluation and certification of physician specialists." Compl. ¶ 20. Plaintiffs also allege that the ABMS is one of five "governing sponsors" of the NRMP. Id. With respect to the CMSS, plaintiffs allege that it is "a not-for-profit corporation whose membership consists of 17 physician societies in specialties having a member board participating in ABMS" and that it also is one of five "governing sponsors" of the NRMP. Id. ¶ 21.
Plaintiffs do not define "governing sponsor" in their complaint. In their opposition to defendants' motions to dismiss, plaintiffs cite to statements by the Executive Director of the NRMP, Robert L. Beran, Ph.D., that the ABMS and the CMSS are two of five "sponsors" of the NRMP. Pls.' (b)(2) Opp. at 30 (citing Defendant National Resident Matching Program's Motion to Dismiss and Compel Arbitration, Ex. A, Affidavit of Robert L. Beran, Ph.D. ("Beran Compel Aff.") ¶ 1). Plaintiffs assert that the ABMS thus itself "admits" that it is a sponsor of the NRMP, that its representative serves as President of the NRMP and that its representative telephones the NRMP several times a month. Plaintiffs also assert that the CMSS admits to its "involvement" with the NRMP and has "contacts with the District of Columbia." Pls.' (b)(2) Opp. at 30. Plaintiffs charge that the relationships between these two organizational defendants and the NRMP are "ongoing and committed [, and] as sponsors, [the ABMS and the CMSS] are entitled to and do elect two members to the twelve member NRMP Board of Directors." Id. at 36. From this predicate, plaintiffs argue that "the two moving Organizational Defendants play an integral role in governing the NRMP, [and in] formulating its policies, including the anti-competitive policies of the Match," and that they therefore are subject to suit in the District of Columbia under Section 13-423(a)(1). Id.
The ABMS and the CMSS offer support for their motions to dismiss in the form of sworn declarations from their Executive Vice President and President, respectively. Each states that his organization does not *134 elect members to the NRMP board, but instead nominates individuals from the organization to serve; the NRMP board itself elects its members. See Declaration of Stephen H. Miller, M.D., Ph.D., in Support of Motion of the American Board of Medical Specialties to Dismiss the Complaint Pursuant to Fed.R.Civ.P. 12(b)(2) ("Miller Decl.") ¶ 6; Declaration of Bruce E. Spivey, M.D., in Support of Motion of the Council of Medical Specialty Societies to Dismiss the Complaint ("Spivey Decl.") ¶ 6. In addition, Dr. Spivey states that the CMSS nominees to the NRMP board are not officers or employees of the CMSS and do not act on the CMSS's behalf. See Spivey Decl. ¶ 6. While it may be that nomination is tantamount to election, both Dr. Miller and Dr. Spivey state that their respective organizations do not exercise any control over the activities of the NRMP after their organizations' nominees are elected to the NRMP board. See Miller Decl. ¶ 6; Spivey Decl. ¶ 6. In a separate affidavit, the Executive Director of the NRMP confirmed that "the sponsoring organizations only have the right to nominate. Election of new board members is left to the discretion of the current Board. The sponsoring organizations have no other power with respect to the NRMP." Beran Compel Aff. ¶ 3 (emphasis added). Furthermore, while Dr. Miller is both Executive Vice President of the ABMS and President of the NRMP, he states that all the business he conducts with NRMP personnel, which includes several telephone conversations a month and travel once or twice a year to the District of Columbia, is in his capacity as NRMP President and not on behalf of the ABMS. See Miller Decl. ¶ 7. These statements in declarations and affidavits offered in support of defendants' motions remain uncontradicted by plaintiffs.
The Court concludes that plaintiffs have not alleged sufficient facts to demonstrate that either the ABMS or the CMSS transacts business in the District of Columbia for purposes of the long-arm statute. Plaintiffs' only true jurisdictional claim rests on the fact that these organizational defendants are "governing sponsors" of the NRMP and nominate two directors to the NRMP board. Because plaintiffs do not define "governing sponsor," the Court is left to consider what that term may mean. In light of plaintiffs' assertion that as governing sponsors the organizational defendants have the power to direct policy and determine procedures of the NRMP, perhaps the most analogous relationship is that of a parent corporation with control over the activities of its subsidiary. See, e.g., El-Fadl v. Central Bank of Jordan, 75 F.3d 668, 676 (D.C.Cir.1996) ("[I]f parent and subsidiary `are not really separate entities,' ... or one acts as an agent of the other, ... the local subsidiary's contacts can be imputed to the foreign parent."). If this is the most analogous relationship, however, it does not serve plaintiffs well. Plaintiffs fail to allege a sufficient level of control by the ABMS and/or the CMSS over the NRMP, and the uncontradicted declarations submitted by Dr. Miller and Dr. Spivey state unequivocally that their organizations do not exercise any control over the activities of the NRMP. The Court therefore has no basis to attribute the activity of the NRMP in the District of Columbia to either organization.[6]
*135 2. Sections 13-423(a)(3) and (4): Tortious Injury
Section 13-423(a)(3) of the long-arm statute confers jurisdiction over a person who causes "tortious injury in the District of Columbia by an act or omission in the District of Columbia." D.C. CODE § 13-423(a)(3). To invoke this subsection, plaintiffs must show that the moving defendants either directly or through an agent caused tortious injury to plaintiffs in the District of Columbia by an act or omission in the District of Columbia. See Richard v. Bell Atlantic Corp., 946 F. Supp. 54, 73 (D.D.C.1996); see generally Moncrief v. Lexington Herald-Leader Co., 807 F.2d 217, 219 (D.C.1986).
Section 13-423(a)(4) of the long-arm statute provides:
A District of Columbia court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a claim for relief arising from the person's ... causing tortious injury in the District of Columbia by an act or omission outside the District of Columbia if he regularly does or solicits business, engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the District of Columbia.
D.C. CODE § 13-423(a)(4). In order to establish personal jurisdiction under this subsection after jurisdictional discovery has taken place plaintiffs must demonstrate by a preponderance of the evidence that (1) plaintiffs suffered a tortious injury in the District of Columbia; (2) the injury was caused by a defendant's act or omission outside of the District; and (3) the defendant had one of the three enumerated contacts with the District of Columbia. See Crane v. Carr, 814 F.2d 758, 762-63 (D.C.Cir.1987); Blumenthal v. Drudge, 992 F.Supp. at 53; Trager v. Wallace Berrie & Co., 593 F. Supp. 223, 225 (D.D.C.1984).[7]
Under both "tortious injury" subsections of the long-arm statute plaintiffs must allege that they have suffered a tortious injury in the District of Columbia. In their complaint, plaintiffs allege no injury to the named plaintiffs within the District of Columbia. In their opposition to defendants' motion to dismiss, plaintiffs attempt to describe an injury, citing to allegations in the complaint that the defendants' actions restrained competition in the recruitment, hiring, employment and compensation of resident physicians nationwide. Because the District of Columbia is part of the alleged national relevant market in which competition was restrained, plaintiffs argue that they lost "the right to *136 negotiate with employers in the District of Columbia for placement as resident physicians" as a result of the alleged anticompetitive activity. Pls.' (b)(2) Opp. at 37-38. Plaintiffs have failed, however, to allege or otherwise demonstrate any facts that any named plaintiff pursued or would have pursued a resident position within the District of Columbia by ranking or interviewing with a District of Columbia hospital, or undertook any other action in connection with residency employment in the District. Absent such allegations, plaintiffs' argument fails. There has been no tortious injury to any plaintiff in the District of Columbia. If the Court were to find jurisdiction under this flawed premise, any plaintiff alleging an antitrust conspiracy could satisfy the tortious injury requirement under either "tort" prong of the long-arm statute simply by asserting that the District of Columbia is part of the relevant market.[8]
At oral argument, plaintiffs argued belatedly that the injury was the Match itself that is, that the injury is the actual binding of the fourth year medical student to a specific residency program and thus the tortious injury occurred in the District of Columbia where the Match is executed. See Transcript of February 23, 2003 Motions Hearing, Afternoon Session ("Tr.") at 41 ("As soon as that rank order list is submitted, and the algorithm employed, and that match is made, that is the injury."). Without reaching the merits of this "injury" claim, the Court rejects this line of reasoning in light of the plaintiffs' own assertion in their complaint and briefs that plaintiffs are bound and thus, by extension, injured upon entry into the Student Match Contract rather than upon the execution of the contract. See Compl. ¶ 86(b); Pls.' (b)(2) Opp. at 6 n. 4 ("[M]edical school seniors who sign up for the Match agree that they will accept the position to which they are matched if a match is made, and will enroll in the residency program to which they are matched by the NRMP. `The listing of [...] a program by an applicant on the individual's Rank Order List establishes a commitment to [...] accept an appointment when a match results.'") (quoting NRMP Handbook for Institutions and Program Directors at 4-5). There are no allegations that plaintiffs were in the District of Columbia when they entered into the Student Match Contract. The Court concludes that plaintiffs' allegations are insufficient to demonstrate any tortious injury in the District of Columbia, and therefore that jurisdiction cannot be predicated on Section 13-423(a)(3) or (4) of the long-arm statute.
C. Personal Jurisdiction under Section 12 of the Clayton Act: "Transacting Business"
Plaintiffs assert that the Court has jurisdiction over all the moving defendants under the jurisdictional grant of Section 12 of the Clayton Act. See Compl. ¶ 7. Section 12 states that "[a]ny suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant, *137 but also in any district wherein it may be found or transacts business; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found." 15 U.S.C. § 22.
In determining whether jurisdiction over defendants exists under the Clayton Act, the Court must assess "whether the corporation is doing business in the district of any substantial character, even if its business is entirely interstate in character and is transacted by agents who do not reside in the District." Caribe Trailer Systems, Inc. v. Puerto Rico Maritime Shipping Authority, 475 F. Supp. 711, 716 (D.D.C.1979). See also Mylan Laboratories, Inc. v. Akzo, N.V., Civil Action No. 89-1671, 1990 WL 58466, at *6 (D.D.C. Mar. 27, 1990), 1990 U.S. Dist. LEXIS 3521, at *21 Chrysler Corp. v. General Motors Corp., 589 F. Supp. 1182, 1195 (D.D.C.1984). The Court must look for "tangible manifestations of doing business" in the District of Columbia, such as the presence of officers, employees, agents, offices, ownership of property, maintenance of corporate records or bank accounts. Caribe Trailer Systems, Inc. v. Puerto Rico Maritime Shipping Authority, 475 F.Supp. at 716. Unlike the "transacting business" analysis conducted under the District of Columbia long-arm statute, jurisdiction under Section 12 does not require that the transactions on which jurisdiction is based be related to the cause of action underlying the suit. See Diamond Chemical Co., Inc. v. Atofina Chemicals, Inc., 268 F. Supp. 2d 1, 10 (D.D.C.2003) (quoting Chrysler Corp. v. General Motors Corp., 589 F.Supp. at 1195).
1. The Institutional Defendants
Plaintiffs do not allege any tangible manifestations of doing business in the District of Columbia on the part of the moving institutional defendants. Instead, they invite the Court to consider the institutional defendants' participation in the Institutional Match Contract, the COTH Survey and activities related to the institutions' membership in the AAMC. See Pls.' (b)(2) Opp. at 44 ("[E]ach of the moving Institutional Defendants enter into multiple agreements with the D.C.-based NRMP and AAMC to perform highly prized services which require regular and ongoing contacts with each of the D.C.-based entities, and the Institutional Defendants pay fees into the District of Columbia for those services.").
It is undisputed that Barnes-Jewish Hospital, Beth Israel Deaconess Medical Center, Inc., Boston Medical Center Corp., Cedars-Sinai Medical Center, The Cleveland Clinic Foundation, Emory University, Rhode Island Hospital, Rush-Presbyterian-St. Luke's Medical Center, St. Louis University, Stanford Hospital & Clinics, Thomas Jefferson University Hospital, Inc., Administrators of the Tulane Educational Fund, University Hospitals of Cleveland, Inc. and Yale-New Haven Hospital, Inc. participated in the Match and in the annual COTH Survey by submitting the institutions' resident stipend data to the AAMC, and by receiving the results of the Survey in return.[9]
*138 In addition to participating in the Match and the COTH Survey, a majority of the moving institutional defendants admit that they or their employees had additional contacts with the District of Columbia. First, The Cleveland Clinic Foundation states that it employs one lobbyist who travels to the District of Columbia "solely for the purpose of lobbying the federal agencies and government," but asserts that such actions are protected by the government contacts exception. Defendant The Cleveland Clinic Foundation's Supplemental Memorandum of Points and Authorities in Support of Its Motion and the Omnibus Memorandum in Support of Motions by Various Defendants to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2) at 6 n. 3. Second, Beth-Israel Deaconess Medical Center, Inc., Boston Medical Center Corp., Cedars-Sinai Medical Center, Rhode Island Hospital, Thomas Jefferson University Hospital, Inc., University Hospitals of Cleveland, Inc. and Yale-New Haven Hospital, Inc. acknowledge that they employ individuals who are members of organizations such as defendant American Hospital Association ("AHA"), the AAMC and/or the COTH Section and that these employees travel to the District of Columbia to fulfill their obligations to such organizations.[10]
Third, Baylor College of Medicine acknowledges that it has had two additional contacts with the District: specifically that it contracted with a firm that provides services concerning relations with the federal government, and that certain Baylor residents each year attend a program conducted in the District of Columbia by the United States Department of Defense. See Supplemental Memorandum in Support of Defendant Baylor College of Medicine's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2) at 3 n. 2. Finally, the Administrators of the Tulane Educational Fund admits that it has one assistant professor who "is providing *139 technical advice concerning infectious disease programs in Africa pursuant to a subcontract for the United States Agency for International Development (USAID). This employee works out of a private nonprofit organization that is the prime contractor to USAID." Supplemental Memorandum of Points and Authorities in Support of Defendant Tulane's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2); Declaration of Anthony P. Lorino ¶ 4.
To the extent that the moving institutional defendants admit to their agents' presence in the District of Columbia in order to lobby certain agencies of the federal government on the defendants' behalf, such contacts with the District are excluded from the jurisdictional analysis under the "government contacts" exception. Under this exception, a person or company does not subject itself to the jurisdiction of the courts of the District of Columbia merely by filing an application with a government agency or by seeking redress of grievances from the Executive Branch or the Congress. See Naartex Consulting Corp. v. Watt, 722 F.2d 779, 787 (D.C.Cir.1983); Environmental Research Int'l, Inc. v. Lockwood Greene Eng'rs, Inc., 355 A.2d at 813. "The District of Columbia's unique character as the home of the federal government requires this exception in order to maintain unobstructed access to the instrumentalities of the federal government." Cellutech, Inc. v. Centennial Cellular Corp., 871 F. Supp. 46, 50 (D.D.C.1994). See also Mallinckrodt Medical, Inc. v. Sonus Pharmaceuticals, Inc. 989 F. Supp. 265, 271 (D.D.C.1998).
The Court also concludes that the institutional defendants' membership in and contacts with the AAMC or the COTH Section in the District of Columbia should not be considered in the evaluation of whether any defendant transacted business of any "substantial character" in the District because it is established that the "government contacts" exception extends "to non-resident contact with trade associations located with [sic] the District of Columbia." World Wide Minerals, Ltd. v. Republic of Kazakhstahn, 116 F. Supp. 2d 98, 105-06 (D.D.C.2000). The AAMC is a typical association for these purposes; it is "a non-profit association founded [ ] to work for reform in medical education" and "[a]s an association of medical schools, teaching hospitals, and academic societies, the AAMC works with its members to set a national agenda for medical education, biomedical research, and health care, and assists its members by providing services at the national level that facilitate the accomplishment of their missions." See Omnibus Reply Memorandum in Support of Motions by Various Defendants to Dismiss the Complaint Pursuant to Fed.R.Civ.P. 12(b)(2), Ex. F, "About the AAMC." Any travel to the District by an institutional defendant's agent for the purpose of fulfilling the membership obligations of the institution in the AAMC or the COTH Section therefore does not subject the defendant to the jurisdiction of the Court. See World Wide Minerals, Ltd. v. Republic of Kazakhstahn, 116 F.Supp.2d at 105-06; American Association of Cruise Passengers v. Cunard Line, Ltd., 691 F. Supp. 379, 380 (D.D.C.1987) ("attendance at a trade association meeting [...] does not constitute `transacting business'" under the long-arm statute).
The Court thus is left to consider only plaintiffs' allegations with respect to the institutional defendants' participation in the Match Program and the COTH Survey, and the de minimis contacts admitted by Baylor College of Medicine and the Administrators of the Tulane Educational Fund with respect to those institutions. The Court concludes that these contacts *140 are not sufficient to provide personal jurisdiction over the moving institutional defendants under Section 12 of the Clayton Act. While plaintiffs attempt to construe the COTH Survey as a service contracted for by the institutional defendants with the AAMC in the District of Columbia, plaintiffs allege in their complaint that the Survey is administered and published by the AAMC and not at the behest of any individual hospital. Compare Pls.' (b)(2) Opp. at 18-19 with Compl. ¶ 74. Although institutional defendants provide their individual information to the AAMC and the results of the Survey are distributed by the AAMC to its members, the institutional defendants are not required to provide information in order to receive the Survey. In fact, the Survey is available to the public at large. See http:/www.aamc.org/hlthcare/coth-hss.start.htm. Upon consideration of plaintiffs' allegations with respect to the COTH Survey, alone or in conjunction with the allegations regarding the Institutional Match Contract and/or the de minimis allegations in the complaint described above, the Court concludes that any amalgamation of these contacts with the District of Columbia fails to demonstrate that any of the moving institutional defendants is doing business in the District "of any substantial character," thereby justifying jurisdiction under the Clayton Act. See Caribe Trailer Systems, Inc. v. Puerto Rico Maritime Shipping Authority, 475 F.Supp. at 716.[11]
2. The Organizational Defendants
Plaintiffs do not allege any additional contacts with the District of Columbia that would subject the moving organizational defendants to the Court's jurisdiction in addition to those evaluated in the Court's "transacting business" analysis under Section 13-423(a)(1) of the long-arm statute. For the reasons stated in Section II(B)(1)(b), supra, the Court therefore concludes that plaintiffs have failed to demonstrate that the ABMS or the CMSS has transacted "substantial business" within the District of Columbia.
D. "Conspiracy Jurisdiction" Under the Long-Arm Statute
Plaintiffs assert that the Court has jurisdiction over all the moving defendants pursuant to the "conspiracy" theory of long-arm jurisdiction. Under this doctrine, acts undertaken within the forum by one co-conspirator in furtherance of an alleged conspiracy may subject a non-resident co-conspirator to personal jurisdiction under the long-arm statute. See Second Amendment Foundation v. United States Conference of Mayors, 274 F.3d 521, 524 (D.C.Cir.2001) (citing Jungquist v. Sheikh Sultan Bin Khalifa Al Nahyan, 115 F.3d 1020, 1030-31 (D.C.Cir.1997)) (applying conspiracy theory of personal jurisdiction to long-arm statute's "transacting business" subsection); First Chicago Int'l v. United Exch. Co., 836 F.2d at 1377-78; Edmond v. United States Postal Serv. Gen. Counsel, 949 F.2d at 424-425 (discussing application of conspiracy theory under Section 13-423(a)(3)).
Plaintiffs claim that personal jurisdiction exists over each moving defendant pursuant to the conspiracy theory of jurisdiction stemming from Section 13-423(a)(1). See Pls.' (b)(2) Opp. at 24-30.[12]*141 Conspiracy jurisdiction under this subsection presumes that "[p]ersons who enter the forum and engage in conspiratorial acts are deemed to `transact business' there `directly'; [and] coconspirators who never enter the forum are deemed to `transact business' there `by an agent.'" Second Amendment Foundation v. United States Conference of Mayors, 274 F.3d at 523 (quoting D.C. CODE § 13-423(a)(1)). So long as any one co-conspirator commits at least one overt act in furtherance of the conspiracy in the forum jurisdiction, there is personal jurisdiction over all members of the conspiracy. See Dooley v. United Technologies Corp., 786 F.Supp. at 78. In this context, plaintiffs must allege (1) the existence of a conspiracy; (2) the nonresident's participation in or agreement to join the conspiracy; and (3) an overt act taken in furtherance of the conspiracy within the forum's boundaries. See Edmond v. United States Postal Serv. Gen. Counsel, 949 F.2d at 425.
"Mere speculation" that a conspiracy exists or that "the non-resident defendants are co-conspirators [is] insufficient to meet plaintiff's [ ] burden." Dooley v. United Technologies Corp., 786 F.Supp. at 78. A plaintiff resting on the conspiracy theory of jurisdiction "must plead with particularity the conspiracy as well as the overt acts within the forum taken in furtherance of the conspiracy." Jungquist v. Sheikh Sultan Bin Khalifa Al Nahyan, 115 F.3d at 1031 (internal quotation omitted). See also United States v. Philip Morris Inc., 116 F.Supp.2d at 122. This requirement is strictly enforced, and courts in this Circuit have applied the conspiracy jurisdiction theory "warily" in light of concerns that plaintiffs will use the doctrine to circumvent the constitutional boundaries of the long-arm statute. Dooley v. United Technologies Corp., 786 F.Supp. at 77. As Judge Silberman said in his concurring opinion in Edmond,"we cannot allow plaintiffs to subvert the important constitutional principles of sovereignty and due process that underlie personal jurisdiction limitations with mere unspecified and unsubstantiated claims that multifarious defendants were part of a broad conspiracy and that one of them committed some [act] in the plaintiffs' desired forum." Edmond v. United States Postal Serv. Gen. Counsel, 949 F.2d at 428 (Silberman, J, concurring) (internal quotation omitted). See also United States v. Philip Morris Inc., 116 F.Supp.2d at 122; In re Vitamins Antitrust Litigation, 2001 U.S. Dist. LEXIS 25073, at *46.[13]
In addition, once jurisdictional discovery has taken place it still is necessary under a theory of conspiracy jurisdiction that plaintiffs demonstrate jurisdiction by a preponderance of the evidence. See Second Amendment Foundation v. United States Conference of Mayors, 274 F.3d at 524; First Chicago Int'l v. United Exch. Co., 836 F.2d at 1377-78 ("bare allegation of conspiracy or agency is insufficient to establish personal jurisdiction"); In re Vitamins *142 Antitrust Litigation, 2001 U.S. Dist. LEXIS 25073, at *46 (in conspiracy jurisdiction context, issue remains "whether [plaintiffs] have satisfied their preponderance of the evidence burden necessary to defeat the pending motion to dismiss for lack of personal jurisdiction"). Since jurisdictional discovery is limited, however, plaintiffs must prove by a preponderance of the evidence only that acts in furtherance of the alleged conspiracy took place in the District of Columbia. Plaintiffs do not have to demonstrate the very existence of the conspiracy by a preponderance of the evidence. See Second Amendment Foundation v. United States Conference of Mayors, 274 F.3d at 524 ("The general rule ... that a plaintiff must make a prima facie showing of the pertinent jurisdictional facts applies to conspiracy-based jurisdiction.") (internal quotation omitted). To impose this additional requirement would place on plaintiffs the inequitable burden of demonstrating the existence of something by a preponderance of the evidence about which they have not yet had the opportunity to conduct discovery.
The Court concludes that if the activities alleged constitute a conspiracy to restrain trade, plaintiffs have demonstrated by a preponderance of the evidence that acts in furtherance of the conspiracy took place in the District of Columbia. Specifically, it is uncontested that defendant NRMP conducts the Match in the District of Columbia and that defendant AAMC facilitates the COTH Survey from the District. Plaintiffs also have submitted documentation demonstrating that the District-based institutional defendants MedStar-Georgetown Hospital Medical Center, George Washington University and MedStar Health, Inc. contracted in the District of Columbia with the NRMP to participate in the Match and employed resident physicians in the District of Columbia through the Match Program during the relevant period. See Pls.' (b)(2) Opp., Ex. 2, NRMP Directory 1999 Match, Hospitals and Programs Participating in the Matching Program at 12-13. Thus, if there was a conspiracy plaintiffs have demonstrated that several of the conspirators committed overt acts in furtherance of the conspiracy in the District of Columbia. See In re Vitamins Antitrust Litigation, 2001 U.S. Dist. LEXIS 25073, at *46. The question remains whether plaintiffs adequately have alleged that a conspiracy existed.
As the Court explains in Section IV(B), infra, plaintiffs adequately have alleged a conspiracy to depress resident compensation between, inter alia, those institutional defendants that participated in the Match and the NRMP. The Court therefore concludes that the fifteen moving institutional defendants who themselves acknowledge that they took part in the Match Program are subject to the jurisdiction of this Court under the conspiracy theory of jurisdiction. Those institutional defendants are Barnes Jewish-Hospital, Baylor College of Medicine, Beth Israel Deaconess Medical Center, Inc., Boston Medical Center Corp., Cedars-Sinai Medical Center, The Cleveland Clinic Foundation, Emory University, Rhode Island Hospital, Rush-Presbyterian-St. Luke's Medical Center, St. Louis University, Stanford Hospital & Clinics, Thomas Jefferson University Hospital, Inc., Administrators of the Tulane Educational Fund, University Hospitals of Cleveland, Inc. and Yale-New Haven Hospital, Inc.[14] Because plaintiffs failed to *143 demonstrate that defendant Washington University Medical Center participated in the Match or otherwise participated in the conspiracy, plaintiffs have not demonstrated that the Court has personal jurisdiction over Washington University Medical Center. The Court therefore will deny the motions to dismiss for lack of personal jurisdiction filed by fifteen of the sixteen moving institutional defendants the exception being the motion of Washington University Medical Center, which the Court will grant.
With respect to the ABMS and the CMSS, the organizational defendants that moved to dismiss for lack of personal jurisdiction, the Court concludes that because plaintiffs have failed to demonstrate that either organization participated in the conspiracy, see Section IV(B)(2), infra, the Court lacks personal jurisdiction over these organizational defendants under a conspiracy theory of jurisdiction and will grant their motions to dismiss for lack of personal jurisdiction.
III. DEFENDANT NRMP'S RULE 12(b)(1) MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION AND MOTION TO COMPEL ARBITRATION
A. Background
The NRMP moves to dismiss plaintiffs' claim against it for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure, arguing that to the extent that plaintiffs' claim relates to the NRMP and its governing sponsors, the claim is subject to compulsory arbitration. The NRMP therefore seeks an order "compelling plaintiffs to arbitrate the first element of their tripartite claim; namely, that defendants used the Matching Program to eliminate competition in the recruitment and employment of resident physicians." Memorandum of Law in Support of Defendant National Resident Matching Program's Motion to Dismiss and to Compel Arbitration ("NRMP Arbit. Mem.") at 7 (internal quotation omitted). The NRMP relies on the arbitration provision of Student Match Contract. The provision states as follows:
All claims, disputes and other matters in question arising out of or relating to this Agreement or the breach thereof, shall be decided by binding arbitration in accordance with the Rules of the American Arbitration Association then in effect, unless the parties mutually agree otherwise. This agreement to arbitrate shall be specifically enforceable. The NRMP Polices shall govern the demand for arbitration and other procedural matters. The arbitrators shall conduct all arbitration proceedings in the Offices of the American Arbitration Association in Chicago, Illinois. This Agreement shall be governed by the laws of the State of Illinois, but Illinois conflicts of laws provisions shall not be construed to apply the law of any other jurisdiction. The unenforceability of one or more of the terms of this Agreement shall not affect the validity of the remaining terms.
Id., citing Beran Compel Aff., Ex. A-1, 1998 Student Agreement of Plaintiff Denise Greene (emphasis added).[15]
*144 The NRMP also relies on another provision in the Student Match Contract that states that "[t]he NRMP Policies and Handbook are incorporated by reference in and are an integral part of this agreement." Beran Compel Aff., Ex. A-1, 1998 Student Agreement of Plaintiff Denise Greene. Among the policies of the NRMP Policies and Handbook is Paragraph 11.0, entitled "Disputes and Claims," which provides that "[a]ny controversy or claim arising out of or related to the Matching Program, any NRMP Agreement or the breach thereof, and in general all disputes between the NRMP and any applicant or institution participating or seeking participation in the Matching Program shall be settled by arbitration in accordance with the Rules of the American Arbitration Association then in effect ...." Beran Compel Aff., Ex. A-5, Policies of the NRMP, in effect March 1998 ¶ 11.0.
The NRMP further argues that the claim against the AMA also should be referred to binding arbitration despite the fact that this organization is not a signatory to the Student Match Contract, because plaintiffs' claim against it is based on the organizations' alleged status as governing sponsors of the NRMP. See NRMP Arbit. Mem. at 14-16.[16] Plaintiffs and certain institutional defendants oppose the motion.
B. Compulsory Arbitration Under the Federal Arbitration Act
The Federal Arbitration Act ("FAA") provides that a "written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon any grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The FAA applies to any transaction involving interstate commerce and creates a strong presumption in favor of the enforcement of agreements to arbitrate; any doubts regarding the scope of an agreement to arbitrate are to be resolved in favor of arbitration. See Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226-27, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987) (with enactment of the FAA Congress mandated that arbitration agreements be rigorously enforced); see also Moses H. Cone Memorial Hospital v. Mercury Construction Corporation, 460 U.S. 1, 24-25, 103 S. Ct. 927, 74 L. Ed. 2d 765 (1983); Finegold, Alexander & Assocs. v. Setty & Assocs., 81 F.3d 206, 207-08 (D.C.Cir.1996). The Supreme Court has stressed that "the liberal federal policy favoring arbitration agreements, manifested by this provision and the Act as a whole, is at bottom a policy guaranteeing the enforcement of private contractual arrangements." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985). Under the FAA, "[t]here is a presumption of arbitrability in the sense that `an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation *145 that covers the asserted dispute. Doubts should be resolved in favor of coverage.'" AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 650, 106 S. Ct. 1415, 89 L. Ed. 2d 648 (1986) (quoting United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83, 80 S. Ct. 1347, 4 L. Ed. 2d 1409 (1960) (Brennan, J., concurring)).
This strong public policy in favor of arbitration must be considered in the context of the equally important principle that "arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to submit." AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. at 648, 106 S. Ct. 1415 (internal quotation and citation omitted). See also EEOC v. Waffle House, Inc., 534 U.S. 279, 294, 122 S. Ct. 754, 151 L. Ed. 2d 755 (2002) (FAA "does not require parties to arbitrate when they have not agreed to do so") (internal quotation and citation omitted); Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 57, 115 S. Ct. 1212, 131 L. Ed. 2d 76 (1995) ("[T]he FAA's proarbitration policy does not operate without regard to the wishes of the contracting parties."). As the court of appeals has noted, "this principle recognizes that `arbitrators derive their authority to resolve disputes only because the parties have agreed in advance to submit such grievances to arbitration.'" National Railroad Passenger Corp. v. Boston & Maine Corp., 850 F.2d 756, 759 (D.C.Cir.1988) (quoting AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. at 648, 106 S. Ct. 1415).
In Mitsubishi, the Supreme Court provided the standard by which motions to compel arbitration should be evaluated. The Court's first task "is to determine whether the parties agreed to arbitrate [the] dispute," keeping in the forefront the strong policy favoring arbitration. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. at 626, 105 S. Ct. 3346. If the Court finds that the parties did agree to arbitrate the dispute at issue, the Court then must determine "whether legal constraints external to the parties' agreement foreclose[ ] the arbitration of those claims." Id. at 628, 105 S. Ct. 3346. In other words, is there a competing statute or policy that outweighs the strong interest in referral to arbitration?
Relying on the plain language of arbitration provision of the Student Match Contract signed by each plaintiff all claims "arising out of or relating to this Agreement" shall be referred to binding arbitration the NRMP argues that plaintiffs' Section 1 conspiracy claim "arises out of" or "relates to" the Student Match Contract and therefore must be referred to arbitration. The NRMP maintains that the Match itself is "squarely challenged by plaintiffs in this action," that plaintiffs' complaint specifically alleges that "defendants eliminated competition `by assigning prospective resident physician employees to resident positions through [the Match Program],'" and that the Match Program "is a mechanism that eliminates a free and competitive market and substitutes a centralized anticompetitive allocation system." NRMP Arbit. Mem. at 10-11 (quoting Compl. ¶¶ 3(b), 15, 83-85). The NRMP also focuses on the complaint's allegations that the Match Program "`imposes anticompetitive restraints through several of its features,'" including, inter alia,"`forcing applicants to commit contractually to any assigned position as a condition of enrolling in the matching program' and `severely restricting attempts by employers and applicants to withdraw from the matching program.'" NRMP Arbit. Mem. at 11 (quoting Compl. ¶ 86(a)-(b)). The NRMP asserts that the former of *146 these features "derives from paragraph 7.0 of the NRMP Policies to which applicants pledge adherence in the [Student Match Contract], while the latter derives from Paragraph 9.0 thereof." Id. at 11. In light of plaintiffs' specific allegations, the NRMP argues, the conspiracy claim with respect to the NRMP clearly "relates to" or "arises out of" the Match Contract, and therefore should be referred to arbitration under the arbitration agreement.
Plaintiffs respond that the arbitration agreement does not include antitrust claims expressly, that their Sherman Act claim does not concern the Student Match Contract, and that although this contract "may have evidentiary significance in proving defendants' illegal conspiracy," such significance does not mean that the dispute itself "relates to" or "arises from" the contract. Plaintiffs' Consolidated Brief Opposing Defendants' Motion to Dismiss and to Compel Arbitration ("Pls.' Arbit. Opp.") at 8.
Generally, courts have interpreted broadly agreements providing for the arbitration of disputes "arising out of or relating to" the underlying contract. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. at 624 n. 13, 105 S. Ct. 3346 ("arising out of or relating to" is a "broad clause" applicable to antitrust claims); Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 398, 87 S. Ct. 1801, 18 L. Ed. 2d 1270 (1967) ("arising out of or relating to" is a "broad" arbitration clause); Genesco v. T. Kakiuchi & Co., Ltd., 815 F.2d 840, 855 (2d Cir.1987) (language "sufficiently broad" to encompass fraudulent inducement claim). In order to determine whether the arbitration agreement in the Student Match Contract encompasses plaintiffs' claim as it relates to the NRMP, the Court must "focus on the factual allegations in the complaint rather than the legal causes of action asserted." Genesco Inc. v. T. Kakiuchi & Co., 815 F.2d at 846. "If the allegations underlying the claims `touch matters' covered by the parties' ... agreement, then those claims must be arbitrated ...." Id. (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. at 624 n. 13, 105 S. Ct. 3346).
Upon review of the complaint, the Court concludes that plaintiffs' conspiracy claim does relate in part to the Student Match Contract. Although plaintiffs assert that the agreement merely serves as evidence of the conspiracy, the allegations of the complaint suggest much more. Plaintiffs expressly allege that forcing plaintiffs to execute the contract was itself an anticompetitive act. See Compl. ¶ 86(b) (Match Program "imposes anticompetitive restraints through several of its features including ... forcing applicants to commit contractually to any assigned position as a condition of enrolling in the matching program"); ¶ 100(b) ("Defendants and members of the Defendant Class illegally restrain competition in a number of related ways, including ... assigning prospective resident physician employees to positions through the NRMP.").[17] Where the execution of the contract is itself alleged to be an anticompetitive act, plaintiffs cannot argue that the claim does not arise from or relate to the agreement. See Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 722 (9th Cir.1999) (antitrust claim "arose in connection with" the contract where plaintiff alleged *147 use of the agreement as an anticompetitive tool and court had to interpret agreement to determine whether competition was suppressed); PPG Industries, Inc. v. Pilkington plc, 825 F. Supp. 1465, 1478 (D.Ariz.1993) (same).
The cases on which plaintiffs rely in support of their position that the Student Match Contract merely evidences the alleged conspiracy do not lead to a different conclusion. In those actions, plaintiffs' claims were separate from and tangential to the contracts containing the arbitration provisions. See Telecom Italia, SpA v. Wholesale Telecom Corp., 248 F.3d 1109, 1116 (11th Cir.2001) (no referral of claim of tortious interference with contract between plaintiff and third party on basis of arbitration provision in separate lease agreement between plaintiff and defendant in absence of charge that defendant used execution of lease agreement to interfere with third-party contract); AlliedSignal, Inc. v. B.F. Goodrich Co., 183 F.3d 568, 573 (7th Cir.1999) (antitrust claim asserting, inter alia, anticompetitive pricing not referable under arbitration agreement because underlying contract did not regulate pricing); Ford v. NYLCare Health Plans of the Gulf Coast, Inc., 141 F.3d 243, 251 (5th Cir.1998) (no arbitration of false advertising claim that could be maintained without reference to "legally irrelevant" service contract containing arbitration provision); Coors Brewing Co. v. Molson Breweries, 51 F.3d 1511, 1516 (10th Cir.1995) (antitrust claims concerning defendant foreign brewer's alliance with rival domestic brewer unrelated to plaintiff's licensing agreement with foreign brewer and therefore not referable); Swensen's Ice Cream Co. v. Corsair Corp., 942 F.2d 1307, 1310 (8th Cir.1991) (no referral of antitrust claim charging defendant undermined distribution agreement and not the separate franchise agreement containing relevant arbitration clause). Here, the Student Match Contract, its terms and its execution are part of plaintiffs' conspiracy claim and therefore relate to the agreement.
C. Countervailing Statutory or Policy Concerns
In light of the Court's conclusion that plaintiffs' claim relates to the Student Match Contract, the Court must determine whether a countervailing statute or policy renders the claim nonetheless non-arbitrable. While plaintiffs acknowledge that antitrust claims are arbitrable as a matter of law, see Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. at 629, 105 S. Ct. 3346; Kotam Electronics, Inc. v. JBL Consumer Products, Inc., 93 F.3d 724, 728 (11th Cir.1996); Armco Steel Co., L.P. v. CSX Corp., 790 F. Supp. 311, 317 (D.D.C.1991), they assert that five countervailing policies direct the Court to deny the NRMP's motion to compel: (1) the arbitration provision improperly results from the "overwhelming economic power" of defendants; (2) NRMP policy requires that the parties share the costs of arbitration equally, which improperly restricts plaintiffs from pursuing their statutory claims; (3) the arbitration clause is unconscionable under Illinois law; (4) the arbitration clause is the result of duress under Illinois law; and (5) under Illinois law the Student Match Contract and its arbitration provision are unenforceable because they allegedly result from a violation of the antitrust laws. See Pls.' Arbit. Opp. at 18-28. Certain institutional defendants also filed a brief in opposition to the motion to compel, asserting that as a matter of Illinois law, a court and not an arbitrator must decide whether a contract is void as a violation of the antitrust laws. See Memorandum of Points and Authorities in Support of Opposition by Various Defendants to Motion to Compel Arbitration ("Inst. Defs.' Arbit. Mem.") at 1-2.
*148 1. Federal Defense of "Overwhelming Economic Power"
Plaintiffs first assert that they were forced to enter the Student Match Contract and, by extension, the arbitration provision, by the "overwhelming economic power" defendants hold over "[f]ourth year medical students, like plaintiffs here, [who] have no practical choice but to sign the match application with the `boilerplate' arbitration clause on which NRMP relies which is presented to the medical students on a `take it or leave it' basis." Pls.' Arbit. Opp. at 20-21. Plaintiffs argue that this imbalance in power between the NRMP and plaintiffs unlawfully denies them the right to vindicate their statutory rights under the Sherman Act. Plaintiffs rely on the Supreme Court's cautionary note in Mitsubishi that "courts should remain attuned to well-supported claims that the agreement to arbitrate resulted from the sort of fraud or overwhelming economic power that would provide grounds `for the revocation of any contract.'" Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. at 627, 105 S. Ct. 3346 (quoting 9 U.S.C. § 2). The Supreme Court subsequently has noted, however, that "[m]ere inequality in bargaining power [ ] is not a sufficient reason to hold that arbitration agreements are never enforceable ...." Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 33, 111 S. Ct. 1647, 114 L. Ed. 2d 26 (1991). See also Cole v. Burns Int'l Security Service, Civil No. 95-1785, 1996 U.S. Dist. LEXIS 22541, at *10-11 (D.D.C. Jan. 31, 1996), aff'd, 105 F.3d 1465 (D.C.Cir.1997). In any event, the burden is on plaintiffs to demonstrate that this defense is "well-supported," Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. at 627, 105 S. Ct. 3346, and they have failed to do so.
2. The NRMP "Fee-Splitting" Policy
Plaintiffs next argue that NRMP Policy 11.0, which is incorporated by reference in the Student Match Contract, frustrates the objectives of the Sherman Act because it requires plaintiffs to share equally in the costs of arbitration. See Pls.' Arbit. Opp. at 21. The Policy states that "[e]ach party shall share equally in the costs of arbitration." See Beran Compel. Aff., Ex. A-4, NRMP Policies in Effect for 1996 and 1997 Matches at 4.
Plaintiffs'"fee-splitting" claim does not survive scrutiny. While plaintiffs provide an affidavit detailing the possible costs of arbitration in this matter (see Pls.' Arbit. Opp., Affidavit of Michael L. Shakman), they offer no support for their assertion that the individual plaintiffs are unable to meet the anticipated costs. As the Supreme Court held in Green Tree Financial Corp. Alabama v. Randolph, 531 U.S. 79, 92, 121 S. Ct. 513, 148 L. Ed. 2d 373 (2000), "where a party seeks to invalidate an arbitration agreement on the ground that arbitration would be prohibitively expensive, that party bears the burden of showing the likelihood of incurring such costs." See also Livingston v. Associates Finance, Inc., 339 F.3d 553, 557 (7th Cir.2003) (plaintiffs' failure to provide details of financial resources under Green Tree defeats plaintiffs' claim).[18]
Furthermore, the NRMP has stated that if any plaintiff "can show the fees are unreasonable given their respective financial *149 situations, the NRMP has offered to pay the individual claimant's share of the costs of the arbitrator's fees." Defendant National Resident Matching Program's Reply Brief on its Motion to Dismiss and to Compel Arbitration ("NRMP's Arbit. Reply") at 15. See also Tr. at 65 ("[E]ven if there were a burden there, it can be cured, and the NRMP has made the very offer that has been approved in other cases to waive that provision."). Where a party moving to compel arbitration offers to cover the costs of arbitration to the extent the opposing party demonstrates its inability to pay, the opposing party is foreclosed from arguing against arbitration on expense grounds. See Livingston v. Associates Finance, Inc., 339 F.3d at 557. As Judge Walton concluded in Nelson v. Insignia/Esg, Inc., 215 F. Supp. 2d 143, 157 (D.D.C.2002), "even if the plaintiff had adequately demonstrated a prima facie showing of prohibitive expenses, the Court would conclude that the defendant's offer to pay all fees and expenses of arbitration effectively obviated any concerns the plaintiff may have raised regarding her ability to vindicate her claims in an arbitral forum because of the fee-splitting provision in the arbitration agreement." Accord Nur v. K.F.C., USA, Inc., 142 F. Supp. 2d 48, 52 (D.D.C.2001) (same). The Court thus concludes that the arbitration provision of the Student Match Contract cannot be voided on the basis of NRMP Policy 11.0.
3. Unconscionability
Section 2 of the FAA provides that "a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction ... shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2. The Supreme Court has concluded that "the text of § 2 declares that state law may be applied 'if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally.' Thus, generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements without contravening § 2." Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681, 686-87, 116 S. Ct. 1652, 134 L. Ed. 2d 902 (1996) (quoting Perry v. Thomas, 482 U.S. 483, 493 n. 9, 107 S. Ct. 2520, 96 L. Ed. 2d 426 (1987)) (emphasis in original).
Plaintiffs assert that the arbitration provision in the Student Match Contract should not be enforced because it is unconscionable under Illinois law.[19] Specifically, they argue that a gross disparity in bargaining positions existed between the NRMP and the medical students, that plaintiffs had no meaningful choice when presented with the Student Match Contract, and that the terms of the arbitration provision, "especially the fee-splitting requirement," are unreasonably favorable to defendants. Pls.' Arbit. Opp. at 26. The Supreme Court of Illinois has held that "a contract is unconscionable when it is improvident, oppressive, or totally one-sided ...." The Streams Sports Club, Ltd. v. Richmond, 99 Ill. 2d 182, 75 Ill. Dec. 667, 457 N.E.2d 1226, 1232 (1983) (internal citations omitted). Applying this standard, Illinois courts have found unconscionable those contracts that encompass "a lack of meaningful choice by one party," and that an unconscionable bargain is one "which *150 no reasonable person would make, and no honest person would accept." Saunders v. Michigan Avenue National Bank, 278 Ill.App.3d 307, 214 Ill. Dec. 1036, 662 N.E.2d 602, 610 (1996) (internal citation omitted). "Factors relevant to finding a contract unconscionable include gross disparity in the values exchanged or gross inequality in the bargaining positions of the parties together with terms unreasonably favorable to the stronger party." Ahern v. Knecht, 202 Ill.App.3d 709, 150 Ill. Dec. 660, 563 N.E.2d 787, 792 (1990).
The Court concludes that the arbitration provision of the Student Match Contract is not unconscionable under Illinois law. Plaintiffs make broad assertions that the agreement is "unreasonably favorable" to defendants and that plaintiffs had no meaningful choice when presented with the agreement. Under Illinois law, however, "mere disparity of bargaining power is not sufficient grounds to vitiate contractual obligations." The Streams Sports Club, Ltd. v. Richmond, 75 Ill. Dec. 667, 457 N.E.2d at 1232. Furthermore, "Illinois law does not void contracts where parties have unequal bargaining power, even if a contract is a so-called `take-it-or-leave-it' deal and `consent to [the] agreement is secured because of hard bargaining positions or the pressure of financial circumstances.'" Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361, 367 (7th Cir.1999) (quoting Kewanee Prod. Credit Ass'n v. G. Larson & Sons Farms, 146 Ill.App.3d 301, 99 Ill. Dec. 838, 496 N.E.2d 531, 534 (1986)). "`Rather, the conduct of the party obtaining the advantage must be shown to be tainted with some degree of fraud or wrongdoing in order have an agreement invalidated.... [T]he mere fact that a person enters into a contract as a result of the pressure of business circumstances ... is not sufficient.'" Koveleskie v. SBC Capital Markets, Inc., 167 F.3d at 367 (quoting Kewanee Prod. Credit Ass'n v. G. Larson & Sons Farms, 99 Ill. Dec. 838, 496 N.E.2d at 534). This is the case even if the contract is perceived to be a mandatory gateway to participation in a specific profession. See Metro East Center for Conditioning and Health v. Qwest Communications International, Inc., 294 F.3d 924, 926 (7th Cir.2002).[20]
4. Duress
Plaintiffs also argue that the arbitration agreement is unenforceable because it is a product of economic duress. Under Illinois law,
[d]uress occurs where one is induced by a wrongful act or threat of another to make a contract under circumstances that deprive one of the exercise of one's own free will. To establish duress, one must demonstrate that the threat has left the individual bereft of the quality of mind essential to the making of a contract. The acts or threats complained of must be wrongful; however, the term "wrongful" is not limited to acts that are criminal, tortious, or in violation of a contractual duty. They must extend to acts that are also wrongful in a moral sense.
Krilich v. American National Bank and Trust Co. of Chicago, 334 Ill.App.3d 563, 268 Ill. Dec. 531, 778 N.E.2d 1153, 1162 (2002) (internal citation and quotation omitted). See also Hurd v. Wildman, Harrold, Allen and Dixon, 303 Ill.App.3d *151 84, 236 Ill. Dec. 482, 707 N.E.2d 609, 614 (1999).
Plaintiffs do not argue that they were actually threatened or forced to enter the Student Match Contract but suggest that they lacked "free will" in that they either could sign the contract or "surrender their plan to become physicians and forfeit the time and money that they had invested in medical school." Pls.' Arbit. Opp. at 27. Once again, however, under Illinois law "where consent to an agreement is secured merely because of hard bargaining positions or financial pressures, duress does not exist." Hurd v. Wildman, Harrold, Allen and Dixon, 236 Ill. Dec. 482, 707 N.E.2d at 614. In addition, plaintiffs' argument that the NRMP's conduct was "wrongful" in executing the Student Match Contract because the contract allegedly formed part of the antitrust conspiracy is irrelevant to the duress analysis. The "wrongful" act for these purposes must relate to any intentional pressure or threats applied by the contracting party to enter into the agreement, not to the alleged "wrongfulness" of the underlying contract. See id. 236 Ill. Dec. 482, 707 N.E.2d at 615 ("Unless wrongful or unlawful pressure is applied, there is no business compulsion or economic duress."). The Court therefore concludes that the arbitration provision is not voidable as a product of duress.
5. Avoidance of Arbitration Under Illinois Arbitration Law
Finally, plaintiffs assert that in analyzing the motion to compel, the Court should apply Illinois arbitration law pursuant to the general choice of law provision of the Student Match Contract, and that under Illinois law the Student Match Contract is not enforceable because the contract itself allegedly "results from defendants' violation of the antitrust laws." Pls.' Arbit. Opp. at 24. Certain of the institutional defendants make a somewhat similar argument, asserting that under Illinois law, a court and not an arbitrator must decide whether the Student Match Contract violates the antitrust laws. See Inst. Defs.' Arbit. Mem. at 1-2. Defendants respond that both arguments are foreclosed by the Supreme Court's decision in Mastrobuono v. Shearson Lehman Hutton, Inc., in which the Court held that the parties' intent to incorporate state laws or rules regarding the scope of arbitration must be clear, and that a broad choice of law clause is insufficient to meet that requirement. See NRMP's Arbit. Reply at 20-21. Defendants assert that Illinois arbitration law therefore is not applicable here because the parties' intent to apply the state's arbitration law is not clearly demonstrated.
Plaintiffs and the institutional defendants primarily rely on Armco Steel Co. v. CSX Corp., 790 F.Supp. at 319, in which Judge Hogan concluded that "the FAA does not compel parties to arbitrate when the parties have chosen to be governed by state law and the state law relieves the parties of the responsibility to arbitrate when there is an allegation that the contract itself is a product of a violation of the antitrust laws." Judge Hogan concluded that by including a general choice-of-law provision in the underlying contract, the parties "indicated their intention to arbitrate to the extent allowed by Ohio law." Id.
Four years after Judge Hogan decided Armco, however, the Supreme Court decided Mastrobuono. The dispute in Mastrobuono arose out of a standard form contract that expressly provided in a general choice of law clause that the contract was to be governed by the laws of the State of New York. The matter went to arbitration, and the arbitrators awarded punitive damages. Respondent moved for *152 vacatur of the arbitration award on the ground that under New York law only courts may award punitive damages, a law that conflicted with the FAA rule allowing arbitrators to do so. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. at 53, 115 S. Ct. 1212. The district court granted respondent's motion, concluding that the general choice of law provision directed application of New York arbitration law to the arbitration matters. The Seventh Circuit upheld the decision to vacate the award, and appellants sought and obtained certiorari.
The Supreme Court first determined that nothing in the contract indicated that the parties affirmatively expressed their intent to preclude the arbitrator from awarding punitive damages notwithstanding the general choice of law provision. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. at 62, 115 S. Ct. 1212. The Court found that at most the general choice of law provision actually introduced an ambiguity into a contract that otherwise would have allowed for punitive damage awards, and in light of the strong federal policy favoring arbitration, any ambiguity had to be read in favor of arbitration and thus against application of New York law. See id.; see also EEOC v. Waffle House, Inc., 534 U.S. at 293 n. 9, 122 S. Ct. 754 (noting that Mastrobuono held that clear contractual language governs interpretation of arbitration agreements, but where choice of law provision is ambiguous the agreement must be read to favor arbitration under FAA). More specifically, the Court in Mastrobuono held that "the choice of law provision covers the rights and duties of the parties, while the arbitration clause covers arbitration" and its scope. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. at 64, 115 S. Ct. 1212.
Numerous courts of appeals have concluded that Mastrobuono requires that the intent of the contracting parties to apply state arbitration rules or law to arbitration proceedings must be explicitly stated in the contract and that under Mastrobuono, a general choice of law provision does not evidence such intent. See Sovak v. Chugai Pharmaceutical Co., 280 F.3d 1266, 1270 (9th Cir.2002) ("[A] general choice-of-law clause within an arbitration provision does not trump the presumption that the FAA supplies the rules for arbitration."); Roadway Package System, Inc. v. Kayser, 257 F.3d 287, 288-89 (3d Cir.2001) ("[A] generic choice-of-law clause, standing alone, is insufficient to support a finding that contracting parties intended to opt out of the FAA's default standards."); UHC Management Co., Inc. v. Computer Sciences Corp., 148 F.3d 992, 997 (8th Cir.1998) (finding general choice of law provision insufficient; court "will not interpret an arbitration agreement as precluding the application of the FAA unless the parties' intent that the agreement be so construed is abundantly clear"); Ferro Corp. v. Garrison Industries, Inc., 142 F.3d 926, 936 (6th Cir.1998) (rejecting general choice of law provision in absence of "indication that the parties intended to incorporate Ohio law to determine that the issue of fraudulent inducement should be adjudicated in a judicial forum"); Porter Hayden Co. v. Century Indem. Co., 136 F.3d 380, 383 (4th Cir.1998) ("[T]he choice-of-law provision in the [agreement] is neither an unequivocal expression of the parties' intent to commit adjudication of timeliness defenses to the court, rather than to an arbitrator, nor, more generally, an unequivocal expression of the parties' intent to invoke Maryland, rather than federal, arbitration law."); National Union Fire Insurance Co. of Pittsburgh, Pa. v. Belco Petroleum Corp., 88 F.3d 129, 135 (2d Cir.1996) ("[T]he choice-of-law clause is *153 not an unequivocal inclusion of a New York rule that requires the preclusive effect of a prior arbitration to be decided by the court."); PaineWebber Inc. v. Elahi, 87 F.3d 589, 594 (1st Cir.1996) (general choice of law provision did not indicate parties' intent to apply state rule requiring a judicial determination of effect of relevant clause).
In light of Mastrobuono and its progeny, the Court concludes that plaintiffs and the institutional defendants cannot rely on Judge Hogan's decision in Armco in support of their assertion that the general choice of law provision in the Student Match Contract suffices to demonstrate the parties' intent to apply Illinois law to define the scope of the arbitrator's authority. Mastrobuono requires more. See Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. at 62, 115 S. Ct. 1212; see also Ferro Corp. v. Garrison Industries, Inc., 142 F.3d at 933 (district court's reliance on Armco in support of application of state arbitration law on basis of general choice of law provision was "misplaced ... because [court] was bound to follow the Supreme Court's more recent decision [in Mastrobuono]").[21]
This Circuit's decision in Ekstrom v. Value Health, Inc., 68 F.3d 1391 (D.C.Cir.1995), is not to the contrary. In Ekstrom, the court of appeals considered the dismissal of the appellants' petition to vacate an arbitration award as untimely on the ground that Connecticut law restricted the time period within which a party could appeal an arbitration award to 30 days, a shorter period than allowed for under the FAA. The parties agreed that Connecticut substantive law on contracts and on arbitration applied, but appellants asserted that the statute of limitations question was procedural in nature under Connecticut law. See id. at 1394. The court of appeals concluded, however, that the statute of limitations issue was a substantive question under Connecticut law and therefore that Connecticut state arbitration laws applied. See id. at 1395. The court also concluded that the state law was not preempted by the FAA because no direct conflict existed in light of the parties' agreement to apply Connecticut substantive law. See id. at 1395-96. This Court concludes that Ekstrom is not inconsistent with Mastrobuono. Mastrobuono does not prevent parties from deciding that a state's arbitration law applies; it only requires that such a choice is expressed unequivocally, and the parties in Ekstrom expressly agreed that Connecticut substantive arbitration law applied. Here, by contrast, no such agreement exists. This Court therefore concludes that in this case federal arbitration law under the FAA defines the scope of the arbitrator's authority.[22]
The Court's conclusion is significant because federal law differs in substantial ways from Illinois law (as it is described by the non-moving parties) to the detriment of the non-moving parties' efforts to avoid arbitration. Plaintiffs assert that under Illinois law a party is relieved from an arbitration agreement if the underlying contract is alleged to be void for *154 violation of the antitrust laws. Under the FAA, however, a party is not relieved from an agreement to arbitrate on the ground that the contract is allegedly void for violation of the antitrust laws unless plaintiffs demonstrate that the Court's enforcement of the arbitration provision would make the Court a party to the unlawful activity. See Dickstein v. duPont, 443 F.2d 783, 786 (1st Cir.1971) (antitrust defenses to arbitration "allowed only in cases where the intrinsic illegality of the contract is so clear that enforcement would make a court party to the precise conduct forbidden by the law"); In re Universal Service Fund Telephone Billing Practices Litigation, No. 02-MD-1468, 2003 WL 21254765, *3 (D.Kan. May 27, 2003), 2003 U.S. Dist. LEXIS 9235, at *9-11 (finding arbitration clause enforceable, concluding that "a contract that is legal on its face and does not call for unlawful conduct in its performance is not voidable or unenforceable simply because it resulted from an antitrust conspiracy"). See also Kelly v. Kosuga, 358 U.S. 516, 518, 79 S. Ct. 429, 3 L. Ed. 2d 475 (1959) ("[A] plea of illegality based on violation of the Sherman Act has not met with much favor in this Court."); National Souvenir Center, Inc. v. Historic Figures, Inc., 728 F.2d 503, 514-16 (D.C.Cir.1984) ("remote danger" that court would be a party to enforcing illegal restraint "outweighed by the probability that allowing the [antitrust] defense would let the buyer escape from its side of a bargain"). Plaintiffs have made no such showing. Similarly, while the institutional defendants assert that Illinois law requires a court to determine whether a contract violates the antitrust laws, federal law permits the arbitrator to make that determination. See Simula, Inc. v. Autoliv, Inc., 175 F.3d at 721-22 (antitrust claim involving contract that allegedly functioned to restrain trade properly referred to arbitration); Coors Brewing Co. v. Molson Breweries, 51 F.3d at 1516 (same).[23]
D. Compelling Countervailing Interest in the Proper Adjudication of Sherman Act Claims
While the Court has concluded that the arbitration clause in the Student Match Contract encompasses the claim the NRMP seeks to have arbitrated, and that none of the countervailing statutory or policy considerations suggested by plaintiffs and certain institutional defendants relieve them from the responsibility to arbitrate, the Court nonetheless concludes that compelling arbitration of any part of the conspiracy claim would undermine the purposes of the Sherman Act by improperly compartmentalizing plaintiffs' single conspiracy claim. The Court also concludes that the request for arbitration by the AMA, a non-signatory to the Student Match Contract, would result in further improvident compartmentalizing of the claim.
In its motion, the NRMP describes plaintiffs' conspiracy claim, designating three main elements: the use of the Match Program to eliminate competition in the recruitment and employment of medical residents, the exchange of competitively sensitive information regarding resident physician compensation and benefits, and the promulgation of and compliance with purportedly anticompetitive accreditation standards. See NRMP's Arbit. Mem. at 3-4. The NRMP asserts that "[t]ogether, these three elements of the supposed conspiracy are said to have `the purpose and *155 effect of artificially fixing, depressing, standardizing and stabilizing resident physician compensation and other terms of employment.'" Id. at 4 (quoting Compl. ¶ 101). Plaintiffs likely would not dispute this characterization of their claim. The NRMP then seeks an order "compelling plaintiffs to arbitrate the first element of their tripartite claim; namely, that defendants used the Matching Program to eliminate competition in the recruitment and employment of resident physicians.'" NRMP's Arbit. Mem. at 7. Characterizing plaintiffs' single conspiracy claim as "tripartite," however, cannot disguise the fact that plaintiffs' claim alleges a single conspiracy with three interacting prongs that when considered together are alleged to have the anticompetitive effect charged.
The Supreme Court has held that where certain claims within a multi-count complaint are arbitrable, the liberal federal policy favoring arbitration directs referral of those claims to arbitration "even where the result would be the possibly inefficient maintenance of separate proceedings in different forums." Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 217, 105 S. Ct. 1238, 84 L. Ed. 2d 158 (1985). See also NPS Communications, Inc. v. The Continental Group, Inc., 760 F.2d 463, 465 (2d Cir.1985) (retaining non-arbitrable antitrust claims while referring arbitrable contract claims to arbitration). In Dean Witter, the Supreme Court rejected the "doctrine of intertwining claims" as a defense to arbitration even when "piecemeal" litigation results, "at least absent a countervailing policy manifested in another federal statute." Id. at 221. Some courts also have concluded that "the Arbitration Act requires the separation of arbitrable `issues' from non-arbitrable ones" within individual claims. Rain v. Donning Co./Publishers, Inc., 964 F.2d 1455, 1460 (4th Cir.1992) (in single breach of contract claim alleging multiple bases for breach, referring to arbitration only those bases expressly arbitrable under relevant agreement).
It does not follow, however, that one element of an overarching conspiracy claim, an element in which multiple defendants allegedly are involved, should be referred to arbitration. Conspiracy is a far different creature from breach of contract, and conspiracy allegations in antitrust cases cannot be compartmentalized and considered in isolation "as if they were separate lawsuits, thereby overlooking the conspiracy claim itself." In re Fine Paper Antitrust Litigation, 685 F.2d 810, 822 (3d Cir.1982). Indeed, in Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. 690, 82 S. Ct. 1404, 8 L. Ed. 2d 777 (1962), the Supreme Court expressly held that in cases that involve an alleged conspiracy among multiple actors involving multiple acts,
plaintiffs should be given the full benefit of their proof without tightly compartmentalizing the various factual components and wiping the slate clean after scrutiny of each. The character and effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts, but only by looking at it as a whole .... [I]n a case like the one before us, the duty of the jury was to look at the whole picture and not merely at the individual figures in it.
Id. at 699, 82 S. Ct. 1404 (internal quotation and citation omitted). See also In re Consumer Credit Counseling Services Antitrust Litigation, Misc. No. 97-0233/Civil Action No. 97-1741, 1997 WL 755019, at *5 (D.D.C. Dec. 4, 1997), 1997 U.S. Dist. LEXIS 19669, at *13-14 (refusing to consider allegations of various anticompetitive acts separately when brought under single conspiracy claim, concluding that "the character and effect of the conspiracy are *156 not to be evaluated by viewing its separate parts.... [T]he ramification and effect of the conspiracy should be looked at as a whole."); In re Medical X-Ray Film Antitrust Litigation, 946 F. Supp. 209, 218 (E.D.N.Y.1996) (refusing to consider elements of conspiracy claim separately because "while each of these factors taken in isolation does not necessarily provide a basis alone for inferring an agreement or conspiracy, in combination, these factors, taken together and `on the ground,' may support a reasonable inference that an agreement or conspiracy existed").
Chief Judge Hogan's decision in In re Vitamins Antitrust Litigation, Misc. No. 99-197 (TFH), 2000 WL 1475705 (D.D.C. May 9, 2000), 2000 U.S. Dist. LEXIS 7397 is instructive on this issue. In that case, certain defendants moved to sever the allegations that related to those defendants in plaintiffs' single price-fixing conspiracy claim, arguing that not one but three conspiracies existed, each based on different vitamins produced. Relying on Continental Ore, Judge Hogan denied the motion to sever portions of the single conspiracy claim, concluding that "it would be improper ... to prejudge the scope of the conspiracy that plaintiffs allege," and noting that "the trier of fact `must look at the whole picture and not merely at the individual figures in it.'" Id. at *17 (quoting Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. at 699, 82 S. Ct. 1404). The Court finds the Continental Ore directive even more compelling in the instant action, in which defendants assert that the alleged anticompetitive acts are facially lawful if considered separately. See Section IV(B)(3)-(5) infra. The Court concludes that the Continental Ore decision and its progeny manifest a clear and compelling countervailing interest in the comprehensive adjudication of conspiracy claims brought under the Sherman Act. Defendant NRMP's motion to compel arbitration therefore must be denied.
The Court also concludes that the request for arbitration made by the AMA, a non-signatory to the Student Match Contract, must be denied as well. The referral of the claim would further improperly compartmentalize plaintiffs' single conspiracy claim. Moreover, inasmuch as this request is predicated on a theory of derivative liability resulting from the AMA's role as a "governing sponsor" of the NRMP, the Court's conclusion that the claim as it relates to the NRMP is non-arbitrable also defeats these additional requests. See NRMP Arbit. Reply at 30-31. It also seems self-evident that entities that are not parties to a contract containing an arbitration agreement are not entitled to arbitrate their disputes. As the Supreme Court said in Waffle House,"[t]he FAA directs courts to place arbitration agreements on equal footing with other contracts, but it `does not require parties to arbitrate when they have not agreed to do so.'" EEOC v. Waffle House, Inc., 534 U.S. at 293, 122 S. Ct. 754 (quoting Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. at 478, 109 S. Ct. 1248). None of the plaintiffs in this case has a contractual obligation to arbitrate any claims with the AMA and the Court will not require them to do so. See Dayhoff, Inc. v. H.J. Heinz, Co., 86 F.3d 1287, 1296-97 (3d Cir.1996).
IV. DEFENDANTS' RULE 12(b)(6) MOTIONS TO DISMISS FOR FAILURE TO STATE A CLAIM
Plaintiffs raise one claim of price-fixing against all defendants under Section 1 of the Sherman Act: "Defendants and others have illegally contracted, combined and conspired among themselves to displace competition in the recruitment, hiring, employment and compensation of resident physicians, and to impose a scheme of *157 restraints[,] which have the purpose and effect of fixing, artificially depressing, standardizing and stabilizing resident physician compensation and other terms of employment." Compl. ¶ 2. Certain defendants have filed motions to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.
A. The Legal Framework
1. Failure to State a Claim in the Antitrust Context
On a motion to dismiss for failure to state a claim under Rule 12(b)(6), the Court must assume the truth of the facts alleged in the complaint and may grant the motion only if it appears that plaintiffs will be unable to prove any set of facts that would justify relief. See Summit Health, Ltd. v. Pinhas, 500 U.S. 322, 325, 111 S. Ct. 1842, 114 L. Ed. 2d 366 (1991); Browning v. Clinton, 292 F.3d 235, 242 (D.C.Cir.2002); Haynesworth v. Miller, 820 F.2d 1245, 1254 (D.C.Cir.1987). The complaint must contain "either direct or inferential allegations respecting all material elements necessary to sustain a recovery under some viable legal theory." In re Vitamins Antitrust Litigation, 2000 WL 1475705, at *8, 2000 U.S. Dist. LEXIS 7397, at *45. The complaint "is construed liberally in the plaintiffs' favor, and [the Court should] grant plaintiffs the benefit of all inferences that can be derived from the facts alleged." Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994). Accord Andrx Pharmaceuticals v. Biovail Corp. Int'l, 256 F.3d 799, 805 (D.C.Cir.2001) (same standard in antitrust context). The Court need not accept any inferences drawn by plaintiffs, however, "if such inferences are unsupported by the facts set out in the complaint. Nor must the Court accept legal conclusions cast in the form of factual allegations." Andrx Pharmaceuticals v. Biovail Corp. Int'l, 256 F.3d at 805 (quoting Kowal v. MCI Communications Corp., 16 F.3d at 1276).
To survive a Rule 12(b)(6) motion in the antitrust context, plaintiffs must do more than simply paraphrase the language of the federal antitrust laws or state in conclusory terms that a defendant has violated those laws. See Dial A Car. Inc. v. Transportation, Inc., 884 F. Supp. 584, 588 (D.D.C.1995), aff'd 82 F.3d 484 (D.C.Cir.1996). "If [a plaintiff] claims an antitrust violation, but the facts he narrates do not at least outline or adumbrate such a violation, he will get nowhere merely by dressing them up in the language of antitrust." Sutliff, Inc. v. Donovan Companies, Inc., 727 F.2d 648, 654 (7th Cir.1984). See also TV Communications Network, Inc. v. Turner Network Television, Inc., 964 F.2d 1022, 1024 (10th Cir.1992). "Conclusory allegations, in a complaint, if they stand alone, are a danger sign that the plaintiff is engaged in a fishing expedition." DM Research, Inc. v. College of American Pathologists, 170 F.3d 53, 55 (1st Cir.1999). See also GTE New Media Services Inc. v. Ameritech Corp., 21 F.Supp.2d at 40. The Supreme Court has cautioned, however, that in the antitrust context, "where `the proof is largely in the hands of the alleged conspirators,' dismissals prior to giving the plaintiff ample opportunity for discovery should be granted very sparingly." Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 746, 96 S. Ct. 1848, 48 L. Ed. 2d 338 (1976) (quoting Poller v. Columbia Broadcasting, 368 U.S. 464, 473, 82 S. Ct. 486, 7 L. Ed. 2d 458 (1962)).
2. Conspiracy in Restraint of Trade under Section 1
In order to state a claim of conspiracy in restraint of trade in violation of Section 1 of the Sherman Act, plaintiffs must allege (1) that the defendants entered into some agreement, contract, combination, conspiracy or other concerted activity; *158 (2) that at least one defendant committed an overt act in furtherance of the conspiracy; and (3) that the agreement constituted an unreasonable restraint of trade in the relevant market in a manner that had an impact on interstate commerce. See Invamed, Inc. v. Barr Laboratories, Inc., 22 F. Supp. 2d 210, 221 (S.D.N.Y.1998); Dial A Car, Inc. v. Transportation, Inc., 884 F.Supp. at 591. Like other conspiracies, at the heart of an antitrust conspiracy is an agreement and a conscious decision by each defendant to join it. While an agreement in "restraint on trade is rarely evidenced by an express oral or written agreement," Binder v. District of Columbia, Civil Action No. 90-0255, 1991 U.S. Dist. LEXIS 7094, at *9 (D.D.C. May 22, 1991), plaintiffs must allege "that the challenged restraint is not the result of independent actions by the defendants," but rather that "the defendants consciously committed to a common agreement of an unreasonable restraint on trade." GTE New Media Services Inc. v. Ameritech Corp., 21 F.Supp.2d at 42 (citing Monsanto v. Spray-Rite Service Corp., 465 U.S. 752, 761, 104 S. Ct. 1464, 79 L. Ed. 2d 775 (1984)). In the Section 1 context, "`[p]roof of a tacit, as opposed to explicit, understanding is sufficient to show agreement.'" Federal Trade Commission v. Mylan Laboratories, Inc., 62 F. Supp. 2d 25, 55 (D.D.C.1999) (quoting Halberstam v. Welch, 705 F.2d 472, 477 (D.C.Cir.1983)). Courts therefore "have ... allowed `inferences [to be] fairly drawn from the behavior of the alleged conspirators' to prove conspiracy." See Binder v. District of Columbia, 1991 U.S. Dist. LEXIS 7094, at *9 (quoting Michelman v. Clark-Schwebel Fiber Glass Corp., 534 F.2d 1036, 1043 (2d Cir.1976)).
3. Inapplicability of Matsushita to Rule 12(b)(6) Motions
Two defendants, the ACGME and Yeshiva University ("Yeshiva"), argue that there is another element to the legal standard that plaintiffs must satisfy in order to survive a motion to dismiss in the antitrust context. Specifically, these defendants assert that there is a limitation on the inferences that the Court may make in consideration of their motions to dismiss that derives from the Supreme Court's decision in Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). In Matsushita, the Supreme Court considered a Section 1 conspiracy claim in the summary judgment context, and concluded that if a plaintiff relies on circumstantial evidence of an agreement rather than express acts, and if the claim against a defendant appears implausible, a plaintiff has an additional evidentiary burden:
[T]he absence of any plausible motive to engage in the conduct charged is highly relevant to whether a `genuine issue for trial' exists within the meaning of Rule 56(e). Lack of motive bears on the range of permissible conclusions that might be drawn from ambiguous evidence: if petitioners had no rational economic motive to conspire, and if their conduct is consistent with other, equally plausible explanations, the conduct does not give rise to an inference of conspiracy.
Id. at 596-97, 106 S. Ct. 1348. Thus, if it appears that a defendant lacks a plausible motive for engaging in anticompetitive conduct, in order to survive summary judgment a plaintiff must present evidence that "show[s] that the inference of conspiracy is reasonable in light of the competing inferences of independent action or collusive action that could not have harmed respondents." Id. at 587, 106 S. Ct. 1348. The ACGME and Yeshiva ask the Court to extend Matsushita to plaintiffs' initial pleading burden, thereby requiring plaintiffs *159 to have put forth allegations in their complaint demonstrating the reasonableness of their conspiracy claim in comparison with potential competing inferences defendants may raise. See Memorandum of Defendant Accreditation Council for Graduate Medical Education in Support of Its Motion to Dismiss ("ACGME (b)(6) Mem.") at 16; Defendant Yeshiva University's Memorandum in Support of Its Motion to Dismiss ("Yesh.(b)(6) Mem.") at 7-8.
The Court concludes that application of the Matsushita rule simply is not appropriate in the context of a motion to dismiss. A motion to dismiss for failure to state a claim generally is made before discovery and should be evaluated on the basis of the four corners of the pleading. See Summit Health, Ltd. v. Pinhas, 500 U.S. at 325, 111 S. Ct. 1842; Browning v. Clinton, 292 F.3d at 242. A summary judgment motion commonly is filed after at least some discovery and it turns on whether there is a genuine issue of material fact for trial; it is only in that post-discovery context in which the plausibility of competing motives should be assessed. See Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451, 468, 112 S. Ct. 2072, 119 L. Ed. 2d 265 (1992) ("Matsushita demands only that the nonmoving party's inferences be reasonable in order to reach the jury, a requirement that was not invented, but merely articulated, in that decision. If the plaintiff's theory is economically senseless, no reasonable jury could find in its favor, and summary judgment should be granted.").
By contrast, plaintiffs are not required to set forth allegations of motive in their complaint in anticipation of what defendants may argue on a motion to dismiss are equally plausible explanations for the alleged conspiratorial activities. See Atlantic Coast Airlines Holdings, Inc. v. Mesa Air Group, Inc., 295 F. Supp. 2d 75, 91-92 (D.D.C.2003) (rejecting applicability of Matsushita evidentiary burden on motion for preliminary injunction); In re Compact Disc Minimum Advertised Price Antitrust Litigation, 138 F. Supp. 2d 25, 27 (D.Me.2001) (expressly rejecting application of Matsushita summary judgment evidentiary burden to conspiracy claim on motion to dismiss); AD/SAT v. Associated Press, 885 F. Supp. 511, 521 (S.D.N.Y.1995) (plaintiff's conspiracy allegations "while sufficient to survive a motion to dismiss, [were] inadequate to defeat the ... motion for summary judgment [under the Matsushita standard]"). Antitrust claims, like all other claims, are subject only to the notice pleading requirements of Rule 8 of the Federal Rules of Civil Procedure. See Todd v. Exxon Corp., 275 F.3d 191, 198 (2d Cir.2001) ("[A] short plain statement of a claim for relief which gives notice to the opposing party is all that is necessary in antitrust cases, as in other cases under the Federal Rules."); MCM Partners, Inc. v. Andrews-Bartlett & Associates, 62 F.3d 967, 976 (7th Cir.1995) ("[A]n antitrust plaintiff need not include the particulars of his claim to survive a motion to dismiss.... It is instead sufficient for the plaintiff to include in its complaint only a short and plain statement of the claim showing an entitlement to relief.") (internal quotation and citation omitted).[24]
*160 4. The Import of Continental Ore and American Tobacco
In Continental Ore Co. v. Union Carbide & Carbon Corp., the Supreme Court held that in cases that involve an alleged conspiracy among multiple actors involving multiple acts,
plaintiffs should be given the full benefit of their proof without tightly compartmentalizing the various factual components and wiping the slate clean after scrutiny of each. The character and effect of a conspiracy are not to be judged by dismembering it and viewing its separate parts, but only by looking at it as a whole ... and in a case like the one before us, the duty of the jury was to look at the whole picture and not merely at the individual figures in it.
Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. at 699, 82 S. Ct. 1404 (internal quotation and citation omitted). See also In re Fine Paper Antitrust Litigation, 685 F.2d at 822 (conspiracy allegations in antitrust cases can not be compartmentalized and considered seriatim "as if they were separate lawsuits, thereby overlooking the conspiracy claim itself"); In re Medical X-Ray Film Antitrust Litigation, 946 F.Supp. at 218 (same). Although Continental Ore was decided in the context of a motion for a directed verdict after trial, its maxim has been applied in a variety of contexts, including in consideration of motions to dismiss. See In re Consumer Credit Counseling Services Antitrust Litigation, 1997 WL 755019, at * 5, 1997 U.S. Dist. LEXIS 19669, at *13-14 (court cannot consider alleged anticompetitive acts separately on a motion to dismiss when those acts are alleged to be part of a single conspiracy claim); In re Medical X-Ray Film Antitrust Litigation, 946 F.Supp. at 218 (summary judgment); ITT World Communications Inc. v. Western Union Telegraph Co., 524 F. Supp. 702, 704 (S.D.N.Y.1981) (denying motion to dismiss). "[T]he character and effect of the conspiracy are not to be evaluated by viewing its separate parts .... [T]he ramification and effect of the conspiracy should be looked at as a whole." In re Consumer Credit Counseling Services Antitrust Litigation, 1997 WL 755019, at *5, 1997 U.S. Dist. LEXIS 19669, at *13-14. In analyzing defendants' Rule 12(b)(6) motions, the Court therefore will consider the allegations with respect to the individual defendants only in the context of the larger conspiracy alleged.
The Supreme Court also stated in Continental Ore that "acts which are in and of themselves legal lose that character when they become constituent elements of an unlawful scheme." Continental Ore Co. v. Union Carbide & Carbon Corp., 370 U.S. at 707, 82 S. Ct. 1404. As the Court earlier had announced in American Tobacco Co. v. United States, 328 U.S. 781, 66 S. Ct. 1125, 90 L. Ed. 1575 (1946):
It is not the form of the combination or the particular means used but the result *161 to be achieved that the statute condemns. It is not of importance whether the means used to accomplish the unlawful objective are in themselves lawful or unlawful. Acts done to give effect to the conspiracy may be in themselves wholly innocent acts. Yet, if they are part of the sum of the acts which are relied upon to effectuate the conspiracy which the statute forbids, they come within its prohibition.
Id. at 809, 66 S. Ct. 1125. See also In re Medical X-Ray Film Antitrust Litigation, 946 F.Supp. at 218; ITT World Communications Inc. v. Western Union Telegraph Co., 524 F.Supp. at 704.
Neither of these rules, however, relieves plaintiffs of the burden of adequately alleging that a conspiracy to restrain trade existed in the first instance and that each defendant knowingly joined or agreed to participate in the conspiracy. If plaintiffs fail to do so, neither Continental Ore nor American Tobacco shield plaintiffs' claims from dismissal. See Southern Pacific Communications Co. v. American Telephone & Telegraph Co., 556 F. Supp. 825, 888 (D.D.C.1982) ("[N]othing in Continental Ore requires a conclusion that a defendant that has not engaged in an unlawful conspiracy, and has committed no acts in themselves violative of the Sherman Act, could be found guilty of antitrust violations on some theory that the acts have `synergistic effects' that convert lawful conduct into violations of law.") (emphasis in original).
B. Organizational Defendants' Motions to Dismiss
Plaintiffs have sued seven organizational defendants: (1) the American Hospital Association ("AHA"); (2) the American Board of Medical Specialties ("ABMS"); (3) the Council of Medical Specialty Societies ("CMSS"); (4) the American Association of Medical Colleges ("AAMC"); (5) the American Medical Association ("AMA"); (6) the Accreditation Council for Graduate Medical Education ("ACGME"); and (7) the National Resident Matching Program ("NRMP"). Plaintiffs in their complaint allege that the AAMC "operates and manages" the Match Program, which functions to suppress competition in the hiring of medical residents by adopting policies that "restrict[ ] attempts by employers and applicants to withdraw from the matching program," that "prohibit [ ] employment agreements between [Match Program] participants outside the [M]atch," and that require "applicants to commit contractually to any assigned position as a condition of enrolling in the [Match Program]." Compl. ¶ 86(a), (b). Certain ACGME standards that limit the number of residents in any given program and limit the mobility of medical residents between programs allegedly further serve to suppress competition in the hiring and employment of medical residents. See id. ¶ 88. Plaintiffs charge that medical students are compelled to participate in the Match Program because "with few exceptions, only resident physicians who complete specified employment periods in ACGME-accredited institutions and programs or combined programs are eligible for ABMS-member board certification," and that the ACGME "encourages and/or requires participation in [the Match] as a condition of accreditation." Id. ¶¶ 87, 88(c).
Plaintiffs' claim is that the restrictive "one position" nature of the Match Program combined with the ACGME accreditation standards together foreclose any external pressure on the institutional defendants to raise compensation levels that would be generated by prospective medical residents with multiple employment offers and their attendant bargaining power. See Compl. ¶ 92. This allegedly allows for *162 compensation to be stabilized at a depressed level, facilitated by the institutional defendants' receipt of the COTH Survey distributed by the AAMC and the FREIDA database maintained by the AMA, which both provide annual medical resident compensation information. See id. ¶ 80. Furthermore, the AAMC's and the AMA's dissemination of recent and current compensation information and the ACGME's review of individual residency programs' compensation policies allegedly provide the means by which the institutional co-conspirators' compensation levels are policed. See id. ¶¶ 73, 88(d). Plaintiffs allege that medical resident salaries are and essentially have been stabilized at artificially low rates for more than 30 years, notwithstanding differences between programs in program prestige, geographic location, resident merit and year of employment. See id. ¶¶ 92-96.
From these allegations, the Court concludes that plaintiffs adequately have alleged a common agreement to displace competition in the recruitment, hiring, employment and compensation of resident physicians and to impose a scheme of restraints, which have the purpose and effect of fixing, artificially depressing, standardizing and stabilizing resident physician compensation and other terms of employment among a number of the named organizational defendants and those institutional defendants that participated in the Match Program. The extent to which plaintiffs adequately have alleged that the organizational defendants participated in the conspiracy and which organizational defendants participated is the subject of the following analyses.[25]
All the organizational defendants but the NRMP have filed motions to dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. All of the movants except the ACGME assert that plaintiffs' claim based on the allegation that they are "governing sponsors" of the NRMP and the ACGME cannot survive scrutiny. The AAMC and the AMA also argue that their information exchange programs in the case of the AAMC, the COTH Survey; in the case of the AMA, the FREIDA database cannot form the basis of a Section 1 antitrust claim. The ACGME argues that its creation and enforcement of accreditation standards for resident medical programs is non-commercial conduct that is beyond the reach of the antitrust laws.
1. Motion to Dismiss of the AHA
The AHA moves to dismiss the claim against it on the ground that the only allegations in the complaint pertaining to it namely that it is a "governing sponsor" of the NRMP and the ACGME are insufficient to demonstrate its participation in an antitrust conspiracy. The AHA further argues that those generalized allegations in the complaint pertaining to all "defendants" are conclusory and also are insufficient to tie the association to the conspiracy. See Memorandum of American Hospital Association in Support of Its Motion to Dismiss for Failure to State a Claim ("AHA (b)(6) Mem.") at 1-2.[26]
*163 Plaintiffs concede that they do not make any argument on the basis of the vicarious liability of the so-called governing sponsors for the actions of the NRMP or the ACGME or on the basis of any like doctrine. See Plaintiffs' Consolidated Brief in Opposition to Defendants' Rule 12(b)(6) Motions ("Pls.' (b)(6) Opp.") at 46. Instead, they assert that they have made specific allegations of direct participation by the AHA in the conspiracy. Yet plaintiffs offer only the following paragraphs of the complaint to tie the AHA to the alleged conspiracy: that the AHA is a "governing sponsor" of the NRMP and the ACGME (see Compl. ¶ 19); that "[d]efendants collectively design and implement [the Match Program] and collectively agree to and comply with its anticompetitive restrictions" (see id. ¶ 83); that "[d]efendants periodically refine the [Match Program] to strengthen and expand its anticompetitive effect and to close avenues of circumvention" (see id. ¶ 85); and that the Match Program "adopt[s] policies forcing the vast majority of prospective resident physicians to use the [Match Program] rather than attempting to find employment on their own" (Id. ¶ 86(a)). See Pls.' (b)(6) Opp. at 43-44 (quoting complaint).
Plaintiffs do not dispute the AHA's assertion that Illinois law, the state of incorporation of the AHA and the NRMP, does not recognize or otherwise define the term "governing sponsor." The meaning of the term "governing sponsor" is far from self-evident, and plaintiffs do not make any assertions with respect to what role governing sponsors play for either the NRMP or the ACGME. The Court will not speculate as to the purpose or activities of a "governing sponsor" or infer from this vague term that the AHA "designed and implemented" or "facilitated" the Match Program or that, through its "active governance" of the ACGME, the AHA "created" the allegedly anticompetitive accreditation standards. Pls.' (b)(6) Opp. at 44, 44 n. 31, 45. While all inferences are to be drawn in favor of plaintiffs on a motion to dismiss, the Court will not draw inferences from such vague, unsupported allegations. See Andrx Pharmaceuticals v. Biovail Corp. Int'l, 256 F.3d at 805. Nor will the Court permit plaintiffs to supplement the bare and insufficient allegations in their complaint with additional assertions from their brief. It is "axiomatic that the complaint may not be amended by the briefs in opposition to a motion to dismiss." Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th Cir.1984); see Coleman v. Pension Benefit Guaranty Corp., 94 F. Supp. 2d 18, 24 n. 8 (D.D.C.2000).
Furthermore, plaintiffs' use of the term "defendants" to refer to multiple defendants situated very differently from one another in the context of general and global allegations is insufficient either by itself or in combination with the allegations relating to "governing sponsor" to demonstrate a basis for the AHA's participation in the conspiracy. Plaintiffs cannot escape their burden of alleging that each defendant participated in or agreed to join the conspiracy by using the term "defendants" to apply to numerous parties without any specific allegations as to the AHA. See Invamed, Inc. v. Barr Laboratories, Inc., 22 F.Supp.2d at 221 ("The complaint fails *164 to support the existence of conspiracy as it presents no facts that might establish any participation by [parent companies] save including them within the term `defendants.' ... [Plaintiff] has not alleged that the [parent companies] `acted' in any way."). Although the Court must consider defendants' motions to dismiss in the context of the larger conspiracy, as discussed in Section IV(A)(4), supra, plaintiffs are not relieved from alleging that each individual defendant joined the conspiracy and played some role in it. See Invamed, Inc. v. Barr Laboratories, Inc., 22 F.Supp.2d at 221; Southern Pacific Communications Co. v. American Telephone & Telegraph Co., 556 F.Supp. at 888.[27]
Plaintiffs' allegations themselves evidence the ambiguity inherent in the global term "defendants." Surely paragraph 83 of the complaint, for example, does not mean that all the defendants design the Match Program or that each defendant is in a position to implement it. See Compl. ¶ 83 ("Defendants collectively design and implement [the Match Program] and collectively agree to and comply with its anticompetitive restrictions."). Nor can paragraph 85 mean that each defendant "periodically refine[s] the matching program to strengthen and expand its anticompetitive effect," for not every defendant is in a position to do so. Id. ¶ 85. Compare In re Magnetic Audiotape Antitrust Litigation, 99 Civ. 1580, 2002 U.S. Dist. LEXIS 8366, at *14 (S.D.N.Y. May 9, 2002) (allegations concerning all "defendants" adequate where allegation addressed specific meeting of all defendants at which price-fixing conspiracy was established).
The Court concludes that plaintiffs' allegations with respect to the AHA are vague, conclusory and simply insufficient to meet plaintiffs' burden under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The Court therefore grants defendant AHA's motion to dismiss for failure to state a claim.
2. Motions to Dismiss of the CMSS and the ABMS
Defendants CMSS and ABMS move to dismiss the complaint by joining in the motions of the AMA, the AAMC, the ACGME and the AHA. See CMSS Mot. at 2; ABMS Mot. at 2. Upon review of the complaint, the Court determines that the only explicit or implied reference to the CMSS in the complaint is an allegation defining the CMSS as "an Illinois not-for-profit corporation whose membership consists of 17 physician societies in specialties having a member board participating in ABMS. The CMSS is one of five governing sponsors of the NRMP and the ACGME." Compl. ¶ 21. Plaintiffs allege that the ABMS also is one of five governing sponsors of the NRMP and the ACGME. See id. ¶ 20.[28] Plaintiffs further allege (1) that the ABMS is "an Illinois not-for-profit corporation whose membership consists of 24 recognized medical specialty certification boards in the United States" (id.); (2) that these medical specialty boards "develop and apply professional and education standards for the evaluation and certification of physician specialists" (id.); and (3) that "[s]pecialty certification by one of the *165 ABMS-member boards is essential to graduating medical school seniors and other eligible prospective residents. ABMS-member boards, with few exceptions, accept only ACGME-accredited residency employment in satisfaction of certification requirements." Id. ¶ 69.
Even if these allegations adequately alleged that the 17 physician societies that are members of the CMSS or the 24 medical certification boards that are members of the ABMS were part of the conspiracy, the Court will not impute the activities of either organization's members to the organization itself absent allegations that the entity participated in the conspiracy. There are no such allegations in the complaint, and it is established that a trade association or like organization can be held liable "for concerted action" taken by its members in furtherance of a conspiracy only if the association "acted as an entity." Alvord-Polk, Inc. v. F. Schumacher & Co., 37 F.3d 996, 1007 (3d Cir.1994). "[C]oncerted action does not exist every time a trade association member acts or speaks," and an association cannot be held liable "for the actions of its individual members alone." Id.; compare Mastercard Int'l Inc. v. Dean Witter, 93 Civ. 1478 (LJF), 1993 WL 338213, at *2-3 (S.D.N.Y. Aug. 27, 1993), 1993 U.S. Dist. LEXIS 11964, at *6-7 (association comprised of horizontal competitors acting as a single entity under name of association in order to restrain trade subject to Section 1 scrutiny). For these reasons, together with those stated in Section IV(B)(1), supra, regarding governing sponsors, the Court concludes that plaintiffs have failed to state a claim against either the CMSS or the ABMS.
3. Motion to Dismiss of the AAMC
The AAMC asserts that only three allegations in the complaint pertain to it: (1) the AAMC "manage[s] and operate[s] the residency matching program of the NRMP" (Compl.¶ 15); (2) the "AAMC is one of the five governing sponsors of both the NRMP and the ACGME" (id. ¶ 17); and (3) "the AAMC/COTH annually surveys members of the COTH Section" of the AAMC and then "publishes an annual report entitled `Survey of Housestaff Stipends, Benefits and Funding,'" which includes, inter alia, historical (from 1968) and current national average salaries for first year residents as well as the average salaries for years one through six of the post graduate years of employment (id. ¶ 74). See AAMC (b)(6) Mem. at 3. In addition to these specific allegations cited by the AAMC, plaintiffs include introductory information about the AAMC, alleging that it is a not-for-profit corporation made up of a membership including "all 125 accredited medical schools (including those medical schools named as Defendants in this Complaint) and approximately 375 major teaching hospitals and health systems in the United States (including those hospitals and health systems named as Defendants in this Complaint)." Compl. ¶ 17.[29]
With respect to the allegations concerning the COTH Survey, plaintiffs plead in detail the way in which the AAMC through the COTH Survey allegedly facilitates the conspiracy by annually gathering and disseminating medical resident compensation information. See Compl. ¶¶ 73-79, 81. Specifically, plaintiffs make the following allegations: The AAMC annually surveys the members of the COTH Section *166 in July seeking compensation levels for the employment year that begins that month. See id. ¶ 74. Approximately 75% of all residents are employed by COTH Section members that the AAMC surveys. See id. ¶ 75. Based on the responses, the AAMC publishes the COTH Survey, which in addition to compensation information includes budgetary information detailing resident compensation as a percentage of total operating budgets, the ratio of resident benefits to salaries, and funding sources for resident salaries. See id. ¶ 77. The full Survey is distributed in October or November of that same year with a "preliminary report" containing only salary information issued some time prior to the full report. Id. ¶ 78. The information disseminated in the Survey is highly specific because once salary information is broken down into subsets, those subsets "consist of as few as five employers." Id. ¶ 76. As a function of the foregoing, the "annual survey data provide employers with a baseline for determining resident physician compensation for the upcoming year. The following year employers are provided with another survey report which establishes a new baseline. In this way, employers avoid straying from standardized compensation levels." Id. ¶ 79.
The AAMC argues that plaintiffs have failed to state a claim against it because the allegations related to the COTH Survey concern only the exchange of information that is only in aggregated form, because the Survey includes no information on future compensation, because the information is readily available to the public, and because there is no allegation that the AAMC participated in any discussion of compensation information. See AAMC (b)(6) Mem. at 7-21. The AAMC maintains that the dissemination of this kind of information under such circumstances is not a violation of the antitrust laws.[30]
As a preliminary matter, the Court notes that the AAMC mischaracterizes plaintiffs' claim by limiting the scope of the claim to the allegations that explicitly name the AAMC. A more accurate characterization of plaintiffs' claim is that there exists an agreement to fix the compensation of resident physicians at an improperly depressed level and that the AAMC has participated in the conspiracy by facilitating the anticompetitive agreement through the creation and dissemination of the COTH Survey, which provides a mechanism by which compensation levels remain stabilized and depressed. Plaintiffs specifically allege that together the Match Program and the ACGME accreditation standards eliminate the possibility that prospective medical residents can use compensation as a bargaining chip in gaining employment or in negotiating the terms of employment, and that the compensation information disseminated by the AAMC assists in keeping compensation levels for resident physicians fixed. The AAMC's motion to dismiss must be viewed through the lens of this larger price-fixing charge, and through this lens the Court concludes that while plaintiffs have not alleged expressly that the AAMC agreed to join the conspiracy, it is reasonable to infer from the facts and circumstances detailed in the complaint that the AAMC, an organization whose membership includes the institutional defendants, annually collects *167 and disseminates compensation information to its members in order to facilitate the alleged compensation-fixing agreement and to allow for internal policing of member co-conspirators.
The AAMC argues that several facets of the COTH Survey preclude the Court from concluding that plaintiffs adequately have alleged that the AAMC participated in the conspiracy, but none of its arguments is persuasive. First, the fact that plaintiffs' allegations regarding the AAMC concern information dissemination does not prevent the Court from concluding that the AAMC participated in the conspiracy. While the sharing of pricing and other information often may serve legitimate purposes, United States v. United States Gypsum Co., 438 U.S. 422, 443 n. 16, 98 S. Ct. 2864, 57 L. Ed. 2d 854 (1978), "information exchange is an example of a facilitating practice that [in some circumstances] can help support an inference of a price-fixing agreement." Todd v. Exxon Corp., 275 F.3d at 198. See also Penne v. Greater Minneapolis Area Board of Realtors, 604 F.2d 1143, 1148 (8th Cir.1979) (exchange of price information among competitors, although not a per se violation, may carry with it "the potential for the development of concerted price-fixing arrangements which lie at the core of the Sherman Act's prohibitions") (internal quotation omitted). Second, the fact that the COTH Survey only offers aggregated information rather than employer-specific information does not mean that such information could not have been utilized to facilitate the price-fixing conspiracy. See AAMC (b)(6) Mem. at 14-15. To the contrary, plaintiffs expressly have alleged that "once salary information [in the COTH Survey] is broken down into subsets based on year of employment, region and ownership type, those subsets consist of as few as five employers." See Compl. ¶ 76. In similar circumstances other courts have found sufficient allegations of antitrust violations. See Todd v. Exxon Corp., 275 F.3d at 212 (aggregated compensation data reducible to subsets consisting of three competitors facilitated price-fixing conspiracy).
Third, the fact that plaintiffs allege only the exchange of past and current price information as contrasted with proposals for future price increases or announcements of new prices does not defeat plaintiffs' claim that the information exchange facilitated the stabilization of medical resident compensation. As the Supreme Court has held, "[e]xchanges of current price information ... have the greatest potential for generating anti-competitive effects and ... have consistently been held to violate the Sherman Act." United States v. United States Gypsum Co., 438 U.S. at 443 n. 16, 98 S. Ct. 2864. From plaintiffs' allegations regarding the COTH Survey, it is reasonable to infer that the annual nature of the survey provides the institutional defendant co-conspirators the information they need to keep compensation levels depressed; each institutional defendant is able to set compensation levels consistent with the previous year knowing that the levels will be checked against those of the coming year with the next Survey. See United States v. Container Corp. of America, 393 U.S. 333, 335, 89 S. Ct. 510, 21 L. Ed. 2d 526 (1969) (exchange of historical and current price information anticompetitive because it "seemed to have the effect of keeping prices within a fairly narrow ambit"); Todd v. Exxon Corp., 275 F.3d at 210.
Fourth, the fact that the information is publicly disseminated does not insulate the activity from consideration in the larger price-fixing claim. As the Ninth Circuit concluded in In re Coordinated Pretrial Proceedings in Petroleum Products Antitrust Litigation, 906 F.2d 432 (9th Cir. *168 1990), "[t]he fact that it is feasible for the appellees to communicate the necessary price information through press releases does not `immunize the exchange of price information from legal sanction [where] the conditions of the market suggest that the exchange promotes collusive rather than competitive pricing.'" Id. at 447 (quoting RICHARD POSNER, ANTITRUST LAW: AN ECONOMIC PERSPECTIVE 147 (Univ. Chi. Press 1976)). Here, the alleged conditions of the market suggest that the information exchange does not promote competitive compensation levels. In an unrestrained market, prospective residents ostensibly could use the information in the COTH Survey to better evaluate competing offers among institutional defendants and to conduct more informed negotiations with the residency programs. In the market as alleged in the complaint, however, prospective residents cannot utilize the information in such a manner because there are no competing offers; the Match requires prospective residents to commit to one position before their receive any offer of employment.
Finally, plaintiffs do not allege only that the dissemination of the COTH Survey allows the institutional defendants to set depressed compensation levels. Plaintiffs also allege that the COTH Survey provides a policing mechanism for the various institutions a separate, second way in which plaintiffs charge that the AAMC's distribution of the COTH Survey facilitates the price-fixing conspiracy. See Compl. ¶ 73. With the annual COTH Survey the institutional defendants not only are able to gauge their own compensation levels on a regular basis, but also are able to monitor their co-conspirators to ensure that others are not departing upward from the depressed levels. Plaintiffs' allegation that "survey reports have at times included statistics on `atypical' deviations from salary averages" underscores this point. Id. ¶ 81(b); see Todd v. Exxon Corp., 275 F.3d at 212 ("Price exchanges that identify particular parties, transactions, and prices are seen as potentially anticompetitive because they may be used to police a secret or tacit conspiracy to stabilize prices."). Upon careful consideration of the AAMC's motion to dismiss for failure to state a claim, and granting all reasonable inferences in favor of plaintiffs as it must at this juncture, the Court will deny the AAMC's motion to dismiss.
4. Motion to Dismiss of the AMA
The AMA asserts that only two paragraphs in the complaint relate to it: (1) the allegation that it is a "governing sponsor" of both the NRMP and the ACGME (see Compl. ¶ 18); and (2) the allegation that "employers have access to resident physician compensation information through an electronic database known as the Fellowship and Residency Electronic Interactive Database ('FREIDA'), which is maintained by the AMA." Id. ¶ 80.[31] According to plaintiffs, "[t]he information contained in FREIDA is not average or aggregated data. It is detailed and employer-specific." Id. The AMA argues that the FREIDA-based allegation fails to state a claim against the AMA. Like the AAMC, the AMA contends that plaintiffs have not alleged that the association entered into an agreement with competitors to fix medical resident compensation, but rather only that the AMA allegedly conspired to disseminate information. See AMA (b)(6) Mem at 5-6.[32]
For the reasons stated with respect to the AAMC's dissemination of compensation *169 information in Section IV(B)(3), supra, the Court cannot conclude automatically that the AMA's dissemination of resident compensation information in the FREIDA database could not form the basis for an inference that the AMA participated in the alleged conspiracy.[33] The Court does conclude, however, that by contrast to the AAMC, there is such a paucity of detail in plaintiffs' complaint concerning the AMA that plaintiffs' conclusory allegations do not survive a motion to dismiss for failure to state a claim. Unlike the allegations related to the COTH Survey, plaintiffs fail to allege how the FREIDA database information is utilized and distributed in furtherance of the conspiracy; they allege only that resident physician compensation is available through the database. Compare Compl. ¶ 80 (single allegation indicating existence of FREIDA database) with id. ¶¶ 74-79, 81 (detailed description of how COTH Survey functions to facilitate alleged conspiracy). Furthermore, unlike the allegation concerning the AAMC's membership, the alleged membership of the AMA of individual "physicians and others in the health care field" does not lend support to an inference that the AMA participated in the alleged conspiracy. See id. ¶ 18. The Court therefore grants the AMA's motion to dismiss.[34]
5. Motion to Dismiss of the ACGME
The ACGME moves to dismiss plaintiffs' claim against it on the ground that the creation and enforcement of accreditation standards for resident medical programs is non-commercial conduct that is beyond the reach of the antitrust laws. In addition, the ACGME argues that plaintiffs have failed to allege that the ACGME took part in any conduct outside of educational accreditation. See ACGME (b)(6) Mem. at 2.[35]
Plaintiffs allege in their complaint that the ACGME accreditation standards play a central role in the conspiracy to depress medical resident salaries. Broadly stated, plaintiffs allege that completion of an ACGME-accredited residency program is perceived by medical students as necessary *170 to ultimate board certification and practice. See Compl. ¶¶ 69, 87. More specifically, plaintiffs allege that four elements of the accreditation process function to unlawfully restrain the commercial endeavor of employing resident physicians and to fix, depress and stabilize compensation and other terms of employment in several ways. See id. ¶ 88. Plaintiffs allege that the ACGME: (1) "has the authority to regulate the number of employment positions a particular program may offer, and exercises that authority;" (2) "imposes substantial obstacles to the ability of a resident physician to transfer from one employer to another during the period of residency, essentially making the NRMP assignment effective for the entire duration of the residency;" (3) "encourages and/or requires participation in the [Match Program by the institutional defendants] as a condition of accreditation;" and (4) "in reviewing compliance with accreditation standards" directly reviews compensation and other terms of employment "with the purpose and effect of fixing, depressing, standardizing and stabilizing such compensation and terms." Id. ¶¶ 88(a)-(d). In effect, plaintiffs allege that the ACGME aided in and enforced the conspiracy to depress the compensation of resident physicians by promulgating and enforcing accreditation standards (1) that directly aid in the suppression of competition in the employment and compensation of medical residents effectuated through the Match Program; and (2) that provide the ACGME the authority to review individual compensation levels for resident physicians in order to police compensation levels among its alleged co-conspirators.
The ACGME is correct that actors in the educational world and/or professional associations have been held to be insulated from the antitrust laws if the activity at issue is non-commercial in nature. See Marjorie Webster Junior College v. Middle States Association of Colleges and Secondary Schools, Inc., 432 F.2d 650, 654 (D.C.Cir.1970) (absent commercial motive, process of accreditation presumptively is "distinct from the sphere of commerce; it goes rather to the heart of the concept of education itself"); Selman v. Harvard Medical School, 494 F.Supp. at 621 (medical school admissions "distinctly" non-commercial). It also is true, however, that in Goldfarb v. Virginia State Bar, 421 U.S. 773, 787, 95 S. Ct. 2004, 44 L. Ed. 2d 572 (1975), the Supreme Court expressly eliminated any blanket exception to the antitrust laws for professional educational entities, "learned professions," and professional associations, emphasizing that "Congress intended to strike as broadly as it could in § 1 of the Sherman Act." Id. Since Goldfarb, educational entities often have been subjected to the antitrust laws if the activity at issue is determined to be commercial. See National Collegiate Athletic Association v. Board of Regents of the University of Oklahoma, 468 U.S. 85, 98, 104 S. Ct. 2948, 82 L. Ed. 2d 70 (1984) (educational association restriction on members' participation in television market commercial); Law v. National Collegiate Athletic Association, 134 F.3d 1010, 1019 (10th Cir.1998) (college athletic association restriction on salary of coaching staff commercial in nature); United States v. Brown University, 5 F.3d 658, 667 (3d Cir.1993) (inter-university agreement limiting financial aid programs sufficiently commercial to be subject to antitrust laws).[36]
*171 The applicability of the antitrust laws to educational and/or accreditation organizations is a question of fact. When such entities "perform acts that are the antithesis of commercial activity, they are immune from antitrust regulation.... This immunity, however, is narrowly circumscribed. It does not extend to commercial transactions with a `public service aspect.' Courts classify a transaction as commercial or noncommercial based on the nature of the conduct in light of the totality of surrounding circumstances." United States v. Brown University, 5 F.3d at 666 (quoting Goldfarb v. Virginia State Bar, 421 U.S. at 787-88, 95 S. Ct. 2004). See also Association for Intercollegiate Athletics for Women v. National Collegiate Athletic Association, 735 F.2d 577, 584-85 (D.C.Cir.1984) ("Practices by non-profit organizations that economically disadvantage consumers are generally prohibited even though such practices may be designed to advance independent social or political values.").
Plaintiffs allege that certain ACGME accreditation standards have a clear impact on commerce because they facilitate and enforce the suppression of competition in the hiring, employment and compensation of resident physicians effectuated by the Match Program and allow the ACGME to monitor resident compensation. See Pls.' (b)(6) Opp. at 27-28. While the ACGME responds that it lacks a motive to conspire to depress salaries and compensation in the medical resident field and offers non-anticompetitive explanations for the existence of the accreditation standards, this is not the proper stage of the proceedings in which to evaluate motive or weigh countervailing explanations for actions allegedly taken in furtherance of the conspiracy. See Section IV(A)(3), supra; see also Hamilton Chapter of Alpha Delta Phi, Inc. v. Hamilton College, 128 F.3d 59, 66 (2d Cir.1997) (in considering Rule 12(b)(6) motion, district court improperly relied on defendant's assertion that relevant activity concerned educational rather than commercial gain); Welch v. American Psychoanalytic Association, 1986 WL 4537, at *7, 1986 U.S. Dist. LEXIS 27182, at *19-20 ("[A]ntitrust actions involving motive and intent to conspire and injure ... [are] particularly inappropriate for [dispositive motion] treatment.") (internal quotation omitted). Rather, the question at this stage is whether the allegations in plaintiffs' complaint provide an adequate basis from which the Court can infer that the ACGME participated in the charged conspiracy.
In DM Research, Inc. v. College of American Pathologists, Judge Boudin addressed the circumstances in which accreditation standards have been found to be anticompetitive. He noted that "[m]erely to say that the standards are disputable or have some market effects has not generally been enough to condemn them as `unreasonable' under the Sherman Act." DM Research, Inc. v. College of American Pathologists, 170 F.3d at 57. Instead, "something else or more extreme is generally present in the cases that have condemned quality standards as anticompetitive." Id. In the instant case, plaintiffs have alleged "something else or more extreme." In their complaint plaintiffs have alleged that the ACGME standards directly limit competition in the hiring of medical residents by, inter alia, requiring prospective residents to contractually commit to any offers they receive through the Match Program and by providing for the ACGME's policing of institutional defendants' compensation levels. See Compl. ¶¶ 88(a)-(d). Upon consideration of the foregoing, in concert with plaintiffs' broader allegations of conspiracy, the Court concludes that *172 plaintiffs have set forth allegations in their complaint from which it reasonably may be inferred that the ACGME is a member of the alleged conspiracy. If the facts prove otherwise after discovery, a motion for summary judgment will be appropriate.
C. Yeshiva University's Motion to Dismiss
Defendant Yeshiva University moves to dismiss for failure to state a claim on the ground that the complaint does not set forth any allegations connecting it to the alleged conspiracy. See Yesh. (b)(6) Mem. at 3. The only allegation in the complaint that explicitly concerns Yeshiva is that "[d]efendant Yeshiva University ('Yeshiva'), of which the Albert Einstein College of Medicine ('AEC') is a part, ... through AEC, sponsors medical residency programs, employing members of the Plaintiff class. Yeshiva has contracted, combined and conspired with the named Defendants and others to restrain competition as alleged in this Complaint." Compl. ¶ 50.
Plaintiffs argue that this is enough to tie Yeshiva to the conspiracy because the term "defendants" as it is used throughout the complaint includes "employers of resident physicians, entities related to and/or affiliated with such employers, or professional organizations through which the illegal restraints set forth in this Complaint are accomplished." Pls.' (b)(6) Opp. at 50 (quoting Compl. ¶ 5) (emphasis added). Notwithstanding this general definition, the Court concludes that the complaint fails to allege adequately any claim against Yeshiva.
The only connection Yeshiva is alleged to have to the price-fixing conspiracy is that it "sponsors" the graduate medical education aspects of the AEC on behalf of the ACGME. See Compl. ¶ 50. In the complaint, however, a "Sponsoring Institution" is defined as an institution "operating medical residency programs in one or more specialties, as well as individual residency programs ('Sponsored Programs') affiliated with those and other institutions ...." Id. ¶ 16. Yeshiva does not fall into this category because it does not operate a medical residency program nor is it an individual residency program.[37] Any allegations concerning the activities of "Sponsoring Institutions" therefore do not pertain to Yeshiva. In addition, unlike the other institutional defendants, Yeshiva is not alleged to own or operate a hospital or health center, to employ medical residents or to participate in either the Match Program or the COTH Survey. Any allegations concerning these activities therefore also do not pertain to Yeshiva.
The only aspect of the alleged conspiracy that arguably may link Yeshiva to the conspiracy is that portion of the complaint that addresses the ACGME accreditation standards, because Yeshiva admits that it monitors residency program compliance with ACGME standards for the accreditation association. See Yesh. (b)(6) Mem. at 4. In that section of the complaint, however, plaintiffs set forth no allegations concerning entities like Yeshiva that monitor residency program compliance with ACGME standards on behalf of the ACGME. Even the allegation that expressly pertains to residency program compliance does not mention the existence or role of such a monitoring entity. Plaintiffs only allege that "in reviewing compliance with accreditation standards, the ACGME directly reviews compensation *173 and other terms of employment with the purpose and effect of fixing, depressing, standardizing and stabilizing such compensation and terms." Compl. ¶ 88(d) (emphasis added).
Although plaintiffs assert that ACGME accreditation standards can regulate residency programs "only through conduits like Yeshiva," (Pls.' (b)(6) Opp. at 51), plaintiffs have not set forth any allegations in their complaint that describe or challenge the activities of such "conduits," or specifically of Yeshiva. The Court will not infer from the generalized allegations concerning the ACGME that a separate entity that monitors ACGME-accredited medical residencies on behalf of the ACGME participated in the conspiracy. See Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 527, 103 S. Ct. 897, 74 L. Ed. 2d 723 (1983) ("It is not ... proper to assume that [a plaintiff] can prove facts that it has not alleged or that the defendants have violated the antitrust laws in ways that have not been alleged."). Plaintiffs cannot reinforce their complaint by creatively recasting and embellishing the allegations of their complaint in their opposition brief. See Car Carriers, Inc. v. Ford Motor Co., 745 F.2d at 1107; Coleman v. Pension Benefit Guaranty Corp., 94 F.Supp.2d at 24 n. 8. Even construing the complaint in a light most favorable to plaintiffs, the Court concludes that the complaint fails to state a claim for which relief can be granted against Yeshiva University.
V. CONCLUSION
For the foregoing reasons, the Court first concludes that it has personal jurisdiction over the following institutional defendants: Barnes Jewish-Hospital, Baylor College of Medicine, Beth Israel Deaconess Medical Center, Inc., Boston Medical Center Corp., Cedars-Sinai Medical Center, The Cleveland Clinic Foundation, Emory University, Rhode Island Hospital, Rush-Presbyterian-St. Luke's Medical Center, St. Louis University, Stanford Hospital & Clinics, Thomas Jefferson University Hospital, Inc., Administrators of the Tulane Educational Fund, University Hospitals of Cleveland, Inc. and Yale-New Haven Hospital, Inc. The Court therefore denies the motions to dismiss for lack of personal jurisdiction filed by those institutions under Rule 12(b)(2) of the Federal Rules of Civil Procedure. The Court concludes that it does not have personal jurisdiction over institutional defendant Washington University Medical Center and therefore grants its motion to dismiss.
The only two organizational defendants that have filed motions to dismiss for lack of personal jurisdiction are the American Board of Medical Specialties and the Council of Medical Specialty Societies. The Court concludes that it does not have personal jurisdiction over either organizational defendant and therefore grants those defendants' motions to dismiss for lack of personal jurisdiction.
Second, the referral to arbitration of any portion of plaintiffs' single conspiracy claim would be improper. The Court therefore has subject matter jurisdiction over plaintiffs' entire claim and denies defendant National Resident Matching Program's motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure and its motion to compel arbitration. It also denies the motion to compel arbitration filed by the American Medical Association.
Finally, the Court finds that plaintiffs adequately have alleged a common agreement to displace competition in the recruitment, hiring, employment and compensation of resident physicians and to impose a scheme of restraints that has the purpose and effect of fixing, artificially depressing, *174 standardizing and stabilizing resident physician compensation and other terms of employment among certain defendants. Those defendants include movants the Association of American Medical Colleges and the Accreditation Council for Graduate Medical Education. Accordingly, the Court denies the motions to dismiss for failure to state a claim upon which relief can be granted filed by these two organizational defendants. Because plaintiffs have failed adequately to allege that movants the American Hospital Association, the American Medical Association or Yeshiva University participated in the conspiracy, the Court will grant the motions to dismiss for failure to state a claim filed by those defendants.
An Order consistent with this Opinion shall be issued this same day.
SO ORDERED.
ORDER
For the reasons stated in the separate Opinion issued this same day, it is hereby
ORDERED that the Motion of the Defendant the Cleveland Clinic Foundation to Dismiss Plaintiffs' Complaints Against the Cleveland Clinic Foundation for Lack of Personal Jurisdiction [21-1] is DENIED; it is
FURTHER ORDERED that Defendant Beth Israel Deaconess Medical Center's Motion to Dismiss the Complaint [27-1] is DENIED; it is
FURTHER ORDERED that Defendant Boston Medical Center's Motion to Dismiss the Complaint [29-1] is DENIED; it is
FURTHER ORDERED that Defendant Rhode Island Hospital's Motion to Dismiss the Complaint [31-1] is DENIED; it is
FURTHER ORDERED that Defendant Thomas Jefferson University Hospital's Motion to Dismiss the Complaint [33-1] is DENIED; it is
FURTHER ORDERED that Defendant Yale-New Haven Hospital's Motion to Dismiss the Complaint [35-1] is DENIED; it is
FURTHER ORDERED that the Motion of the Association of American Medical Colleges to Dismiss for Failure to State a Claim [37-1] is DENIED; it is
FURTHER ORDERED that the Motion of American Hospital Association to Dismiss Plaintiffs' Complaint for Failure to State a Claim [40-1] is GRANTED; it is
FURTHER ORDERED that Yeshiva University's Motion to Dismiss the Complaint for Failure to State a Claim Upon Which Relief Can Be Granted [45-1] is GRANTED; it is
FURTHER ORDERED the Defendant Rush-Presbyterian-St. Luke's Medical Center's Motion to Dismiss Pursuant to Rule 12(b)(2) [47-1] is DENIED; it is
FURTHER ORDERED that Defendant National Resident Matching Program's Motion to Dismiss and to Compel Arbitration [49-1] is DENIED; it is
FURTHER ORDERED that Defendant Bames-Jewish Hospital's Motion to Dismiss [50-1] is DENIED; it is
FURTHER ORDERED that Defendant Emory University's Motion to Dismiss [54-1] is DENIED; it is
FURTHER ORDERED that Defendant Stanford Hospital & Clinics' Motion to Dismiss [58-1] is DENIED; it is
FURTHER ORDERED that Defendant Administrators of the Tulane Educational Fund's Motion to Dismiss [61-1] is DENIED; it is
FURTHER ORDERED that Defendant Washington University Medical Center's Motion to Dismiss [63-1] is GRANTED; it is
FURTHER ORDERED that Defendant University Hospitals of Cleveland, Inc.'s *175 Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2) [65-1] is DENIED; it is
FURTHER ORDERED that Defendant St. Louis University's Motion to Dismiss the Complaints for Lack of Personal Jurisdiction [69-1] is DENIED; it is
FURTHER ORDERED that the Motion of Council of Medical Specialty Societies to Dismiss the Complaint for lack of personal jurisdiction [71-1] is GRANTED; it is
FURTHER ORDERED that the Motion of Defendant American Medical Association to Dismiss the Complaints Against It for Failure to State a Claim and Conditional Motion to Compel Arbitration [83-1] is DENIED in part and GRANTED in part; the conditional motion to compel arbitration is DENIED; the motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim is GRANTED; it is
FURTHER ORDERED that the American Board of Medical Specialties' Motion to Dismiss the Complaint for lack of personal jurisdiction [89-1] is GRANTED; it is
FURTHER ORDERED that Baylor College of Medicine's Motion to Dismiss for Lack of Personal Jurisdiction [91-1] is DENIED; it is
FURTHER ORDERED that Defendant Cedars-Sinai's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2) [92-1] is DENIED; and it is
FURTHER ORDERED that the Motion to Dismiss of Defendant Accreditation Council for Graduate Medical Education [104-1] is DENIED; it is
FURTHER ORDERED that this case is dismissed against the following defendants with prejudice: the American Hospital Association, Yeshiva University, and the American Medical Association; and it is
FURTHER ORDERED this case is dismissed against the following defendants without prejudice: Washington University Medical Center, the Counsel for Medical Specialty Societies, and the American Board of Medical Societies.
SO ORDERED.
NOTES
[1] The institutional defendants that have moved to dismiss the complaint for lack of personal jurisdiction are Barnes Jewish-Hospital, Baylor College of Medicine, Beth Israel Deaconess Medical Center, Inc., Boston Medical Center Corp., Cedars-Sinai Medical Center, The Cleveland Clinic Foundation, Emory University, Rhode Island Hospital, Rush-Presbyterian-St. Luke's Medical Center, St. Louis University, Stanford Hospital & Clinics, Thomas Jefferson University Hospital, Inc., Administrators of the Tulane Educational Fund, University Hospitals of Cleveland, Inc., Washington University Medical Center and Yale-New Haven Hospital, Inc.
[2] Washington University Medical Center asserts that contrary to plaintiffs' complaint it does not participate in the Match. See Supplemental Memorandum of Law in Support of Defendant Washington University Medical Center's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Brian Phillips ¶ 4. Plaintiffs do not refute this statement.
[3] See Supplemental Memorandum of Points and Authorities in Support of Defendant Barnes-Jewish Hospital's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Terra Mouser ¶ 2 ("Barnes-Jewish Hospital also has sporadic contact with the NRMP's technical support staff"); Supplemental Memorandum in Support of Defendant Baylor College of Medicine's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Ralph D. Feigin ¶ 4 (interactions include transmission of resident names, telephone calls to NRMP to address electronic submission problems, receipt of periodic emails and packages from NRMP); Supplemental Memorandum of Points and Authorities in Support of Defendant Emory University's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of James R. Zaidan, M.D., M.B.A ¶ 3 (defendant "has sporadic contact with the NRMP's technical support staff"); Memorandum of Law in Support of Defendant Rush Presbyterian St. Luke's Medical Center's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Thomas A. Deutsch ¶ 4 (defendant "has sporadic contact with the NRMP's technical support staff"); Supplemental Memorandum of Points and Authorities in Support of Defendant Stanford Hospital & Clinics' Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Ann M. Dohn ¶ 3 (defendant "has sporadic contact with the NRMP's technical support staff"); Supplemental Memorandum of Points and Authorities in Support of Defendant Tulane's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2); Declaration of Edward F. Foulks, M.D., Ph.D. ¶ 3 (defendant "has sporadic contact with the NRMP's technical support staff").
[4] Taking plaintiffs' argument to its logical conclusion, a forum-based entity could ensure that the Court had jurisdiction over any non-forum contracting party merely by requesting that the non-forum party provide any information necessary to execute the contract in intervals. See Health Communications, Inc. v. Mariner Corp., 860 F.2d 460, 463 (D.C.Cir.1988).
[5] Plaintiffs' discussion of personal jurisdiction predicated on a defendant's contact with a forum via an interactive web site is a red herring. Those cases cited by plaintiffs address the question of whether a defendant, by maintaining its own interactive web site that is accessible to or directed towards a specific jurisdiction, makes itself vulnerable to suit within that forum. See Gorman v. Ameritrade Holding Corp., 293 F.3d 506, 513 (D.C.Cir.2002); Blumenthal v. Drudge, 992 F. Supp. 44, 53 (D.D.C.1998). Here, plaintiffs cite to the defendants' use of a co-defendant's web site for the purpose of sending information into the District in connection with the execution of the Match. As the Court concludes, however, such communications to the NRMP, whether in electronic or in written form, are insufficient to demonstrate that the institutional defendants purposefully availed themselves of the privileges and the responsibilities of conducting business in the District of Columbia.
[6] With further respect to the fact that Dr. Miller serves both as President of the NRMP and Executive Vice President of the ABMS, plaintiffs have not disputed Dr. Miller's declaration that any actions he took in the District of Columbia were in his capacity as President of the NRMP and not in his capacity as Executive Vice President of the ABMS. The presence of Dr. Miller as an officer of both organizations, without additional allegations that the steps Dr. Miller took nominally as NRMP President were in fact taken on behalf of the ABMS, is insufficient to demonstrate jurisdiction over the ABMS. See United States v. Bestfoods, 524 U.S. 51, 69-70, 118 S. Ct. 1876, 141 L. Ed. 2d 43 (1998); Doe v. Unocal Corp., 248 F.3d 915, 925-26 (9th Cir.2001) (applying United States v. Bestfoods in specific jurisdiction context); In re Vitamins Antitrust Litigation, 270 F.Supp.2d at 26.
[7] Then Circuit Judge Ruth Bader Ginsburg described these three contacts as the "plus factors," factors that demonstrate some "reasonable connection" between the jurisdiction in which the court sits "separate from and in addition to" the injury caused in the jurisdiction. Crane v. Carr, 814 F.2d at 762. The "plus factor" or factors "need not be related to the act that caused the injury; all that is required is `some other reasonable connection' between the defendant and the forum." Id. at 762-63. The "plus factor" does not itself provide the basis for jurisdiction the injury does but "it does serve to filter out cases in which the in-forum impact is an isolated event and the defendant otherwise has no, or scant, affiliation with the forum." Id. at 763. See also Blumenthal v. Drudge, 992 F.Supp. at 54 (under Section 13-423(a)(4), the injury not the enumerated contacts "provides the basis for jurisdiction").
[8] While some putative class members likely pursued employment in the District, defendants are correct that plaintiffs cannot rely on alleged injury to putative plaintiffs in order to meet the in-District injury requirement. See Selman v. Harvard Medical School, 494 F. Supp. 603, 621 (S.D.N.Y.1980), aff'd without opinion, 636 F.2d 1204 (2d Cir.1980) (plaintiff's contention that "injuries and facts relevant to other members of the class should be used in determining jurisdiction" was rejected because "the named representative himself must satisfy all jurisdictional prerequisites before the action can go forward"); accord Williams v. FirstPlus Home Owner Loan Trust 1996-2, 209 F.R.D. 404, 413 (W.D.Tenn.2002); Barry v. Mortgage Servicing Acquisition Corp., 909 F. Supp. 65, 74-75 (D.R.I.1995).
[9] There are three institutions that challenge plaintiffs' allegation that they participate in the COTH Survey. See Supplemental Memorandum of Law in Support of Defendant Washington University Medical Center's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Brian Phillips ¶ 4; Supplemental Memorandum in Support of Defendant Baylor College of Medicine's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Ralph D. Feigin ¶ 5; Supplemental Memorandum of Points and Authorities in Support of Defendant Tulane's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Supplemental Declaration of Edward F. Foulks, M.D., Ph.D. ¶ 2. Beth Israel Deaconess states that it has not participated in the COTH Survey since 1999. See Supplemental Memorandum in Support of Defendant Beth Israel Deaconess Medical Center's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Paul F. Levy ¶ 4.
[10] See Supplemental Memorandum in Support of Defendant Beth Israel Deaconess Medical Center's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Paul F. Levy ¶ 4; Supplemental Memorandum in Support of Defendant Boston Medical Center's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of John B. Chessare, M.D. ¶ 4; Defendant Cedars-Sinai's Supplemental Memorandum of Points and Authorities in Support of Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Thomas M. Priselac ¶ 6 (President and Chief Executive Officer in individual capacity is member of AHA and Chair of COTH Administrative Board; travels to the District four to six times a year to fulfill related obligations); Supplemental Memorandum of Law in Support of Defendant Rhode Island Hospital's Motion to Dismiss the Complaint Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Joseph F. Amaral ¶ 4; Defendant Thomas Jefferson University Hospital's Motion to Dismiss the Complaint, Declaration of Thomas J. Lewis ¶ 4 (President and Chief Executive Officer travels on behalf of defendant to District four times a year to fulfill obligations related to membership in AHA and COTH); Supplemental Memorandum in Support of Defendant University Hospitals of Cleveland, Inc.'s Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of John Ferry, M.D. ¶ 7 (employees travel to District of Columbia in individual capacities as members of professional or industry organizations); Supplemental Memorandum of Law in Support of Defendant Yale-New Haven Hospital's Motion to Dismiss the Complaints Pursuant to Fed.R.Civ.P. 12(b)(2), Declaration of Joseph A. Zaccagnino ¶ 4 (employees travel to District of Columbia in individual capacities as members of professional or industry organizations).
[11] For the reasons stated in Section II(B)(1)(a), supra, the moving institutional defendants' contacts with the District of Columbia in connection with the Institutional Match Contract are insufficient by themselves to demonstrate that the defendants conducted "substantial business" within the District.
[12] Plaintiffs also claim conspiracy jurisdiction pursuant to Sections 13-423(a)(3) and (4), but their failure to allege an in-forum injury defeats any conspiracy jurisdiction claim based on these subsections. See Section II(B)(2), supra.
[13] To the extent that plaintiffs assert that personal jurisdiction exists over the individual moving defendants under a conspiracy jurisdiction theory under Section 12 of the Clayton Act, this Court explicitly rejected the "conspiracy" theory in the Clayton Act context in Mylan Laboratories, Inc. v. Akzo, N.V., 1990 WL 58466, at *6, 1990 U.S. Dist. LEXIS 3521, at *6 (jurisdiction "must be properly established as to each defendant, and cannot be based upon allegations that the defendant's co-conspirators were found there, or transacted business there, or that all the conspirators are agents for each other"). See also Caribe Trailer Systems, Inc. v. Puerto Rico Maritime Shipping Authority, 475 F.Supp. at 717.
[14] Thirteen institutional defendants did not move to dismiss this action for lack of personal jurisdiction: Medstar-Georgetown Hospital Medical Center, Inc., George Washington University, MedStar Health, Inc., Beth Israel Medical Center, Duke University Health System, Inc., Henry Ford Health System, The Massachusetts General Hospital, The McGraw Medical Center of Northwestern University, The Mount Sinai School of Medicine of the City University of New York, The New York and Presbyterian Hospital, Strong Memorial Hospital of the University of Rochester, William Beaumont Hospital and Yeshiva University.
[15] Dr. Beran avers that the remaining named plaintiffs also entered into Student Match Contracts with identical arbitration and choice of law provisions, and this assertion is not disputed. See Beran Compel Aff. ¶ 10.
[16] The AMA conditionally moves to compel arbitration and adopts the arguments put forth by the NRMP. See Motion of Defendant American Medical Association to Dismiss the Complaints Against It for Failure to State a Claim and Conditional Motion to Compel Arbitration at 4-5. Both the ABMS and the CMSS also conditionally move to compel arbitration. See Motion of American Board of Medical Specialties to Dismiss the Complaint ("ABMS Mot.") at 1; Motion of Council of Medical Specialty Societies to Dismiss the Complaint ("CMSS Mot.") at 1. Because the Court has concluded that it lacks personal jurisdiction over these organizational defendants, see Sections II(B)(1)(b), (2), supra, however, the Court will decline to consider the motions to compel of the ABMS or the CMSS.
[17] For these purposes, any distinction between allegations concerning the Match Program and the Student Match Contract is artificial. See Compl. ¶ 15 ("The NRMP exists for the sole purpose of illegally restraining trade by eliminating competition in the recruitment and employment of resident physicians by assigning prospective resident physician employees to medical residency positions.").
[18] Although the opinion of the D.C. Circuit in Cole v. Burns International Security Services, 105 F.3d at 1486, may be read to announce a per se rule prohibiting arbitration where a plaintiff is forced to pay arbitration costs in excess of the costs of litigation pursuant to the arbitration agreement, this decision does not relieve a plaintiff from the burden of demonstrating his or her inability to pay under Green Tree. See LaPrade v. Kidder, Peabody & Co., Inc., 246 F.3d 702, 708 (D.C.Cir.2001).
[19] It is undisputed that Illinois law applies to plaintiffs' contract-based claims pursuant to the choice of law provision in the Student Match Contract. See Beran Compel. Aff., Ex. A-1, 1998 Student Agreement of Plaintiff Denise Greene ("This agreement shall be governed by laws of the State of Illinois, but the Illinois conflicts of law provision shall be not be construed to apply the law of any other jurisdiction.").
[20] To the extent that plaintiffs substantially rest their unconscionability argument on the claim that the fee-splitting provision makes the arbitration agreement "oppressive" and "totally one-sided," Pls.' Arbit. Opp. at 26, the argument is rejected for the reasons stated in Section III(C)(2), supra, in view of the NRMP's offer to pay the individual plaintiffs' shares of the costs of arbitration.
[21] Although the NRMP drafted the Match Contract, the Court concludes that the policy directing a court to hold ambiguity against the drafter does not outweigh the policies that heavily favor arbitration. See Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468, 479, 109 S. Ct. 1248, 103 L. Ed. 2d 488 (1989).
[22] To the extent that other members of this Court have interpreted Ekstrom post-Mastrobuono to extend a general choice of law provision to matters concerning the scope of the arbitrator's authority, the undersigned respectfully disagrees. See Int'l Technologies Integration, Inc. v. Palestine Liberation Organization, 66 F. Supp. 2d 3, 9 n. 5 (D.D.C.1999).
[23] Having determined that Mastrobuono precludes application of Illinois law relating to the scope of an arbitrator's authority, the Court does not reach the question of whether the parties accurately represented the status of Illinois law.
[24] The cases relied upon by defendants in support of their argument for application of Matsushita in the dismissal context do not convince the Court otherwise. In those decisions, the courts extended the plausibility analysis articulated in Matsushita to one of impossibility, effectively concluding that those plaintiffs' complaints failed to state a claim under Rule 12(b)(6). See DM Research, Inc. v. College of American Pathologists, 170 F.3d at 56 ("[A]n implausible conclusory assertion may turn out to be true ... [b]ut the discovery process is not available where, at the complaint stage, a plaintiff has nothing more than unlikely speculations."); TV Communications Network, Inc. v. Turner Network Television, Inc., 964 F.2d at 1026-27 ("Because [defendants] would have no rational motive to create such an environment, [plaintiff's] allegations do not provide an inference of specific intent to conspire to achieve the stated goal of the conspiracy [to monopolize pursuant to Section 2 of the Sherman Act]"); United Magazine Co. v. Murdoch Magazines Distribution, Inc., 146 F. Supp. 2d 385, 402 (S.D.N.Y.2001) ("Since, under any theory, plaintiffs [sic] alleged conspiracy to engage in predatory pricing is entirely unnecessary and makes no economic sense, plaintiffs fail to state a claim under section 1."). See also Dial A Car, Inc. v. Transportation, Inc., 82 F.3d at 487 (While motions to dismiss should be granted sparingly, dismissal is appropriate where appellant "not only fails to allege any facts supporting its claim ..., it also offers nothing to indicate that monopolization of the relevant market is even possible, let alone probable").
[25] Only one institutional defendant, Yeshiva University, separately moved to dismiss the complaint for failure to state a claim. Its arguments are addressed in Section IV(C), infra. Four other institutional defendants joined the motions to dismiss filed by the AAMC, the AMA and the ACGME. None of the joining institutional defendants, however, are similarly situated to the organizations such that dismissal of the organizational defendants would provide a basis for dismissal of the institutions, as is evident in the following pages.
[26] Defendants AMA, AAMC, ABMS and CMSS moved to join AHA's motion to dismiss to the extent that plaintiffs' allegations pertain to them in their capacity as governing sponsors of the NRMP and the ACGME. See Memorandum of Defendant American Medical Association in Support of Its Motion to Dismiss the Complaint Against It for Failure to State a Claim Based on Maintenance of the FREIDA Database ("AMA (b)(6) Mem") at 5; Memorandum of Law in Support of Defendant American Association of Medical Colleges' Motion to Dismiss for Failure to State a Claim ("AAMC (b)(6) Mem.") at 21; ABMS Mot. at 2; CMSS Mot. at 2.
[27] Plaintiffs' reference to the Court's decision in In re Vitamins Antitrust Litigation, 2000 WL 1475705, 2000 U.S. Dist. LEXIS 7397, is misplaced. In that case, Chief Judge Hogan concluded that a plaintiff need not allege overt acts committed by each defendant in furtherance of a conspiracy. See id. at *10-11. He did not hold that plaintiffs need not plead that an individual defendant was a participant in the conspiracy in the first instance.
[28] The Court rejects plaintiffs' governing sponsor assertions with respect to the CMSS and the ABMS as insufficient for the reasons stated in Section IV(B)(1), supra.
[29] The Court rejects plaintiffs'"governing sponsor" allegations as insufficient for the reasons stated in Section IV(B)(1), supra, with respect to the AHA. The Court also rejects the allegation that the AAMC "manages and operates" the NRMP as insufficient because plaintiffs offer no support for this conclusory allegation.
[30] Four institutional defendants have joined the AAMC's Rule 12(b)(6) motion to dismiss. See Defendant Beth Israel Medical Center's Notice of Joinder in Motions to Dismiss ("Beth Israel Joinder") at 1; Notice by Defendants Duke University Health System, Inc., and Mount Sinai School of Medicine of the City University of New York of Their Joinder in Motions to Dismiss ("Duke/Sinai Joinder") at 1; Defendant the New York and Presbyterian Hospital's Notice of Joinder in Motions to Dismiss ("NY/Presb. Joinder") at 1-2.
[31] Four institutional defendants have joined the AMA's Rule 12(b)(6) motion to dismiss. See Beth Israel Joinder at 1; Duke/Sinai Joinder at 1; NY/Presb. Joinder at 1-2.
[32] The AMA further argues that if the Court infers that the AMA was a member of the conspiracy through its maintenance of the FREIDA database, by analogy the publisher of the American Lawyer's annual survey of salaries of first year law firm associates could not be dismissed from an antitrust case brought by associates challenging their compensation. See Reply Memorandum in Support of Motion of Defendant American Medical Association to Dismiss the Complaint Against It for Failure to State a Claim at 24. The Court disagrees. Unlike the medical profession, there is no institutional, national employment placement structure in place whereby law students interview with law firms, rank their preferences for employment and contractually commit to acceptance of a single position prior to receiving an offer into which the American Lawyer's information enters. There also is no indication that law firm associates are underpaid.
[33] In addition, whether the AMA's operation of the FREIDA database and the dissemination of database information is itself lawful is irrelevant. See American Tobacco Co. v. United States, 328 U.S. at 809, 66 S. Ct. 1125 ("[I]f [otherwise lawful acts] are part of the sum of the acts which are relied upon to effectuate the conspiracy which the statute forbids, they come within its prohibition."); In re Medical X-Ray Film Antitrust Litigation, 946 F.Supp. at 218; ITT World Communications Inc. v. Western Union Telegraph Co., 524 F.Supp. at 704. For this reason, the AMA's argument set forth in its supplemental memorandum that plaintiffs allegedly conceded that the FREIDA database is lawful does not inform the Court's analysis. See Supplemental Memorandum of Defendant American Medical Association in Support of Its Motion to Dismiss the Complaint Against It for Failure to State a Claim at 2.
[34] The Court rejects plaintiffs' governing sponsor allegations as insufficient for the reasons stated in Section IV(B)(2), supra.
[35] Four institutional defendants have joined the ACGME's Rule 12(b)(6) motion to dismiss. See Beth Israel Joinder at 1; Duke/Sinai Joinder at 1; NY/Presb. Joinder at 1-2.
[36] "Marjorie Webster is of questionable vitality after Goldfarb, to the extent that it draws a bright line between education and business, or accreditation policy and commerce." Welch v. American Psychoanalytic Association, No. 85 Civ. 1651 (JFK), 1986 WL 4537, at *7 (S.D.N.Y. April 4, 1986), 1986 U.S. Dist. LEXIS 27182, at *9. See also Foundation for Interior Design Education Research v. Savannah College of Art & Design, 244 F.3d 521, 530 (6th Cir.2001).
[37] Similarly, plaintiffs define the defendant class in relevant part as "all ACGME-accredited Sponsoring Institutions as of the date of certification of the Defendant Class, and entities that were ACGME-accredited Sponsoring Institutions at any time since May 7, 1998." Id. ¶ 58. Yeshiva therefore does not fall into the proposed defendant class because it is not a "sponsoring institution" as that term is defined. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2612558/ | 98 Wash. 2d 521 (1983)
656 P.2d 1043
THE STATE OF WASHINGTON, Appellant,
v.
DANIEL A. McDONALD, ET AL, Respondents.
Nos. 48002-8, 48073-7.
The Supreme Court of Washington, En Banc.
January 6, 1983.
*522 Kenneth O. Eikenberry, Attorney General, and John T. Hurley, Assistant, for appellant.
Alan A. McDonald and Bryan G. Evenson (of Halverson, Applegate & McDonald, Inc., P.S.), for respondents.
PEARSON, J.
This case concerns the compensation payable by the State as a result of its taking in eminent domain proceedings 22.41 acres of farmland from respondent Daniel A. McDonald. The issues on appeal concern the application of the "single parcel" rule to three tracts of land affected by the condemnation, the offer by the State of a unilateral stipulation to mitigate damages, and the jury's consideration of the value of crops in computing the amount of just compensation. We conclude that the trial court erred in applying the single parcel rule and in instructing the jury to consider the value of lost crops in computing compensation. We remand for a new trial.
The McDonald hop farm comprised three tracts of land. The first was a 130-acre tract on the banks of the Yakima River. Eighty acres of this tract were planted in hops and 50 acres were undeveloped river bottomland. The Burlington Northern Railroad ran approximately east and west through the middle of the 80 acres of hops, dividing them into two 40-acre hopyards. The north hopyard was irrigated by water from an irrigation canal maintained by an irrigation district. The south hopyard was irrigated by water pumped from a slough of the Yakima River. This slough ran along the southern boundary of the south hopyard. Four miles from the 130-acre tract was the second tract of land owned by McDonald. This was a 30-acre tract on the Connawac Pass Road. Nineteen acres of this tract *523 were planted in hops. The third tract was 1 acre located about 2 1/2 miles from the 130-acre tract. On this land was the equipment used to process the hops for sale: a hop picking machine which removed the hops from the vines, a kiln for drying the hops, and equipment for baling the hops for sale. This equipment processed hops not only from the 99 acres owned by Daniel A. McDonald, but also from land owned by his son, Dan, Jr., and his grandchildren.
The present case arose because the State decided that SR 82, a limited access highway, should run across part of McDonald's farm. The highway had been planned since 1956 and the first section was completed in the early 1970's. It was intended that the Ellensburg-Pendleton section would be begun shortly thereafter, and by the mid-1970's the route had been settled. It was decided that the highway should follow the course of the Yakima River. The roadbed was to be built above the level of the river, and the highway would thus form a dike along one side of the river. The highway was designed in this way so as to aid in the control of periodic flooding of the Yakima River. Construction of the highway was delayed by environmental proceedings and a special tax levy, but by 1978 "flagging out" of the route was completed.
This route took the highway over part of McDonald's 130-acre tract. Essentially it followed the fence line between the southern boundary of the south hopyard and the river bottomland. This took the highway directly over the slough and the pump house which provided water to the south hopyard. In September 1978, the State and McDonald entered a stipulated order for immediate use and possession, by which the State took a total of 22.41 acres: a 7.7-acre strip from the south boundary of the hopyard, and a 14.71-acre strip of bottomland. Construction of the highway began in the spring of 1979.
In September 1979, a jury trial was held to assess the amount of compensation to which McDonald was entitled for the taking of his land. At this trial, McDonald produced evidence to show that by building the highway over the *524 slough and pump house, the State had removed the source of water for the south 40-acre hopyard. Without irrigation, hop production was impossible. The land was of no use for anything but hop production. Thus, by building the highway, the State had rendered the south field valueless. But this was not the end of it. McDonald testified that he needed every acre of hops he owned to keep his expensive hop machinery operating at an economic capacity. Without the hops from the south field, it was not possible to maintain the economic capacity. He could no longer afford to grow hops on his remaining 60 acres because it was too expensive to process them in his hop picker, kiln, and baler. Consequently, the State had taken from him not merely the 22.41 acres of land but the economic value of his entire hop farming operation. But it did not end there either. McDonald had not planted hops in 1976, 1978, or 1979 because he had been told the highway was to be built through his property. He claimed the profits he would have received from those crops in addition to his other damages.
The State sought to establish that a supply of water could be restored to the south 40-acre hopyard. They offered expert testimony that a new well could be drilled elsewhere on the hopyard to supply water. The court held that this evidence was too speculative and rejected the offer of proof. The State then offered a unilateral stipulation to construct a culvert beneath the freeway approximately at the site of the McDonalds' old pump house. The court rejected the stipulation.
The jury assessed compensation at $361,745. The State appealed that verdict to the Court of Appeals, and we accepted certification. The appeal challenges three rulings made by the trial court. First, the State appeals the court's ruling as a matter of law that the three tracts of land owned by the respondent should be considered a single parcel for the purposes of determining reasonable compensation. Second, the State challenges the court's rulings rejecting the offer of proof and stipulation regarding alternative sources of water. Finally, the State challenges a jury *525 instruction that the amount of just compensation payable included the net return lost through the failure to grow hops in 1976, 1978, and 1979, provided that the jury found the failure to grow was out of concern for the construction of the highway and was reasonable. We hold the rejection of the offer of proof and stipulation was not an abuse of the trial court's discretion. However, we hold the court misapplied the law in ruling that, as a matter of law, the three tracts constituted a single parcel, and that the jury instruction concerning lost crops was improper. We accordingly remand for a new trial to determine the amount of just compensation due the respondent.
[1] We turn now to consider the first issue: Whether the three physically separate tracts of land owned by the respondent constituted, as a matter of law, a single parcel, for the purpose of determining compensation, because they were all put to the single use of raising hops. It is worthwhile, in considering this issue, to briefly review some very basic principles which underlie our reasoning. The right to compensation for property taken by eminent domain is guaranteed by the constitution. Article 1, section 16 provides: "No private property shall be taken or damaged for public or private use without just compensation having been first made ..." Where the State takes an entire tract, the measure of damages is the market value of the tract taken. Medina v. Cook, 69 Wash. 2d 574, 418 P.2d 1020 (1966). Furthermore,
It is well settled that when the whole or a part of a particular tract of land is taken for public use, the owner of such land is not entitled to compensation for injury to other separate and independent parcels belonging to him which results from the taking.
(Footnote omitted.) 4A J. Sackman, Nichols on Eminent Domain § 14.25 (3d rev. ed. 1981). Accord, Seattle v. Wald, 77 Wash. 91, 137 P. 435 (1913); Sultan Water & Power Co. v. Weyerhauser Timber Co., 31 Wash. 558, 72 P. 114 (1903). On the other hand, where only part of a single tract of land is taken, the measure of damages is the fair market *526 value of the land taken together with damages to the land not taken. Sultan, at 561. In other words, just compensation is the difference between the fair market value of the entire tract before the acquisition and the fair market value of the remainder after the acquisition. State v. Sherrill, 13 Wash. App. 250, 534 P.2d 598 (1975). It sometimes becomes difficult to determine, for the purposes of assessing compensation, whether the land remaining after a taking is part of the same tract as that which was taken or whether it is a separate and independent parcel. Sultan, at 561. The test applied in the early cases was whether the land remaining had belonged to the same proprietor as the land taken, was contiguous with it, and had been used with it for a common purpose. Sultan, at 561. In particular, the land would not constitute a single tract unless the part remaining was physically contiguous to the part taken. Seattle v. Wald, supra; Sultan Water & Power Co. v. Weyerhauser Timber Co., supra. A slight concession was allowed in State ex rel. Biddle v. Superior Court, 44 Wash. 108, 87 P. 40 (1906), where an entire farm was considered a single tract, despite the interruption of physical contiguity by a public road running through the farm.
The test established by these early cases was considered by the Court of Appeals in State v. Lacey, 8 Wash. App. 542, 507 P.2d 1206 (1973), aff'd, 84 Wash. 2d 33, 524 P.2d 1351 (1974). The Court of Appeals discussion of the test was affirmed without comment by this court. The Court of Appeals noted that the early cases required three elements to establish a single tract for the purposes of compensation unity of ownership, unity of use, and contiguity. The court recognized that although physical contiguity had once been a requirement, the physical separation of individual pieces of land was no longer necessarily fatal to establishing a "larger parcel" or single tract, so long as unity of use could be established. Moreover, Lacey recognized the rule of Seattle v. Wald that the "larger parcel" issue is a question of fact for the jury, unless reasonable minds could not differ on the question. The court concluded as a matter of *527 law in Lacey that the larger parcel test was not satisfied because there was no unity of use among the various pieces of land under consideration.
The trial court in the present case applied Lacey to resolve the larger parcel issue as a matter of law. Unity of ownership was not disputed. There was uncontradicted evidence that all three parcels were used for hop production and therefore unity of use was established. The trial court considered this sufficient to satisfy the larger parcel test. In essence, the trial court dismissed the contiguity element as irrelevant. This was error.
The court in Lacey did not eliminate contiguity as an element of the larger parcel test. The court merely held that physical separation of the parcels was not necessarily fatal to satisfying the larger parcel test. The court said in 8 Wash. App. at 544: "If the land is occupied or in use, unity of use becomes an important factor in determining whether contiguity has been established". It does not follow from this that unity of use is the only important factor in determining whether contiguity has been established. Other factors which may be equally important are the distance between the parcels, the extent of adaptation of the parcels to the use to which they are put, and the availability of alternative parcels. All the facts and circumstances of the particular case should be weighed in making the determination. The trial court rather too readily found contiguity established merely by a showing of unity of use.
The test which ought to be applied in this case is well stated in J. Sackman § 14.26[1], at 14-678:
When two parcels are physically distinct, there must be such a connection or relation of adaption, convenience and actual and permanent use as to make the enjoyment of one reasonably necessary to enjoyment of the other, in the most advantageous manner in the business for which it is used, to constitute a single parcel within the meaning of the rule.
(Footnote omitted.) The fact that the three parcels owned by respondent are separated by several miles of other *528 property is of considerable significance. The treatise continues:
Two distinct parcels separated by intervening private land but used together for the same purpose cannot be considered as one tract, even if they are connected by a private way over the intervening land, unless they are so inseparably connected in the use to which they are devoted that the injury or destruction of one must necessarily and permanently injure the other.
(Footnotes omitted.) J. Sackman § 14.26[1], at 14-691.
[2] It may well be that a jury could have found from the evidence that the three parcels were "inseparably connected in the use" despite their physical separation. But clearly reasonable minds could have differed on this point. The thrust of respondent's case was that by effectively taking the 40-acre hopyard, the State destroyed his farm as an economic unit and rendered all three parcels worthless. Respondent testified that the minimum economic unit was 180 acres. A lesser acreage would not produce sufficient hops to cover the costs of production, especially the expense of the hop picker and kiln. However, even before the taking, respondent owned only 99 acres of hops. There was evidence that the hop picker and kiln on respondent's land processed hops grown on land belonging to his son and his grandchildren. The jury would be entitled to conclude from these facts that if respondent had operated with less than an economic unit before the taking by processing hops from other farms, he could continue to do so after the taking.
The larger parcel issue was one which should have been put to the jury and it was error for the court to decide it was a matter of law.
We turn now to the second issue: the propriety of the trial court's rejection of the State's offer of proof and stipulation regarding alternative sources of water. We consider first the rejection of offered expert testimony regarding the availability of a new well on the south hopyard. The State sought to establish by this testimony that a well could be *529 drilled on the remaining part of the south hopyard to provide groundwater for irrigation. The court refused to admit the testimony, ruling that for two reasons it was too speculative. First, the testimony did not establish to the court's satisfaction that such a well would actually provide any water. No test wells had been drilled in the south hopyard to confirm the expert's opinion and the expert was not familiar with the history of other wells drilled on the respondent's property, which had proved dry. Second, the testimony did not satisfy the court that the respondent's water rights, which had authorized his taking water from the slough, would entitle him to take water from a well such as that proposed by the State. None of the State's witnesses could state categorically that respondent had a right to water from a new well.
[3] The trial court has a very wide discretion in deciding whether to exclude or admit opinion evidence and that discretion will not readily be upset on appeal. Hill v. C. & E. Constr. Co., 59 Wash. 2d 743, 746, 370 P.2d 255 (1962). The trial court's decision not to admit the State's expert opinion evidence was not an abuse of that discretion. The trial court's concern at the speculative nature of the evidence appears well founded on the record. The record suggests that water is a valuable and keenly sought after commodity in the Yakima Valley, and that water rights are jealously guarded. In light of this, it is not unreasonable to require the State to establish with more certainty the availability of an alternative source of water and the integrity of respondent's rights to that water. We therefore uphold the trial court's rejection of the State's offer of proof.
Next, the State offered to stipulate that a culvert would be built under the highway to carry water pumped from a new pump house located on the respondent's river bottomland. The court rejected the stipulation as being too speculative. The stipulation raised unresolved issues of water rights priorities just as the offer of proof had raised them. Furthermore, the stipulation was offered for the first time orally, at trial, by the assistant attorneys general representing *530 the State. It appears to have been presented on the spur of the moment, in response to the unanticipated (by the State) rejection of the offer of proof. We hold that the trial court correctly rejected the offered stipulation as too vague and indefinite.
[4] The leading case on the availability of stipulations by a condemnor to mitigate damages is Tacoma E.R.R. v. Smithgall, 58 Wash. 445, 108 P. 1091 (1910). This court explained such stipulation thus:
Ordinarily the condemning party should describe in its petition the property it desires to take, but cases will often arise where an unanticipated claim for damages interposed by the landowner may be lessened or entirely obviated by a stipulation or waiver on the part of the condemning party. The law does not favor the taking or damaging of property for a public use beyond the necessities of the case, and if damages may be avoided by a waiver or stipulation definite and certain in its terms, which will fully protect the rights of all parties concerned, there is no reason why such a stipulation should not be received and acted upon.
58 Wash. at 451.
We have upheld stipulations very similar to the one proposed in the present case. In State ex rel. Eastvold v. Superior Court, 48 Wash. 2d 417, 294 P.2d 418 (1956), we allowed a stipulation to permit a cattle underpass to be built beneath a highway. The stipulation was presented in that case by the testimony of a district engineer as to construction plans for the underpass and by representations in open court by counsel for the State that such an underpass would be built. We said in 48 Wash. 2d at 423:
The right to take property in condemnation cases, subject to certain easements of the landowner, so as to minimize his damages, is in accordance with the weight of authority.... It is also in harmony with the fundamental principle that no greater estate or interest should be taken than reasonably necessary for contemplated public necessity or use.
However, the condemnor's right to stipulate is not unlimited. As the passage from Tacoma E.R.R. v. Smithgall, *531 quoted above, makes clear, a stipulation must be definite and certain in its terms, and must fully protect the rights of all parties. The trial court was quite correct in concluding that the offered stipulation in this case failed to satisfy these requirements. Its principal shortcoming was that there was no guaranty that the respondent's water rights would be unimpaired under the terms of the stipulation. It therefore failed to protect the rights of respondent and was properly rejected.
This brings us to the final issue: the propriety of the jury instruction relating to the value of hops not planted in 1976, 1978, and 1979. The challenged instruction reads:
In determining the amount of just compensation to be paid to the respondents Dan McDonald, Sr. and wife, you may consider the following elements:
...
C. The net return from the sale of hops which these respondents failed to grow in the years 1976, 1978 and 1979, provided that you find from the evidence that their decision not to grow them was made out of concern for the construction of the highway and was reasonable under all the circumstances.
We hold that this instruction was improper.
We have referred earlier in this opinion to the principle that just compensation is the difference between the fair market value of the property before the acquisition and the fair market value of the remainder after acquisition. A necessary corollary of this principle is that the owner may not recover as compensation lost profits from a business which prior to the acquisition had been conducted on the land. Renton v. Scott Pac. Terminal, Inc., 9 Wash. App. 364, 512 P.2d 1137 (1973); WPI 151.05. More specifically, the only context in which evidence of the value of annual crops is admissible is in determining the value of the land. 4 J. Sackman, Nichols on Eminent Domain § 12.3121[1] (3d rev. ed. 1981). The instruction challenged on this appeal flatly contradicts this rule.
[5] Respondent argues that the instruction is in accordance with this court's decision in Lange v. State, 86 Wn.2d *532 585, 547 P.2d 282 (1976). In that case, a condemnee claimed, in addition to the market value of the property taken, compensation for depreciation of his property caused by precondemnation activities of the State. We concluded that the decline in value of the condemned property should be considered in determining the amount of just compensation. To accomplish this, we held that the date of determining the value of a condemned property should be the date at which the precondemnation activity began to adversely affect the property's value. This represents a modification of the general rule that property is valued as of the date of trial.
Respondent argues that no hops were planted in 1976, 1978, or 1979 because of the precondemnation activities of the State, and that, under the rationale of Lange, he is entitled to the net profits he would have received from those crops. This argument is inconsistent with Lange. Lange does not in any way alter the basic rule that just compensation must relate to the value of land taken. Lange merely modifies the time of valuation in certain cases where that is necessary to achieve a just compensation. It does not allow a landowner to claim, under the guise of compensation, profits allegedly lost as a result of precondemnation activities of the State. The instruction is therefore improper.
The two errors of the trial court leave us no alternative but to order that the case be remanded for a new trial consistent with this opinion.
BRACHTENBACH, C.J., and ROSELLINI, STAFFORD, UTTER, DOLLIVER, WILLIAMS, DORE, and DIMMICK, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3119957/ | Order issued October ~ , 2012
In The
(£ourt of .Appeal
afth 3iatrict of at 3atta
No. 05-12-00418-CV
NORTH CENTRAL DISTRIBUTORS, INC., Appellant
MINYARD FOOD STORES, INC., Appellee
ORDER
We GRANT appellant’s October 16, 2012 motion for an extension time to file a reply brief.
ORDER the reply brief tendered to this Court by appellant on October 16, 2012 filed as of the
date of this order. | 01-03-2023 | 10-16-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1426759/ | 519 F. Supp. 2d 328 (2007)
James A. GHENT, Jr., Plaintiff,
v.
Joseph B. MOORE, et al., Defendants.
No. 05-CV-6182L.
United States District Court, W.D. New York.
October 23, 2007.
*329 *330 David Rothenberg, Geiger and Rothenberg, LLP, Rochester, NY, for Plaintiff.
Tamara B. Christie, NYS Office of the Attorney General, Rochester, NY, for Defendants.
*331 DECISION AND ORDER
DAVID G. LARIMER, District Judge.
Plaintiff, James A. Ghent, Jr., an African-American male, commenced this action against his employer, the State University of New York ("SUNY") and four individual defendants, alleging that he has been discriminated against on account of his race. Plaintiff asserts causes of action under 42 U.S.C. §§ 1981 and 1983, and under the New York State Human Rights Law ("HRL"), Exec. L. § 296. Defendants have moved for summary judgment. For the reasons that follow, defendants' motion is granted.
BACKGROUND
Plaintiff has been a part-time employee at SUNY's Empire State College ("Empire") since program, which is a degree program offered by Empire that is designed for working business professionals in Western New York. FORUM West operates out of Empire's Niagara Frontier Center in Buffalo.
Throughout the relevant period, plaintiff was also employed as a mentor at the Genesee Valley Center ("GVC"), which is an Empire campus located in Rochester. Plaintiff held the FORUM West and GVC positions pursuant, to separate employment contracts, each of which was renewable annually. See Dkt. # 25-2 at 2.
In August 2003, defendant Robert W. Gerulat, the FORUM West program director and plaintiff's immediate supervisor at FORUM West, offered plaintiff a marketing position within FORUM West. That new position, which, if plaintiff accepted, would have taken the place of plaintiff's mentor position at FORUM West, would have involved marketing FORUM West to minorities in the Rochester and Buffalo areas. Gerulat Depo. Tr. (Dkt. # 20 Ex. C) at 213. Plaintiff declined Gerulat's offer, however.
Plaintiffs contract with FORUM West was not renewed upon its expiration on August 31, 2003, for reasons which will be discussed below. Plaintiff has not worked at FORUM West since then, although he continues to be employed as a mentor at GVC.
Plaintiff filed the complaint in this action in April 2005. In addition to SUNY and Gerulat, he has sued Joseph B. Moore, the President of Empire; Joyce B. Elliott, the Provost and Vice President for Academic Affairs of Empire; and Robert P. Milton, the Dean and Center Director of GVC.[1]
The complaint alleges that throughout his employment by SUNY, plaintiff has been subjected to a "pattern and practice" of race discrimination in a number of ways. Now that discovery is complete, however, it is clear from the record before me that the real basis of plaintiffs claim is not that defendants have engaged in a pattern or practice of discrimination, but that plaintiff has been subjected to disparate treatment based on his race. Specifically, plaintiff alleges that the decision not to renew his FORUM West contract was motivated by racial animus.[2] Based on that allegation, *332 plaintiff alleges that defendants have unlawfully discriminated against him on the basis of race, with respect to the benefits, privileges, terms and conditions of plaintiffs contractual relationship with SUNY, in violation of 42 U.S.C. § 1981. He also asserts a claim under § 1983, alleging that defendants have denied him equal protection of the law in violation of his rights under the. Fourteenth Amendment to the United States Constitution. Plaintiffs third cause of action alleges that defendants have discriminated against him on account of his race, in violation of the HRL. Plaintiff seeks injunctive relief "ordering and enjoining defendants to employ plaintiff on such terms and conditions as are comparable to similarly situated majority faculty members," Complaint at 8, compensatory and punitive damages, and costs and attorney's fees.[3]
DISCUSSION
I. Summary Judgment: General Principles
A motion for summary judgment must be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any' material fact and that the moving party *333 is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). In deciding a motion for summary judgment, the evidence submitted must be viewed in the light most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). Summary judgment should be granted "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). Even if parties dispute material facts, summary judgment must be granted "unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Golden Pacific Bancorp. v. F.D.I.C, 375 F.3d 196, 200 (2d Cir.2004) (internal citations and quotation marks omitted). In addition, once the moving party has made a sufficient showing, "[t]he non-moving party may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence showing that its version of the events is not wholly fanciful." Id. (quoting D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.1998)).
The Second Circuit has stated that district courts should be "particularly cautious about granting summary judgment to an employer in a discrimination case when the employer's intent is in question. Because direct evidence of an employer's discriminatory intent will rarely be found, `affidavits and depositions must be carefully scrutinized for circumstantial proof which, if believed, would show discrimination.'" Schwapp v. Town of Avon, 118 F.3d 106, 110 (2d Cir.1997) (quoting Gallo v. Prudential Residential Services, 22 F.3d 1219, 1224 (2d Cir.1994)). However, summary judgment in an employment discrimination case may still be appropriate if the plaintiff relies "on conclusory allegations of discrimination and the employer provides a legitimate rationale for its conduct." Figueroa v. New York Health and Hospitals Corp., 500 F. Supp. 2d 224, 228 (S.D.N.Y.2007) (internal quotation marks omitted). As the Second Circuit has stated, "[t]he summary judgment rule would be rendered sterile . . . if the mere incantation of intent or state of mind would operate as a talisman to defeat an otherwise valid motion. Indeed, the salutary purposes of summary judgment-avoiding protracted, expensive and harassing trials apply no less to discrimination cases than to commercial or other areas of litigation." Meiri v. Dacon, 759 F.2d 989, 998 (2d Cir.1985); see also Abdw-Brisson v. Delta Air Lines, Inc., 239 F.3d 456, 466 (2d Cir.2001) ("It is now beyond cavil that summary judgment may be appropriate even in the fact-intensive context of discrimination cases").
II. Application to the Case at Bar
A. Claims Against SUNY
Defendants contend that all claims against SUNY must be dismissed on the ground of sovereign immunity under the Eleventh Amendment. The Second Circuit has held that "[f]or Eleventh Amendment purposes, SUNY is an integral part of the government of the State [of New York] and when it is sued the State is the real party." Garcia v. SUNY Health Sciences Ctr. of Brooklyn, 280 F.3d 98, 107 (2d Cir.2001) (quoting Dube v. SUNY, 900 F.2d 587, 594 (2d Cir.1990)). Insofar as plaintiff seeks relief against SUNY, therefore, his claims are barred by the Eleventh Amendment. Id.; see also Dube, 900 F.2d at 594 ("no relief, either legal or equitable, is available against SUNY"); accord Banks v. SUNY, No. 06-CV-239, 2007 WL 895505, at *7 (W.D.N.Y. Mar. 22, 2007).
*334 Plaintiff's federal claims against the individual defendants in their official capacities, however, are not barred by the Eleventh Amendment to the extent that plaintiff seeks reinstatement to his previous employment at FORUM West. The Second Circuit has held that "claims for reinstatement to previous employment satisfy the Ex parte Young [209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714 (1908)] exception to the Eleventh Amendment's sovereign immunity bar." State Employees Bargaining Agent Coalition v. Rowland, 494 F.3d 71, 96 (2d Cir.2007); see In re Deposit Ins. Agency, 482 F.3d 612, 617(2d Cir. 2007) (under Ex parte Young, "a plaintiff may sue a state official acting in his official capacity notwithstanding the Eleventh Amendment for prospective, injunctive relief from violations of federal law") (internal quotation marks omitted); see also Dotson v. Griesa, 398 F.3d 156, 178 (2d Cir.2005) ("A court order of reinstatement . . . is not barred by sovereign immunity"). Such claims, however, cannot be brought directly against the state, or a state agency, but only against state officials in their official capacities. See Santiago v. New York State Dep't of Correctional Services, 945 F.2d 25, 32 (2d Cir.1991) ("a plaintiff seeking prospective relief from the state must name as defendant a state official rather than the state or a state agency directly, even though in reality the suit is against the state"); Banks, 2007 WL 895505, at *7 ("A state official . . . may be sued in his official capacity in a federal forum to enjoin conduct that violates the federal Constitution"); Dicks v. Binding Together, Inc., No. 03 Civ. 7411, 2007 WL 1462217, at *5 (S.D.N.Y. May 18, 2007) ("Plaintiff's claims for prospective injunctive relief are not barred by the Eleventh Amendment-provided, however, that Plaintiff brings those claims against a state official, rather than the state itself").
In addition, plaintiff's HRL claim against SUNY must be dismissed in its entirety. "[A] federal court's grant of injunctive relief against a state official may not be based on violations of state law." Dube, 900 F.2d at 595. See Banks, 2007 WL 895505, at *7 ("State officials may not . . . be sued in their official capacity for violations of state law"); Smith v. SUNY, No. 1:00-CV 1454, 2003 WL 1937208, at *7 n. 7 (N.D.N.Y. Apr.23, 2003) ("Ex parte Young does not apply to Plaintiffs' New York Human Rights Law claims to the extent that they seek prospective relief against the individual Defendants in their official capacities because the claims for prospective relief are based upon violations of state law") (citing Dube, 900 F.2d at 595); Jacobs v. SUNY at Buffalo Sch. of Med., 204 F. Supp. 2d 586, 593 (W.D.N.Y. 2002) (dismissing HRL claims as to SUNY on Eleventh Amendment grounds).
B. Claims Against the Individual Defendants
As stated, plaintiff's claims are brought under 42 U.S.C. §§ 1981 and 1983 and the HRL. In general, discrimination claims brought under those statutes are subject to the same analysis as claims brought under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. See Whidbee v. Garzarelli Food Specialties, Inc., 223 F.3d 62, 69 (2d Cir.2000); Davis v. Wisconsin Dep't of Corr., 445 F.3d 971, 976 (7th Cir.2006); Hawkins v. County of Oneida, 497 F. Supp. 2d 362, 376 (N.D.N.Y. 2007). The chief difference between Title VII and the statutes on which Ghent's claims are based is that "in certain circumstances a Title VII claim may be established through proof of a defendant's mere negligence, without a showing of discriminatory intent," whereas "a plaintiff pursuing a claimed violation of § 1981 or denial of equal protection under § 1983 must show that the discrimination was intentional." *335 Patterson v. County of Oneida, 375 F.3d 206, 226 (2d Cir.2004) (citations omitted). In addition, whereas individuals may not be held personally liable under Title VII, see Wrighten v. Glowski, 232 F.3d 119, 120 (2d Cir.2000); Falso v. Sutherland Global Services, 494 F. Supp. 2d 207, 209 (W.D.N.Y.2007), individual liability may arise under §§ 1981 and 1983 and the HRL upon a showing that the individual defendants were personally involved or participated in the violation. Patterson, 375 F.3d at 226; Hawkins, 497 F.Supp.2d at 376; Walter v. Hamburg Central School Dist., No. 04-CV-996, 2007 WL 1480965, at *9 (W.D.N.Y. May 18, 2007) (individual liability may be imposed under the HRL if the defendant "actually participated in the conduct giving rise to the discrimination claim").
Plaintiff's claims of employment discrimination are thus subject to the burden-shifting analysis applied to Title VII claims, as articulated by the Supreme Court in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973). First, plaintiff must establish a prima facie case of discrimination by demonstrating that: (1) he belongs to a protected class; (2) he was qualified for his job; (3) he suffered an adverse employment action; and (4) the action took place under circumstances giving rise to an inference of discrimination. See Roge v. NYP Holdings, Inc., 257 F.3d 164, 168 (2d Cir.2001). Once plaintiff has established a prima facie case, the burden shifts to defendants to articulate a legitimate, nondiscriminatory reason for the adverse employment action. See James v. New York Racing Ass'n, 233 F.3d 149, 154 (2d Cir. 2000). The burden then returns to plaintiff to supply evidence that the reason offered by the defendant is a pretext for unlawful discrimination. See St. Mary's Honor Center v. Hicks, 509 U.S. 502, 508, 113 S. Ct. 2742, 125 L. Ed. 2d 407 (1993).
Plaintiff's race is a protected category, and defendants do not appear to dispute that plaintiff was qualified for his position as mentor, although they do assert that there were some problems with his performance in that position.
Defendants contend, however, that plaintiff has not made out a prima facie case of discrimination because he has not shown that he was subjected to an adverse employment action. Specifically, defendants contend that plaintiff has not demonstrated that the non-renewal of his contract with FORUM West constituted an adverse action.
"A plaintiff sustains an adverse employment action if he or she endures a `materially adverse change' in the terms and conditions of employment." Kassner v. 2nd Avenue Delicatessen Inc., 496 F.3d 229, 238 (2d Cir.2007) (quoting Galabya v. New York City Bd. of Educ., 202 F.3d 636, 640 (2d Cir.2000)). "An `adverse employment action' is one which is more disruptive than a mere inconvenience or an alteration of job responsibilities." Joseph v. Leavitt, 465 F.3d 87, 90 (2d Cir.2006) (quoting Terry v. Ashcroft, 336 F.3d 128, 138 (2d Cir.2003)).[4]
*336 To the extent that defendants argue that the non-renewal of plaintiff's FORUM West contract, as a matter of law, could not constitute an adverse action, I am not persuaded by this assertion. Defendants characterize that nonrenewal as simply a "decrease in [plaintiff's] teaching load," Defendants' Mem. of Law at 11, but it seems obvious that more than that occurred here. Up until the Fall 2003 semester, plaintiff held two part-time positions at Empire one at FORUM West and one at GVC and he lost one of those two positions. Plaintiff's FORUM West contract was not renewed, and, since there was apparently no offsetting increase in plaintiff's responsibilities or pay at GVC, plaintiffs total salary presumably decreased. In general, the non-renewal of an employment contract satisfies the adverse-action requirement for purposes of a plaintiff's prima facie case. See Evans-Marshall v. Board of Educ. of Tipp City Exempted Village School Dist., 428 F.3d 223, 232 (6th Cir.2005) (nonrenewal of public high school teacher's contract constituted adverse employment action for purposes of First Amendment retaliation claim); Thaddeus-X v. Blatter, 175 F.3d 378, 396 (6th Cir.1999) (en banc) (listing "discharge, demotions, refusal to hire, nonrenewal of contracts, and failure to promote" as examples of adverse actions in employment); Hernandez-Mejias v. General Elec., 428 F. Supp. 2d 4, 8 (D.P.R.2005) ("we agree with the overwhelming majority of courts that non-renewal of an employment contract constitutes an adverse employment action"); Kabes v. School Dist. of River Falls, 387 F. Supp. 2d 955, 975 (W.D.Wis.2005) ("Defendants' nonrenewal of plaintiff Kabes's contract constitutes an adverse employment action"); Sloat v. Rapid City Area School Dist. No. 51-4, 393 F. Supp. 2d 922, 930 (D.S.D.2005) (nonrenewal of teacher's one-year contract was adverse employment action sufficient to satisfy requirement for prima facie case of age discrimination).
Defendants also argue that under the particular facts of this case, plaintiff cannot demonstrate that he suffered an adverse action because defendants offered him another position in marketing, which plaintiff turned down. In response, plaintiff contends that the offer was in itself evidence of discriminatory animus, because it was based on the stereotypical notion that plaintiff, as an African-American, would be best suited for a position in which he would be interacting with minority individuals. See Knight v. Nassau County Civil Service Comm'n, 649 F.2d 157 (2d Cir.1981) (involuntary transfer of black employee to minority recruitment constituted impermissible classification based on race in violation of both Title VII and Equal Protection Clause, since it was "based on a racial stereotype that blacks work better with blacks and on the premise *337 that Knight's race was directly related to his ability to do the job").
I find it unnecessary to decide, however, whether plaintiff did suffer an adverse action. Defendants have proffered a facially legitimate reason for their decision not to renew plaintiffs FORUM West mentoring contract: they contend that there were significant problems with plaintiffs job performance as a mentor at FORUM West. They allege that they had received complaints from several students about plaintiff, and that plaintiff had a "negative attitude" with respect to his job. It was for those reasons, defendants contend, that they decided to offer him a switch to a marketing position, and when plaintiff turned that offer down, they had little choice but to let him go.
"Since defendant[s] ha[ve] proffered a legitimate, nondiscriminatory reason for [their] actions, I will proceed to the ultimate issue of whether plaintiff[] ha[s] presented sufficient evidence of pretext to give rise to a genuine issue of material fact." Kourofsky v. Genencor Intern., Inc., 459 F. Supp. 2d 206, 211-12 (W.D.N.Y. 2006); see United States Postal Serv. Bd. of Governors v. Aikens, 460 U.S. 711, 715, 103 S. Ct. 1478, 75 L. Ed. 2d 403 (1983) ("Where the defendant has done everything that would be required of him if the plaintiff had properly made out a prima facie case, whether the plaintiff really did so is no longer relevant"); Wado v. Xerox Corp., 991 F. Supp. 174, 187 (W.D.N.Y. 1998) (where defendant proffered legitimate, nondiscriminatory reasons for plaintiffs' terminations, court would "assume that [each plaintiff] ha[d] made out a prima facie case, and proceed to consider whether the plaintiff ha[d] presented sufficient evidence to create a triable issue of fact about whether Xerox's proffered reason [wa]s a pretext for discrimination"), aff'd sub nom. Smith v. Xerox Corp., 196 F.3d 358 (2d Cir.1999), overruled on other grounds by Meacham v. Knolls Atomic Power Lab., 461 F.3d 134 (2d Cir.2006).
Plaintiff has not, however, shown that there are any genuine issues of material fact concerning whether defendants' proffered reasons for their actions are pretexts for unlawful discrimination. Defendants are therefore entitled to summary judgment, regardless of whether plaintiff was subjected to an adverse employment action. See Lizardo v. Denny's, Inc., 270 F.3d 94,' 103 (2d Cir.2001) ("Evidence of pretext, . . . even combined with the minimal showing necessary to establish a prima facie case . . ., does not mandate a denial of summary judgment. The court must examine the entire record to determine if plaintiffs meet their ultimate burden of persuading the fact-finder of a central element of a 1981 claim: namely, that defendants intentionally discriminated against them on the basis of their race") (citations omitted.); Maglietti v. Nicholson, No. 3-05-cv-1819, 2007 WL 2904192, at *4 (D.Conn. Sept.29, 2007) ("establishing a prima facie case and offering evidence of pretext alone does not suffice to establish a finding of gender discrimination") (citing McGuinness v. Lincoln Hall, 263 F.3d 49, 55 (2d Cir.2001)).
To a great extent, plaintiff, in response to defendants' motion, simply takes issue with their evaluation of his performance as a mentor. Plaintiffs subjective opinion of his own performance, however, is not enough to give rise to a genuine issue of material fact in this regard. Orosco v. Long Island Jewish Med. Ctr., No. 05-CV-3418, 2007 WL 2078300, at *9 (E.D.N.Y. July 18, 2007); see also Jimoh v. Ernst & Young, 908 F. Supp. 220, 226 (S.D.N.Y.1995) (employee's disagreement with his employer's evaluation of his performance is insufficient to establish discriminatory intent).
*338 In addition, the alleged problems with plaintiff's performance that defendants rely on are well documented by contemporaneous documents and notations in the record. See Dkt. # 20-2 at 77-84. While that alone does not establish that the problems were genuine, or that defendants' proffered reasons for their actions are not pretextual, it does indicate that those proffered reasons are not purely after-the-fact justifications for not renewing plaintiff's contract. Plaintiff admits that there were "difficulties" with one of his mentees in particular, see Plaintiff's Aff. ¶¶ 64-65, and although he may believe that this did not warrant defendants' decision not to renew his FORUM West contract, the Court does not "sit as a super-personnel department" to reexamine defendant's decisions in this regard. Stern v. Trustees of Columbia University in City of New York, 131 F.3d 305, 315 (2d Cir.1997); see also Paddock v. Brockport, 418 F. Supp. 2d 288, 296 (W.D.N.Y.2006) ("It is not the Court's role to decide whether SUNY made a bad employment decision when it terminated" plaintiff). While plaintiff has presented evidence that other students considered him to be an excellent mentor, it is hardly unusual for teachers or mentors to receive mixed reviews from their students or mentees. Again, it is not the Court's task to decide whether plaintiff was a good or a bad mentor, but to decide whether there are any issues of fact concerning whether defendants' stated opinions of plaintiff's performance are pretextual. I do not believe that there are.
Plaintiff also notes that in May 2001, Gerulat sent an email to the deans of two academic centers within Empire, stating that "[a]s a primary mentor, Jim [Ghent] provides his students with solid degree planning advice in a caring and effective way." Dkt. # 25 ¶ 30 and Ex. B. Plaintiff contends that this contradicts Gerulat's later statements expressing dissatisfaction with plaintiff's performance.
In fact, this undercuts plaintiff's allegations of discriminatory animus on Gerulat's part. Just as the Second Circuit has observed that "where the person who made the decision to fire was the same person who made the decision to hire, it is difficult to impute to her an invidious motivation that would be inconsistent with the decision to hire," Schnabel v. Abramson, 232 F.3d 83, 91 (2d Cir.2000) (quoting Grady v. Affiliated Cent., Inc., 130 F.3d 553, 560 (2d Cir.1997)), so it is difficult to see why Gerulat would have praised plaintiffs performance in May 2001, and then about two years later, have decided to trump up some purported problems with plaintiff's performance because of Gerulat's previously unmanifested racial animus.
Plaintiff also alleges that during the relevant time period, he was "the sole African-American faculty member in the Forum West Program," Complaint ¶ 33(a), and that historically, minority faculty numbers at Empire have been "below the target goal." Plaintiffs Aff. (Dkt.# 25) ¶ 100. Without other evidence of discrimination, however, that alone is not probative of unlawful discrimination. See Davis v. Oyster Bay-East, No. 03-CV-1372, 2006 WL 657038, at * 10 (E.D.N.Y. Mar. 9, 2006) ("the mere fact that Plaintiff was the only African American stenographer, without more, is insufficient to establish pretext"); Washington v. Martinez, No. Civ.A. 03-3529, 2004 WL 632705, at *6 (E.D.Pa. Jan.28, 2004) ("Although plaintiff was the only African-American in the office she has presented no evidence that she would have been treated differently had she been a white person or that any of her coworkers' actions were motivated by her race"); Padob v. Entex Information Serv, 960 F. Supp. 806, 813 (S.D.N.Y.1997) ("the fact of [plaintiffs] being the only woman *339 Corporate Sales Manager in her position, standing alone, does not create a genuine issue of material fact as to pretext based on gender"); Walker v. Marriott Facilities Mgmt., No. 95-3273, 1995 WL 481511, at *2 (E.D.Pa. Aug.11, 1995) ("Plaintiff merely asserts that he `was the only black person employed in a management capacity in his unit.' He does not allege that similarly situated persons outside the protected class were retained. . . . Thus, Plaintiff has not stated a claim of race or gender based discrimination").
Finally, I am not persuaded by plaintiffs contention that Gerulat's offer of the marketing position is itself evidence of discriminatory animus because it was based on the notion that, as an African-American, plaintiff was best suited for a position that involved dealing with other minority individuals. First, the cases cited by plaintiff, Knight and Patrolmen's Benevolent Ass'n of the City of New York v. City of New York, 74 F. Supp. 2d 321, 338 (S.D.N.Y.1999), are distinguishable from the case at bar. In both of those cases, the employers admitted that they had assigned the employees to certain positions because of the employees' race, but contended that their actions were permissible under the "bona fide occupational qualification" ("BFOQ") defense to Title VII claims. As the courts in Knight and Patrolmen's Benevolent Ass'n explained, however, the BFOQ defense does not apply to discrimination based on race. Knight, 649 F.2d at 157; Patrolmen's Benevolent Ass'n, 74 F.Supp.2d at 337.
Defendants in the case at bar do not rely on a BFOQ defense, and that defense is not at issue in this lawsuit. Defendants do not contend that they offered the marketing position to plaintiff because of his race, but because they were dissatisfied with his performance as a mentor, and because plaintiff had previously told defendants that "he had been very active in marketing activities for the Forum West program in the past." Gerulat Depo. Tr. (Dkt.# 20-2) at 213.
In any event, even if a factfinder believed that defendants' offer of the marketing position to plaintiff was based in part on his race, I find that to be insufficient to give rise to a genuine issue of fact concerning whether the decision not to renew plaintiffs FORUM West mentoring contract was motivated by racial animus. There is simply no evidence that plaintiffs race played any part in that decision, which was clearly not contingent on plaintiff s acceptance of the marketing position. Defendants could lawfully have simply declined to renew plaintiffs mentoring contract, without making any offer of other employment. That they chose to offer him an alternative position instead, even one that may have been related in some way to his race, is not evidence that the decision not to renew the mentoring contract was racially motivated.
CONCLUSION
Defendants' motion for summary judgment (Dkt.# 19) is granted, and the complaint is dismissed.
IT IS SO ORDERED.
NOTES
[1] Plaintiff states in his memorandum of law that "in light of testimony in this action, plaintiff has withdrawn his complaint against defendant Milton." Dkt. # 25-9 at 2 n. 1. Plaintiff's claims against Milton are therefore deemed to be withdrawn and are dismissed.
[2] Pattern-or-practice claims are typically asserted on behalf of a class of plaintiffs, who must demonstrate (usually through statistical evidence) that the defendant engaged in a pattern or practice of intentional discrimination. If the plaintiffs succeed in doing so, the court may fashion class-wide injunctive relief; if individual relief such as back pay is sought, the court proceeds to the "remedial" phase, in which the class members enjoy a presumption in their favor that any particular employment decision, during the period in which the discriminatory policy was in force, was made in pursuit of that policy. See Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 15859 (2d Cir.2001).
It is unclear in this circuit whether an individual plaintiff may proceed on a pattern-or-practice theory. See Walter v. Hamburg Central School Dist., No. 04-CV-996, 2007 WL 1480965, at *5 (W.D.N.Y. May 18, 2007) ("most districts in this Circuit have seriously questioned whether courts can consider pattern or practice claims outside the context of class actions, and one district has held that it cannot") (citing Heap v. County of Schenectady, 214 F. Supp. 2d 263, 271 (N.D.N.Y.2002) (dismissing. pattern-or-practice claim as improper in the context of an individual disparate treatment case)); see also Bacon v. Honda of Am. Mfr., Inc., 370 F.3d 565, 575 (6th Cir.2004) (holding that a pattern-or-practice claim is not available to individual plaintiffs, although "pattern-or-practice evidence may be relevant to proving an otherwise-viable individual claim for disparate treatment").
In support of their summary judgment motion, defendants contend that plaintiff has failed to make out a pattern-or-practice claim. In response, plaintiff states that "[a]lthough each cause of action alleges a pattern and practice of race discrimination, the actionable conduct alleged herein is the non-renewal of plaintiff's contract with the Forum West Program." Plaintiffs Mem. of Law (Dkt. # 25-9) at 4. The Court will therefore treat plaintiffs claims as only alleging disparate treatment based on the non-renewal of plaintiff's contract. In assessing that claim, however, the Court may take into account the purported pattern-and-practice evidence submitted by plaintiff. See Ghent Aff. (Dkt. # 25) ¶¶ 97-108.
[3] The complaint also alleges, as part of its pattern-and-practice allegations, that plaintiff has been passed over for promotion in favor of less qualified "majority" faculty members. Dkt. # 1 ¶ 33. Plaintiff admitted at his deposition that he did not apply for, or express any interest in, those positions, however. See Tamara B. Christie Decl. (Dkt. # 20) Ex. A at 54, 56, 60, 65.
"To establish a prima facie case of discriminatory failure to promote, a plaintiff must `allege that she or he applied for a specific position or positions and was rejected therefrom, rather than merely asserting that on several occasions she or he generally requested promotion.'" Kinsella v. Rumsfeld, 320 F.3d 309, 314 (2d Cir.2003) (quoting Brown v. Coach Stores, Inc., 163 F.3d 706, 710 (2d Cir.1998)); see, e.g., Constance v. Pepsi Bottling Co. of New York, No. 03-CV-5009, 2007 WL 2460688, at *17 (E.D.N.Y. Aug. 24, 2007) (holding that "plaintiffs general expression of interest for . . . a [particular] position [wa]s not sufficient to satisfy the application requirement"). Ghent does not even appear to allege that he "generally requested promotion," much less that he sought these particular jobs. In any event, Ghent's motion papers do not discuss the alleged failure to promote, and plaintiff thus appears to have abandoned this aspect of his claims.
[4] In Burlington Northern & Santa Fe Ry. Co. v. White, ___ U.S. ___, 126 S. Ct. 2405, 165 L. Ed. 2d 345 (2006), the Supreme Court held that a lower standard for "adverse actions" applies to claims of unlawful retaliation than to claims of unlawful discrimination. Specifically, the Court held "that the anti-retaliation provision [of Title VII], unlike the substantive [discrimination] provision, is not limited to discriminatory actions that affect the terms and conditions of employment." 126 S.Ct. at 2412-13. In retaliation cases, the Court held, the plaintiff need only "show that a reasonable employee would have found the challenged action materially adverse, which in this context means it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination." Id. at 2415 (internal quotation marks omitted).
Burlington Northern left intact, however, the rule that to be considered "adverse" for purposes of a substantive discrimination claim, an employer's action must amount to a "materially adverse change in the terms and conditions of employment [that] is more disruptive than a mere inconvenience or an alteration of job responsibilities." Croswell v. Tribbrough Bridge and Tunnel Authority, No. 03 Civ. 2990, 2007 WL 2274252, at *7 (S.D.N.Y. Aug. 7, 2007) (quoting Demoret v. Zegarelli, 451 F.3d 140, 151 (2d Cir.2006)). See Higgins v. Gonzales, 481 F.3d 578, 589 (8th Cir.2007); Piercy v. Maketa, 480 F.3d 1192, 1203 (10th Cir.2007); Evarts v. Southern New England Tel. Co., No. 00CV1124, 2006 WL 2864716, at *8 n. 12 (D.Conn. Oct. 2, 2006). See also Zelnik v. Fashion Inst. of Tech., 464 F.3d 217, 225 (2d Cir.2006) (district court erred in applying "material change in the terms and conditions of his employment" adverse-action standard for discrimination claims to plaintiff's retaliation claim). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1399747/ | 885 F.Supp. 716 (1994)
GRAHAM OIL COMPANY, Plaintiff,
v.
BP OIL COMPANY, Defendant.
Civ. A. No. 94-607.
United States District Court, W.D. Pennsylvania.
September 1, 1994.
*717 *718 Marshall J. Tindall, Robert W. Thomson, Neva L. Stotler, Meyer, Darragh, Buckler, Bebenek & Eck, Pittsburgh, PA, for plaintiff.
James V. Corbilli, D. Matthew Jameson, III, Joseph K. Reinhart, Babst, Calland, Clements & Zomnir, Pittsburgh, PA, for defendant.
MEMORANDUM OPINION
BLOCH, District Judge.
Presently before the Court is defendant's motion to dismiss a portion of Counts I and II of plaintiff's amended complaint, and all of Counts III, VI, IX, X, XI, and XII of plaintiff's amended complaint. For the reasons stated in this opinion, the Court will deny defendant's motion to dismiss a portion of Counts I and II, and deny defendant's motion to dismiss Counts III, VI, IX and X. The Court will grant defendant's motion to dismiss Counts XI and XII of plaintiff's amended complaint.
I. Background
This action arises out of a dispute between plaintiff, Graham Oil Company (Graham), and defendant, BP Oil Company (BP). On or about April 13, 1994, Graham filed an amended complaint asserting twelve causes of action relating to alleged damage to its property caused by defendant.
Graham owns the property located at Midland Avenue and Tenth Street in the Borough of Midland, Beaver County, Pennsylvania. On April 25, 1966, Graham leased this property to Boron Oil Company (Boron) for a lease term beginning June 1, 1966 and ending November 30, 1968. Boron exercised its option to extend the lease term three times. On August 1, 1983, the lease was amended by a Lease Amendment signed by Graham and BP, Boron's successor. Subsequently, BP exercised its option to extend the lease term two times. At all times during the lease, the property was used as a gasoline station and service center.
On January 27, 1992, BP had three 10,000 gallon underground storage tanks removed from the leased premises. On February 4, 1992, BP notified Graham that it was not going to renew the lease, and would allow the lease to expire on November 30, 1992.
As required by Pennsylvania law, BP submitted a "Closure Report" to the Department of Environmental Regulations (DER) when it removed the three underground storage tanks from service. The Closure Report, dated July 28, 1992, revealed contamination to the subsurface of Graham's property in the form of benzene, toluene, ethylbenzene, xylene, chlorobenzene, 1.2 dichlorobenzene, 1.3 dichlorobenzene, 1.4 dichlorobenzene, and petroleum waste.
Subsequent to July 28, 1992, Graham obtained a copy of the Closure Report. Prior to July 28, 1992, however, Graham alleges that it did not have any knowledge of any contamination of its property.
Graham has alleged in its amended complaint that:
[b]y causing or allowing petroleum products, hazardous substances, and other *719 wastes, to be released as a result of its underground storage tank operations and other activities, BP has contaminated the Leased Premises, diminished the value of the Leased Premises, caused Graham to lose the use of the Leased Premises, and disrupted Graham's contractual relationships.
(Plaintiff's amended complaint at ¶ 23).
Count I of Graham's amended complaint asserts a claim under the Federal Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901-6987 (1976) (as amended) (RCRA). BP has moved to dismiss a portion of Count I on the basis that RCRA does not allow a private cause of action for damages.
Count II of the amended complaint asserts a claim under the Pennsylvania Hazardous Sites Cleanup Act, 35 Pa.C.S.A. §§ 6020.101-1305 (1988) (HSCA). BP has moved to dismiss a portion of Count II on the basis that HSCA does not allow for a private cause of action for money damages.
Count III of the amended complaint asserts a claim under the Pennsylvania Storage Tank and Spill Prevention Act, 35 Pa.S.A. §§ 6021.101-2104 (1989) (Pa. Tank Act). BP has moved to dismiss Count III on the basis that Graham failed to provide the requisite notice before initiating this action. Alternatively, BP has moved to dismiss a portion of Count III on the basis that the Pa. Tank Act does not allow for a private cause of action for damages.
Count IV of the amended complaint accuses BP of breaching an implied covenant to quit and surrender in good condition while Count V accuses BP of committing waste. BP has not moved to dismiss either of these counts.
Count VI of the amended complaint asserts a claim of strict liability based on the common law doctrine of ultrahazardous activity. BP has moved to dismiss Count VI on the basis that the operation of a gasoline station is commonplace, and that it is, therefore, not ultrahazardous as a matter of law.
Count VII of the amended complaint asserts a state law claim for negligence, and Count VIII asserts a state law claim for negligent interference with business. BP has not moved to dismiss either of these counts.
Count IX of the amended complaint asserts a state law claim for public nuisance. BP has moved to dismiss Count IX on the basis that Graham has not alleged that it has suffered any damage in the exercise of a right common to the general public.
Count X of the amended complaint asserts a state law claim for private nuisance. BP has moved to dismiss Count X on the basis that the doctrine of private nuisance applies only to adjoining land owners, and not to landlord-tenant relations.
Count XI of the amended complaint asserts a state law claim for trespass and/or continuing trespass. BP has moved to dismiss Count XI on the basis that it was legally in possession of the leased property when it was allegedly contaminated, and there was, therefore, no unprivileged, intentional intrusion onto land in the possession of another. BP further contends that Graham cannot maintain an action for continuing trespass because the alleged contamination constitutes a permanent injury and not a continuing trespass.
Count XII of the amended complaint asserts a common law claim for indemnification. BP has moved to dismiss Count XII on the basis that such a claim is not yet ripe for adjudication.
After summarizing the appropriate standard of review, the Court will address each of defendant's arguments in turn.
II. Discussion
A. Standard for motion to dismiss
When considering a motion to dismiss pursuant to Rule 12(b)(6), the Court must accept as true all facts alleged by the plaintiff in the complaint as well as any reasonable inferences that can be drawn from those facts. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir.1990). Legal conclusions are not admitted as true in a motion to dismiss. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.1993). When no relief can be granted under any set of facts that could be proved, *720 dismissal under Rule 12(b)(6) is appropriate. Markowitz, 906 F.2d at 103.
B. Motion to dismiss a portion of Count I: RCRA
Section 7002(a) of the Solid Waste Disposal Act, 42 U.S.C. § 6972, provides that a citizen may maintain an action against any person "who has contributed or is contributing to the past or present handling, storage, treatment, transportation, or disposal of any soil or hazardous waste which may present an imminent and substantial endangerment to health or the environment." 42 U.S.C. § 6972(a)(1)(B) (the RCRA citizen suit provision). Section 7002 allows the Court to award the following relief when a citizen brings a complaint pursuant to the RCRA:
The district court shall have jurisdiction ... to restrain any person who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste ..., to order such person to take other such action as may be necessary ..., [or] to apply any appropriate civil penalties.
42 U.S.C. § 6972(a). Section 7002 further allows the Court to award "costs of litigation (including reasonable attorney and expert witness fees) to the prevailing or substantially prevailing party whenever the court determines such an award is appropriate." 42 U.S.C. § 6972(e).
Although defendant cites numerous cases supporting the principle that the RCRA citizen suit provision does not permit a private action for damages, it is not necessary to reach that issue. In this case, Graham is not using its RCRA claim as an opportunity to assert a private action for damages. Rather, Graham is seeking only the relief authorized by RCRA's citizen suit provision. The prayer for relief in Count I of the amended complaint itemizes the relief available by RCRA's citizen suit provision, and BP's argument that the relief requested is outside the scope of relief allowed under RCRA is, therefore, mooted. For this reason, the Court will deny BP's motion to dismiss a portion of Count I of the amended complaint.
C. Motion to dismiss a portion of Count II. HSCA
Section 6020.1115 of HSCA provides that:
[a] person who has experienced or is threatened with personal injury or property damage as a result of a release of a hazardous substance may file a civil action against any person to prevent or abate a violation of this act or any order, regulation, standard or approval issued under this act.
35 Pa.S.A. § 6020.1115(a) (the HSCA citizen suit provision).
In addition to allowing citizens to seek injunctive relief, the HSCA citizen suit provision further provides that:
[t]he court may grant any equitable relief; may impose a civil penalty ... and may award litigation costs, including reasonable attorney and witness fees, to the prevailing or substantially prevailing party whenever the court determines such an award is appropriate.
35 Pa.S.A. § 6020.1115(b).
The law in Pennsylvania is unsettled with regard to the types of relief available to a plaintiff under the HSCA citizen suit provision. Because the Court finds that Graham is not asserting a private action for damages under the HSCA, but is rather only seeking the relief authorized by the HSCA citizen suit provision, the Court need not determine whether or not the HSCA prohibits a private cause of action. Thus, the Court will deny BP's motion to dismiss a portion of Count II of the amended complaint.
D. Motion to dismiss Count III: Pa. Tank Act
The purpose of the Pa. Tank Act is to regulate the use of aboveground and underground storage tanks in the Commonwealth of Pennsylvania. See 35 Pa.S.A. § 6021.102. Section 6021.1305(c) of the Pa. Tank Act allows any person to commence a civil action to compel compliance with the Act or any rule or regulation promulgated pursuant to the Act. Specifically, § 6021.1305(c) provides that:
*721 Any person having an interest which is or may be affected may commence a civil action on his behalf to compel compliance with this act or any rule, regulation, order, or permit issued pursuant to this act by any owner, operator, landowner or occupier alleged to be in violation of any provision of this act or any rule, regulation, order, or permit issued pursuant to this act.
35 Pa.S.A. § 6021.1305(c).
In addition to providing citizens with the right to seek injunctive relief, § 6021.1305 further provides that:
[t]he court, in issuing any final order in any action brought pursuant to this section, may award costs of litigation (including attorney and expert witness fees) to any party, whenever the court determines such award is appropriate.
35 Pa.S.A. § 6021.1305(f).
BP contends that Graham's claim under the Pa. Tank Act should be dismissed because "[n]o action pursuant to subsection (c) [the private action provision] may be commenced prior to 60 days after the plaintiff has given notice, in writing, of the violations to the department and to any alleged violator." 35 Pa.S.A. § 6021.1305(d). BP contends that Graham's amended complaint fails to allege that the requisite notice was provided to the DER.
Section 6021.1305(e) provides that the 60-day notice provisions of subsection (d) can be waived when the violation or order complained of constitutes an imminent threat to the health or safety of the plaintiff or would immediately affect a legal interest of the plaintiff. In such a case, any action pursuant to the Pa. Tank Act may be initiated immediately upon written notification to the DER. 35 Pa.S.A. § 6021.1305(e).
In its amended complaint, Graham has alleged that the contamination caused by BP constitutes an imminent threat to human health and safety. (Amended complaint at ¶ 31). Graham has also alleged facts that tend to show that its legal interest in the property has been immediately affected. Id. at ¶ 23. The fact that Graham is the owner of the contaminated property may be enough in and of itself to show that Graham's legal interests have been immediately affected. For these reasons, the Court finds that the 60-day notice requirements of § 6021.1305(d) have been waived, and that Graham was permitted to initiate this action immediately upon written notification of the violation to the DER. Section 6021.1305(e) does not specify that the written notification be given by the plaintiff, as is required under subsection (d). In this case, the requisite notice of the violation was given to the DER when BP submitted its Closure Report to the Department on July 28, 1992.
BP has alternatively moved to dismiss a portion of Count III of the amended complaint on the basis that the Pa. Tank Act does not allow for a private cause of action for damages. In this case, Graham is not attempting to use its Pa. Tank Act claim as an opportunity to assert a private action for damages. Rather, Graham is seeking only the relief authorized by the Pa. Tank Act. See 35 Pa.S.A. §§ 6021.1305(c) and 6021.1305(f). The prayer for relief in Count III of the amended complaint itemizes the relief available under the Pa. Tank Act, and BP's argument that the relief requested is outside the scope of relief allowed under the Pa. Tank Act is, therefore, mooted. For the foregoing reasons, the Court will deny BP's alternative motion to dismiss a portion of Count III of the amended complaint.
E. Motion to dismiss Count VI: ultrahazardous activity
BP moves to dismiss Count VI of the amended complaint on the basis that the operation of a gasoline station does not meet the criteria for an ultrahazardous activity or "abnormally dangerous activity" under Pennsylvania law. Section 520 of the Restatement (Second) of Torts sets forth several factors to consider in determining whether an activity is "abnormally dangerous." Specifically, § 520 provides that:
In determining whether an activity is abnormally dangerous, the following factors are to be considered:
(a) existence of a high degree of risk of some harm to the person, land, or chattels of others;
*722 (b) likelihood that the harm that results from it will be great;
(c) inability to eliminate the risk by the exercise of reasonable care;
(d) extent to which the activity is not a matter of common usage;
(e) inappropriateness of the activity to the place where it is carried on; and
(f) extent to which its value to the community is outweighed by its dangerous attributes.
Restatement (Second) of Torts § 520 (1977).
The Pennsylvania Supreme Court has yet to determine whether the operation of a gasoline station qualifies as an abnormally dangerous activity. BP contends that the operation of a gasoline station does not involve an unpreventable risk, that the storage and dispensing of gasoline is a matter of common usage, that the storage and dispensing of gasoline was appropriate to its location, and that the storage and dispensing of gasoline and other petroleum products is a valuable activity to society. BP relies upon Melso v. Sun Pipe Line Co., 394 Pa.Super. 578, 576 A.2d 999 (1990), appeal denied, 527 Pa. 667, 593 A.2d 842 (1991), to support its contention that the operation of a gasoline station is not an abnormally dangerous activity.
The Court in Melso held that the operation of a petroleum pipeline under a housing development was not an abnormally dangerous activity because it was a matter of common usage. Id. 576 A.2d at 1003. "An activity is a matter of common usage if it is customarily carried on by the great mass of mankind or by many people in the community." Restatement (Second) of Torts § 520, comment (i). The Restatement further explains this definition by way of illustration:
[w]ater collected in large quantity in a hillside reservoir in the midst of a city or in coal mining country is not the activity of any considerable portion of the population, and may therefore be regarded as abnormally dangerous; while water in a cistern or in household pipes or in a barnyard tank supplying cattle, although it may involve much the same danger of escape, differing only in degree if at all, still is a matter of common usage and therefore not abnormal. The same is true of gas and electricity in household pipes and wires, as contrasted with large storage tanks or high tension power lines.
Id. (emphasis added).
While "the transmission on land of natural gas and petroleum products by pipeline ... is a common activity," Melso, 576 A.2d at 1003, it cannot be said that the dispensing of gasoline from large storage tanks is so common as to be "carried on by the great mass of mankind" or even by "many people in the community." Restatement (Second) of Torts § 520, comment (i).
BP also contends that the storage and dispensing of gasoline was appropriate for its location. It is undisputed that the gasoline station operated by BP was located in an urban area. The Restatement (Second) of Torts provides the following illustration when discussing locality as a factor to consider in determining whether a particular activity is abnormally dangerous:
[e]ven a magazine of high explosives, capable of destroying everything within a distance of a half mile, does not necessarily create an abnormal danger if it is located in the midst of a desert area, far from human habitation and all property of any considerable value. The same is true of a large storage tank filled with some highly flammable liquid such as gasoline .... On the other hand, the same magazine of explosives, [or] the huge storage tank full of gasoline ... may become abnormally dangerous if they are carried on in the midst of a city.
Restatement (Second) of Torts § 520, comment (j).
"Whether the activity is an abnormally dangerous one is to be determined by the court, upon consideration of all the relevant factors listed in this section, and the weight given to each that it merits upon the facts in evidence." Restatement (Second) of Torts § 520, comment (1).
Because the plaintiff may prove a set of facts justifying the treatment of this activity as an abnormally dangerous activity, the Court will deny BP's motion to dismiss Count VI of the amended complaint.
*723 F. Motion to dismiss Count IX: public nuisance
The Restatement (Second) of Torts defines a public nuisance as "an unreasonable interference with a right common to the general public." Restatement (Second) of Torts § 821B(1). Before addressing BP's arguments, the Court notes that a release which violates the provisions of the Pa. Tank Act constitutes a public nuisance. 35 Pa.S.A. § 6021.1304.
BP moves to dismiss Count IX of the amended complaint on the basis that the doctrine of public nuisance provides a cause of action to abate nuisances to the general public and not to private citizens. In furtherance of their argument, BP contends that Graham has not alleged that it has suffered any damage in the exercise of a right common to the general public. BP relies upon Philadelphia Electric Co. v. Hercules, Inc., 762 F.2d 303 (3d Cir.1985), which held that private individuals may not recover damages in an individual action for public nuisance unless they have suffered harm of a different kind from that suffered by the general public and the harm was suffered while exercising a right common to the general public. Hercules, 762 F.2d at 315-16. See also Restatement (Second) of Torts § 821C(1).
In Hercules, the public right interfered with was the right to pure water. Hercules, 762 F.2d at 316. Likewise, in the present action, the public right interfered with is the right to soil and water free of contamination. In Hercules, the plaintiff did not allege that it suffered a harm different from that suffered by the general public. Id. Rather, in that case, the Delaware River was the polluted water source and the Philadelphia Electric Company made no commercial use of the water. The plaintiff in Hercules was merely one of many whose dwelling or corporation was situated along the river and, therefore, it was not uniquely affected by the pollution of the river. The Court in Hercules decided that the plaintiff was not uniquely harmed because it was "not a case where an established business made commercial use of the public right with which the defendant interfered." Id. (quoting Prosser, Private Action for Public Nuisance, 52 Va.L.Rev. 997, 1013-14 (1966)).
In the present case, Graham is uniquely affected by the alleged contamination to its property. Graham has alleged that it makes commercial use of its property and that any present or future commercial use of its property will be affected by the contamination. Specifically, Graham has alleged that the contamination has "diminished the value of the Leased Premises, caused [it] to lose the use of the Leased Premises, and disrupted [its] contractual relationships." (Amended complaint at ¶ 23).
Furthermore, the pecuniary loss to a Plaintiff resulting from a public nuisance normally constitutes a different kind of harm from that suffered by the general public. For example, if "A pollutes public waters, killing all the fish, [and] B, who has been operating a commercial fishery in these waters, suffers pecuniary loss as a result, [then] B can recover for the public nuisance." Restatement (Second) of Torts § 821C, comment (h), illus. 11. Similarly, Graham has alleged a pecuniary loss that is not common to the entire community as a result of the contamination. (Amended complaint at ¶ 23).
Therefore, Graham has sufficiently alleged that it has suffered harm of a different kind from the general public and that the harm was suffered while exercising a right common to the general public. For this reason, the Court will deny BP's motion to dismiss Count IX of the amended complaint.
G. Motion to dismiss Count X: private nuisance
The Restatement (Second) of Torts defines a private nuisance as "a nontrespassory invasion of another's interest in the private use and enjoyment of land." Restatement (Second) of Torts § 821D; see also Harford Penn-Cann Service, Inc. v. Zymblosky, 378 Pa.Super. 578, 549 A.2d 208, 209 (1988). BP moves to dismiss Count X of the amended complaint on the basis that Graham was a dispossessed landlord when the alleged contamination occurred and not a neighboring landowner. BP contends that the doctrine *724 of private nuisance applies only to adjoining landowners.
Section 821E of the Restatement (Second) of Torts clarifies who is entitled to bring an action for a private nuisance. Specifically, § 821E provides that:
[f]or a private nuisance there is liability only to those who have property and privileges in respect to the use and enjoyment of the land affected, including
(a) possessors of the land,
(b) owners of easements and profits in the land, and
(c) owners of nonpossessory estates in the land that are detrimentally affected by interference with its use and enjoyment.
Restatement (Second) of Torts § 821E (emphasis added).
While it is a general rule that the law of private nuisance is designed to resolve conflicts between neighboring landowners, see Hercules, 762 F.2d at 314, there are exceptions to this rule. Section 821E further clarifies when an owner of a nonpossessory estate can recover in an action for private nuisance and provides the following exception:
In most cases the owner of a nonpossessory estate in land has no rights or privileges in respect to the present use or enjoyment of the land, and therefore has no action for an interference with it. In some cases, however, an interference with the present use or enjoyment of land has a permanent, detrimental effect on the usability of the land and thus affects the rights and privileges of the owner of the nonpossessory estate in respect to the future use and enjoyment of the land. This is often the case when the land is in the possession of a tenant-at-will. The owner of the nonpossessory estate in this case is usually in the position of a landlord receiving rent from the tenant, and the value of the estate is definitely impaired by a permanent or continuing interference with the usability of the land.
Restatement (Second) of Torts § 821E, comment (f) (emphasis added).
BP cites to several cases to support its contention that the doctrine of private nuisance applies only to neighboring landowners. See, e.g., Hercules, 762 F.2d at 314; Rockaway v. Klockner & Klockner, 811 F.Supp. 1039, 1057-58 (D.N.J.1993); Smith v. King's Grant Condominium, 537 Pa. 51, 640 A.2d 1276, 1280 (1994). The Court of Appeals in Hercules reviewed several cases in which tenants attempted to recover from landlords for defective conditions existing on the premises. Hercules, 762 F.2d at 313-14. The Court of Appeals for the Third Circuit concluded that a tenant cannot recover from its landlord under the doctrine of public nuisance because it is not within the class of protected persons entitled to maintain an action under that theory. Id. at 314. By way of analogy, BP contends that Graham, as landlord, cannot recover from BP, as its tenant, under the doctrine of private nuisance.
The cases cited by BP that address land-lord-tenant relations and that limit the scope of the doctrine of private nuisance all apply a "caveat emptor" analysis. For example, the Court of Appeals in Hercules ruled that tenants cannot recover from landlords in actions for private nuisance for defective conditions existing on the premises over which they have assumed control because to do so would "circumvent limitations on vendor liability inherent in the rule of caveat emptor." Hercules, 762 F.2d at 313. Similarly, the Court in Klockner addressed the same issue of whether a tenant can recover from a landlord in an action for private nuisance. Klockner, 811 F.Supp. at 1057-58.
The only case cited by either Graham or BP which addresses the question of whether a landlord can recover from a tenant in an action for public nuisance is Arawana Mills Co. v. United Technologies Corp., 795 F.Supp. 1238 (D.Ct.1992). The Court in Arawana held that:
[t]here is nothing in the relationship between a landlord and tenant that would appear to prevent a landlord from proving each one of [the] elements [of a public nuisance] in a claim against a tenant, and certainly, tenants can be held liable for injuries to third parties caused by nuisance on leased property.
*725 Arawana, 795 F.Supp. at 1250 (citing Perkins v. Weibel, 132 Conn. 50, 42 A.2d 360 (1945)).
The Court is persuaded that the Arawana analysis is more applicable to the present case than the analyses found in the cases cited by BP. Furthermore, none of the cases cited by BP address the exception to the general rule of private nuisance. See Restatement (Second) of Torts § 521E, comment (f). For the foregoing reasons, the Court will deny BP's motion to dismiss Count X of the amended complaint.
H. Motion to dismiss Count XI: trespass
Under Pennsylvania law, a trespass is defined as an unprivileged, intentional intrusion upon land in possession of another. Kopka v. Bell Telephone Co., 371 Pa. 444, 91 A.2d 232, 235 (1952). BP moves to dismiss Count XI on the basis that BP was a tenant-in-possession of the premises at the time of the alleged contamination and its presence was, therefore, authorized.
In order to maintain a trespass action, a plaintiff must have had the right to exclusive use and possession of the property at issue. Northeast Women's Center, Inc. v. McMonagle, 670 F.Supp. 1300, 1311 (E.D.Pa. 1987). In the present case, Graham surrendered exclusive use and possession of the property when it leased the property to BP. Graham cannot, therefore, maintain an action in trespass based upon any of BP's alleged activities during the term of the lease. It is undisputed that the contamination of the property occurred during the lease term and, therefore, Graham should not be permitted to recover in its action for trespass against BP.
BP cites to several cases supporting this contention. See Potts Run Coal Co. v. Benjamin Coal Co., 285 Pa.Super. 128, 426 A.2d 1175, 1178 (1981); Gedekoh v. Peoples Natural Gas Co., 183 Pa.Super. 511, 133 A.2d 283, 284 (1957) (holding that no trespass occurs where a wrong is committed subsequent to a rightful entry by permission of the owner of the property). The Court in Wellesley Hills Realty Trust v. Mobil Oil Corp., 747 F.Supp. 93 (D.Mass.1990), addressed a similar situation as the one involved in this case. In Wellesley, the Court granted a motion to dismiss a trespass claim filed by a former gasoline service station owner who allegedly caused the release of oil and hazardous substances on the plaintiff's property while in possession of the site. Wellesley, 747 F.Supp. at 99.
Graham contends that it had constructive possession during the lease in that it had an ownership interest in its property and, therefore, it may bring an action in trespass against BP. The only case cited by Graham in support of this contention is Taylor v. Kaufhold, 368 Pa. 538, 84 A.2d 347 (1951). The Court in Taylor held that a dispossessed landlord could bring an action in trespass against a tenant only when he or she is a holdover tenant. Id. 84 A.2d at 351. The Court reasoned that, in a case involving a holdover tenant, the tenant is actually committing a trespass because he or she is no longer authorized to be on the premises. Id. 84 A.2d at 350-51. In contrast, when BP allegedly contaminated the leased property, it was lawfully authorized to be in possession of the premises.
In addition to asserting a trespass claim based upon the act of contamination, Graham has also alleged that BP's actions constitute a continuing trespass on the property. In its amended complaint, Graham alleges that "[b]y causing or allowing releases of hazardous substances and other pollutants to contaminate the Leased Premises, BP interfered with, and continues to interfere with, Graham's possessory interest in the land." (Amended complaint at ¶ 74) (emphasis added). BP moves to dismiss Count XI of the amended complaint on the basis that the alleged contamination of the property constitutes a permanent injury rather than a continuing trespass.
Pennsylvania courts have adopted the sections of the Restatement (Second) of Torts that deal with continuing trespass and permanent injury. Mancia v. Department of Transportation, 102 Pa.Cmwlth. 279, 517 A.2d 1381, 1384 (1986); County of Allegheny v. Merrit Construction Co., Inc., 309 Pa.Super. 1, 454 A.2d 1051 (1982). The Restatement *726 (Second) of Torts defines a continuing trespass as follows:
Continuing trespass. The actor's failure to remove from land in the possession of another a structure, chattel, or other thing which he has tortiously erected or placed on the land constitutes a continuing trespass for the entire time during which the thing is wrongfully on the land and ... confers on the possessor of the land an option to maintain a succession of actions based on the theory of continuing trespass or to treat the continuance of the thing on the land as aggravation of the original trespass.
Restatement (Second) of Torts § 161, comment (b).
The Restatement (Second) of Torts also distinguishes a continuing trespass from a permanent injury as follows:
Effect of a permanent change in the condition of the land. A continuing trespass must be distinguished from a trespass which permanently changes the physical condition of the land. Thus, if one, without a privilege to do so, enters land of which another is in possession and destroys or removes a structure standing upon the land, or digs a well or makes some other excavation, or removes earth or some other substance from the land, the fact that the harm thus occasioned on the land is a continuing harm does not subject the actor to liability for a continuing trespass. Since his conduct has once for all produced a permanent injury to the land, the possessor's right is to full redress in a single action for the trespass, and a subsequent transferee of the land, as such, acquires no cause of action for the alteration of the condition of the land.
Restatement (Second) of Torts § 162, comment (e).
The Pennsylvania Supreme Court clarified the distinction between a continuing trespass and a permanent injury in Sustrik v. Jones and Laughlin Steel Corp., 413 Pa. 324, 197 A.2d 44 (1964). "[A] continuing trespass must be distinguished from a trespass that effects a permanent change in the condition of the land. [A permanent trespass], while resulting in a continuing harm, does not subject the actor to liability for a continuing trespass." Id. 197 A.2d at 46.
The United States District Court for the Eastern District of Pennsylvania addressed this same issue in Tri-County Business Campus Joint Venture v. Clow Corp., 792 F.Supp. 984, 996 (E.D.Pa.1992). Similar to this case, Tri-County was a case involving environmental contamination. The waste in Tri-County included resin-containing drums, parts, buckets and barrels of liquid, semisolid waste, resin blocks and gaskets. Id. at 987. The district court concluded that the defendant's depositing of drums and associated waste on the property did not constitute a continuing trespass because the depositing of waste was a completed act at the time that the property was conveyed. Id. at 996.
Applying this analysis to the present case, BP's depositing of hazardous substances on Graham's property does not constitute a continuing trespass because the contamination was a completed act at the time that Graham took possession of the property. The act of contamination was "completed" on January 27, 1992, when BP had three 10,000 gallon underground storage tanks removed from the leased premises. Because BP's lease did not expire until November 30, 1992, the act of contamination had been completed approximately ten months prior to Graham's repossession of the property.
Although Graham alleges in ¶ 29 of its amended complaint that BP is "continuing to release petroleum and other hazardous substances on the Leased Premises," this is a legal conclusion which need not be accepted on a motion to dismiss. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3rd Cir.1993). Graham's amended complaint does not contain any factual allegations that BP caused the release of hazardous substances at any time after January 27, 1992. In order to maintain a claim for continuing trespass, a plaintiff must plead that the defendant committed and continues to commit harm-causing actions, not merely that the harm continues to result from actions which have ceased. See Hatco Corp. v. W.R. Grace & Co., 801 F.Supp. 1309, 1324 (D.N.J.1992); PBN Associates v. Xerox Corp., 141 A.D.2d 807, 529 N.Y.S.2d 877 *727 (N.Y.App.Div.1988), order modified on reargument on other grounds, 176 A.D.2d 861, 575 N.Y.S.2d 451 (N.Y.App.Div.1991). Drawing all reasonable inferences from the facts alleged in Graham's amended complaint, the Court concludes that the contamination was a completed act at the time the underground storage tanks were removed and that the contamination is, therefore, a permanent injury rather than a continuing trespass.
Because the Court finds that the contamination constitutes a permanent injury rather than a continuing trespass, Graham's only right to redress in trespass is in "a single action for the [original] trespass." Restatement (Second) of Torts § 162, comment (e). The alleged contamination occurred while BP was in possession of the property and, therefore, any acts committed on the property by BP during the term of its lease occurred while it was in lawful possession of the premises. Accordingly, because Graham may not maintain an action for the original trespass, the Court will grant BP's motion to dismiss Count XI of the amended complaint.
I. Motion to dismiss Count XII: indemnification
BP moves to dismiss Count XII of the amended complaint on the basis that Graham has not paid damages to a third party as a result of BP's actions. Common law indemnity applies when "a person who, without active fault on his own part, has been compelled by reason of some legal obligation to pay damages occasioned by the negligence of another." Burbage v. Boiler Engineering & Supply Co., 433 Pa. 319, 249 A.2d 563, 567 (1969). Under Pennsylvania law, before any right to indemnification arises, the indemnitee must pay damages to a third party. Fleck v. KDI Sylvan Pools, Inc., 981 F.2d 107, 122 (3d Cir.1992), cert. denied sub nom., ___ U.S. ___, 113 S.Ct. 1645, 123 L.Ed.2d 267 (1993). Because Graham fails to allege that it has paid any damages to a third party as a result of BP's alleged negligence, the Court will grant BP's motion to dismiss Count XII of the amended complaint. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1526391/ | 297 B.R. 774 (2003)
Christine MYERS, as guardian ad litem for Lacie Myers, a minor, individually, Plaintiff,
v.
UNITED STATES of America; OHM Remediation Services, Inc.; It Corporation; The Shaw Group; and Shaw Environmental, Inc., Defendants.
No. 02CV1349K (AJB).
United States District Court, S.D. California.
April 10, 2003.
*775 *776 Scott Allen, Cox and Moyer, San Francisco, CA, for plaintiff.
U.S. Attorney CV, U.S. Attorneys Office, Southern District of California, Civil Division, San Diego, Kirsten L. Wilkerson, Gay Elizabeth Kang, John Adam Bain, U.S. Department of Justice, Washington, DC, J L Sean Slattery, Gordon and Rees, San Diego, CA, Andrea E. Neuman, Gibson *777 Dunn and Crutcher, Irvine, CA, for defendants.
ORDER GRANTING DEFENDANT'S THE SHAW GROUP AND SHAW ENVIRONMENTAL, INC., MOTION TO DISMISS PURSUANT TO FED.R.CIV.P. 12(b)(6) WITH PREJUDICE
KEEP, District Judge.
Defendant The Shaw Group and Defendant Shaw Environmental, Inc., ("Defendant" or "Shaw")[1] filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) on February 4, 2003. Plaintiff filed an opposition on February 24, 2003, to which Defendants replied on March 3, 2003. Oral arguments were heard on March 26, 2003. Both parties proceed through counsel.
I. Background
The following is taken from the complaint and the parties' pleadings and is not to be construed as findings of fact by the court.
A. Original Personal Injury Suit filed in the Southern District of California
On July 10, 2002, Plaintiff filed a complaint in this court against defendants United States of America, and OHM Remediation Services, Inc. ("OHM"), alleging the following causes of action: (i) negligence; (ii) nuisance; (iii) trespass; and (iv) strict liability based on conducting an ultrahazardous activity.
The factual underpinning of the complaint are as follows: between January 1999 and April 2000, Plaintiff and her family lived on the Wire Mountain Family Housing Complex in Camp Pendleton, United States Marine Corps Base in San Diego County, California. According to the complaint, the Box Canyon Landfill, located near Plaintiff's home, and the neighborhood school and playground, was filled with toxic materials, including thallium. Plaintiff alleges that the defendants activities caused Plaintiff to be exposed to hazardous substances, including thallium. As a result of this toxic exposure, Plaintiff suffered injuries including neurological damage, gastrological disorders, alopecia (loss of all body hair) and severe emotional distress.
B. Bankruptcy Proceeding in Delaware
Unbeknownst to Plaintiff, on January 16, 2002, OHM and the IT Corporation ("IT") filed voluntary petitions for relief under Chapter 11 of Title 11 of the U.S.Code ("Bankruptcy Code").
On April 5, 2002, the Bankruptcy Court of Delaware approved the agreement in which Shaw purchased substantially all of IT's assets. Neither OHM nor IT served Plaintiff with notice of the bankruptcy proceedings, and when Plaintiff became aware of this, she moved the bankruptcy court to excuse the late filing of proof of claim, and relief from the automatic stay to fully prosecute the personal injury lawsuit. In November of 2002, Honorable Mary F. Walrath, U.S. Bankruptcy Judge for the District of Delaware granted both of Plaintiff's motions.
C. Amended Complaint in the Southern District of California
On January 6, 2003, Plaintiff filed a first amended complaint ("FAC") adding the *778 following defendants: IT Corporation, The Shaw Group and Shaw Environmental, Inc.
Shaw now moves to dismiss the complaint for the following three reasons: (1) the April 5, 2002 Order of the Delaware Bankruptcy Court expressly provided that Shaw acquire IT and OHM assets "free and clear" of Plaintiff's claim; (2) the Bankruptcy Code preempts claims of successor liability; and (3) asset purchasers, such as Defendant, are not subject to claims of successor liability under California law. Plaintiff opposes all of these arguments.
II. Motion to Dismiss
A. Legal Standard
Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss a complaint for failure to state a claim upon which relief can be granted. Such a dismissal can be based on either the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. See Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir.1988). In applying this standard, the court must treat all of plaintiff's factual allegations as true. See Experimental Eng'g. Inc. v. United Technologies Corp., 614 F.2d 1244, 1245 (9th Cir.1980). However, the court does not have to accept as true conclusory allegations that contradict facts which may be judicially noticed or which are contradicted by documents referred to in the complaint. See, e.g., Steckman v. Hart Brewing Inc., 143 F.3d 1293, 1295-1296 (9th Cir.1998). To dismiss with prejudice, it must appear to a certainty that the plaintiff would not be entitled to relief under any set of facts that could be proven. See Reddy v. Litton Indus., 912 F.2d 291, 293 (9th Cir.1990), cert. denied, 502 U.S. 921, 112 S.Ct. 332, 116 L.Ed.2d 272 (1991).
B. Discussion
Defendant presents three arguments as to why the complaint should be dismissed against it pursuant to Rule 12(b)(6): (1) the Order of the Bankruptcy Court expressly provided that Shaw acquired IT and OHM assets "free and clear" of Plaintiff's claim; (2) the Bankruptcy Code preempts claims of successor liability; and (3) asset purchasers, such as Defendant, are not subject to claims of successor liability under California law. The court will address each argument in turn.
1. The Bankruptcy Court Sale Order
Defendant argues that the Delaware Bankruptcy Court's April 5, 2002 Order expressly provided that it acquired the IT and OHM assets "free and clear" of Plaintiff's claim. Motion at 5. After noting some of the bankruptcy court's findings, Defendant highlights the following portion of the Order:
Shaw would not have entered into the Agreement and would not consummate the transactions contemplated thereby, thus adversely affecting the Debtors, their estates and their creditors, if the sale of the Assets to Shaw and the assignment of the Assumed Contracts to Shaw was not free and clear of all Claims of any kind or nature whatsoever, or if Shaw would, or in the future could, be liable for any of the Claims. Deft. Request for Judicial Notice ("RJN"), Exh. A at 8 ¶ O.
Shaw argues that the Bankruptcy Court "repeatedly held that the pre-closing date liabilities of IT and OHM would not, and could not, become liabilities of Shaw," highlighting the following language:
The Debtors [IT and OHM] may sell the Assets free and clear of all Claims of any kind of nature whatsoever because, in each case, one or more of the standards set forth in *779 11 U.S.C. § 363(f)(1)-(5) has been satisfied. Deft. RJN, Exh. A at 8 ¶ P.
The (i) transfer of the Assets to Shaw and (ii) assumption and assignment to Shaw of the Assumed Contracts and Liabilities, except as otherwise agreed by Shaw, will not subject Shaw to any liability with respect to the operation of the Debtor's business prior to the Closing Date. Deft. RJN, Exh. A at 9 ¶ Q.
The transfer of the Assets pursuant to the Sale shall not subject Shaw to any liability, except as set forth in the Agreement, with respect to the operation of the Debtor's [IT and OHM] business prior to the Closing Date. Deft. RJN, Exh. A at 13 ¶ 7.
Additionally, Shaw argues that not only did the "Bankruptcy Court hold that Shaw acquired the assets `free and clear' of any claims, including by its terms the ones Plaintiff asserts here, it held that any such claims were `discharged' by operation of law, and that any purported claimant against IT and OHM was estopped and forever barred from asserting a claim against Shaw." Motion at 8-9. Moreover, Shaw contends that Plaintiff is "bound" by this Order, which held that the "terms and provisions of the Agreement and this Sale Order shall be binding in all respects upon . . . the Debtors, their estates, and their creditors. . . ." Motion at 9.
Finally, Shaw argues that the Bankruptcy Court has expressly retained jurisdiction, noting the following language of the Order: "This Court retains jurisdiction to enforce and implement the terms and provisions of the Agreement . . . including, but not limited to, retaining jurisdiction to . . . protect Shaw against . . . any Claims in the Debtors or the Assets, of any kind or nature whatsoever, attaching to the proceeds of the Sale." Deft. RJN, Exh. A at 27 ¶ 40. Shaw contends that the proper forum for Plaintiff is the Bankruptcy Court, and Plaintiff's current complaint against Shaw "is in direct violation of [the Bankruptcy Court] Order and [is] improper and should thus be dismissed." Motion at 11.
Plaintiff argues that there are three reasons why the Bankruptcy Court Order does not protect Shaw from successor liability.
a. The Amendment to the Asset Purchase Agreement
First, Plaintiff argues that one week after the Sale Order of IT's assets, Shaw acquired OHM's assets through a different bankruptcy proceeding. According to Plaintiff, Shaw and IT executed an amendment to the Asset Purchase Agreement, by which a company by the name of Beneco Enterprises, Inc., would purchase the assets of OHM, and Shaw would purchase the assets from Beneco Enterprise Inc. Opposition at 6. Plaintiff argues that this "has the effect of taking Shaw's purchase of OHM's assets outside the reach of the Sale Order entered in the [IT] bankruptcy matter." Opposition at 6.
Shaw contends that this is Plaintiff's attempt to raise a "red herring." At oral arguments, Defendant explained that the Utah bankruptcy proceeding is completely unrelated to the present dispute. According to Defendant, in the Utah bankruptcy matter, Beneco Enterprises Inc., a Utah corporation not related to Shaw or Beneco Inc., sold its assets "free and clear" to Beneco, Inc., a wholly owned subsidiary of Shaw. Plaintiff's counsel did not dispute the accuracy of this statement but argued insufficient information.
The court finds that Defendant's explanation at oral arguments persuasive. The Utah bankruptcy proceeding appears separate from and irrelevant to the current dispute. As such, Plaintiff's argument that Shaw purchased assets from a different *780 bankruptcy proceeding (Utah) is incorrect and the transaction is irrelevant to the motion to dismiss.
b. The Proposed Order submitted to the Delaware Bankruptcy Court
Second, Plaintiff contends that Shaw and/or IT requested certain language limiting successor liability to be included in the Sale Order, but the Delaware "Bankruptcy Court explicitly refused to include any provisions in the Sale Order that would have protected Shaw from successor liability." Opposition at 7. The omitted language claimed by Plaintiff is: "Shaw shall have no successor or vicarious liabilities of any kind or character whether known or unknown as of the Closing Date;" and "Under no circumstances shall Shaw be deemed a successor of or to the Debtors. . . ." Opposition at 4-5. Plaintiff concludes that this omission indicates "that its order was not intended to shield Shaw form successor liability." Id. Plaintiff does however, acknowledge that "there is some general language in the bankruptcy court's order that could, if viewed in isolation without reference to the proposed order rejected by the bankruptcy court, be interpreted as protecting Shaw from successor liability." Id.
Shaw refutes this argument by stating that this is "nothing more than speculation as to why the Bankruptcy Court chose the language it did and, more importantly, ultimately [this argument] requires the rejection of the unequivocal language the Bankruptcy Court did choose." Reply at 4.
The court agrees. Plaintiff has not provided the court with any documents or transcripts from the Delaware Bankruptcy Court explaining why the proposed language was not included in the final Sale Order. Plaintiff assumes this was a meaningful act on the part of the Bankruptcy Court; however, this inference is speculative. What controls is the language of the final order, and only if that language were ambiguous, which it is not, would the omitted language perhaps be helpful. In sum, Plaintiff is asking this court to disregard the plain language of the signed Bankruptcy Court Order, which in part states that the transfer of assets to Shaw "will not subject Shaw to any liability with respect to the operation of the Debtor's business prior to the Closing Date." Deft. RJN, Exh. A at 9 ¶ Q. Plaintiff's argument is unpersuasive.
c. Authority of the Bankruptcy Court pursuant to 11 U.S.C. § 363(f)
Finally, Plaintiff argues that because she holds an unsecured claim, the Bankruptcy Court lacked the authority to approve the sale of assets free and clear of Plaintiff's claim. According to Plaintiff, the Sale Order was issued pursuant to § 363(f) of the Bankruptcy Code, 11 U.S.C. § 363(f), which allows for the sale of debtor's property "free and clear" of any "interest in such property." Plaintiff contends she does not hold an interest, but merely an unsecured claim "to which section 363(f) does not apply." Opposition at 9. Plaintiff expounds on a statutory interpretation of the word "claim" and states that the "Ninth Circuit has not yet ruled on the precise definition of the term `interest' in the context of section 363(f)." Providing a multitude of cases from other jurisdictions, Plaintiff argues that within this context, the "term `interest' as used in section 363(f) does not apply to general, unsecured claims such as that held by the Plaintiff in this case. The Bankruptcy Court, therefore, lacked authority to sell IT and OHM's assets `free and clear' of the Plaintiff's unsecured claim." Opposition at 12.
Shaw argues that Plaintiff's request that this court interpret sections of the Bankruptcy Code is an improper collateral attack on the Bankruptcy Court prohibited *781 by the U.S. Supreme Court in Celotex Corp. v. Edwards, 514 U.S. 300, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995) (respondent impermissibly collaterally attacked Bankruptcy Court's injunction in federal district court, as opposed to the proper procedure which was to appeal to the Bankruptcy Court first). Furthermore, Defendant cites to out-of-circuit case law supporting the proposition that section 363(f) has been interpreted to allow bankruptcy courts to order the sale of assets free and clear of unsecured claims. Reply at 3. Defendant, does not, however, provide any binding Ninth Circuit of California Supreme Court case law, nor does Shaw refute Plaintiff's claim that this issue has not been decided by the Ninth Circuit.
At oral arguments, Defendant argued that the Third Circuit has decided this specific issue in In re Trans World Airlines, 322 F.3d 283 (3d Cir.2003). According to Defendant, the Third Circuit broadly interpreted § 363(f), and upheld limiting successor liability in exactly the type of sales agreement involved herein. Plaintiff, on the other hand, distinguished this case from In re Trans World Airlines on the grounds that the underlying claims in that case were connected to and arose out of the property being sold, whereas in this case Plaintiff claims it does not.
The court is not persuaded by Plaintiff's argument, and finds that the In re Trans World Airlines case does support Defendant's position. In In re Trans World Airlines, two lawsuits were pending against Trans World Airlines ("TWA") when TWA entered Chapter 11 bankruptcy proceedings. One suit was an employment discrimination claim, and other involved a voucher program awarded to flight attendants in settlement of a sex discrimination class action. The bankruptcy court in Delaware approved the sale of TWA's assets to American Airlines ("American"), and determined that there was no basis for successor liability on the part of American, and held that the two pending claims were unsecured claims. Id. at 285-87. The Third Circuit held that these two interests "are interests in property within the meaning of section 363(f) in the sense that they arise from the property being sold." Id. at 290.
Plaintiff argues that her claim for personal injury does not "arise from" the property being sold because the property belongs to the U.S. government. The court does not agree: the property being sold in the Delaware bankruptcy action are the contracts which the U.S. government awarded to IT and OHM to transport toxic materials. Plaintiff's alleged injury arose from IT and OHM's claimed negligent handling of these toxic materials pursuant to these contracts. The court finds that Plaintiff's claim for personal injury does arise from the property being sold, i.e. the contracts to transport toxic materials.
Additionally, the court is concerned with the public policy ramifications of Plaintiff's argument. Allowing Plaintiff to disregard the plain language of the Bankruptcy Court Order would allow unsecured claims to receive greater protection and more priority that secured claims. As the court posited at oral arguments: who would ever purchase assets at a bankruptcy proceeding if the successor liability were not limited, despite the plain wording of the bankruptcy order?
As such, the court is not persuaded by Plaintiff's argument, and finds that the plain language of the Delaware Bankruptcy Court Order states that Shaw purchased the assets "free and clear," which includes Plaintiff's personal liability claim. The court rejects Plaintiff's argument that the complaint cannot be dismissed because Plaintiff holds an unsecured claim and as such is not subject to the jurisdiction of *782 the Delaware Bankruptcy Court, and instead follows the reasoning of In re Trans World Airlines.
2. Preemption of State Law by the Bankruptcy Code
Defendant argues that because of public policy considerations, "numerous courts have held that the Bankruptcy Code preempts any common law theory of successor liability as applied to purchasers of assets from a bankruptcy estate," citing In re White Motor Credit Corp., 75 B.R. 944 (Bankr.N.D.Ohio 1987). The policies referred to are: (i) "if successor liability claims are not limited, claimants will be encouraged to forego Chapter 11 remedies in favor of more lucrative state or federal court recoveries against purchasers . . . [T]he claimants are, in effect, receiving a priority over those claims paid in accordance with the Bankruptcy Code;" and (ii) "permitting successor liability actions to proceed would `chill' Chapter 11 asset bidding because transfers assumed to be `free and clear' would actually be fraught with liability," Motion at 12. Defendant argues that in White Motor, a claimant filed a claim in state court alleging the purchaser's successor liability, but before the plan confirmation. The Bankruptcy Court held that the common law theory of successor liability was preempted, and that to the extent the claimants claims were properly asserted, they would be addressed in the plan of reorganization. Motion at 12, citing White Motor, 75 B.R. at 949. Defendant argues that the present case is similar because "Plaintiff received an order from the [Delaware] Bankruptcy Court expanding the claim bar date so that she could properly pursue her claims within the confines of the bankruptcy reorganization; and Plaintiff's claim will properly be considered in accordance with the reorganization plan." Motion at 13.
Plaintiff argues that her claim filed in the Delaware Bankruptcy Court is "worthless" because IT and OHM stated in their voluntary bankruptcy petition that "Debtor estimates that, after any exempt property is excluded and administrative expenses paid, there will be no funds available for distribution to unsecured creditors." Opposition at 12, n. 11. Moreover, Plaintiff argues that Defendant's reliance on White Motor is misplaced because, in White Motor, the "court was wrong when it concluded that the assertion of a successor liability claim against a party other than the bankrupt debtor conflicts with the discharge provisions of the Bankruptcy Code." Opposition at 13. Plaintiff argues that the Bankruptcy Code's discharge provisions are "expressly limited to claims against the debtor (here, IT and OHM); and Congress made clear that a discharge may not bar claims against third parties other than the debtor." Id.
According to Plaintiff, the Seventh Circuit addressed this issue six years after White Motor, in Zerand-Bernal Group, Inc. v. Cox, 23 F.3d 159 (7th Cir.1994), which held that state law, and not the Bankruptcy Code preempted successor liability claims. Opposition at 14.
Defendant argues that Zerand-Bernal in fact supports its position because the Seventh Circuit noted that "had the [plaintiffs] been parties to the bankruptcy proceeding, [they would] have had no possible basis for a suit against [the asset purchaser] . . . because the successorship doctrine on which they rely is inapplicable if the plaintiff had a chance to obtain a legal remedy against the predecessor, even so limited a remedy as that afforded by the filing of a claim in bankruptcy." 23 F.3d at 163. According to Defendant, "Plaintiff's ability to pursue her claim directly against the debtor in the ongoing bankruptcy *783 proceeding prohibits the actions she attempts to being [sic] here." Reply at 6. Moreover, Defendant argues that Plaintiff's concern that her claim in the bankruptcy estate "will prove to be valueless" is meritless because "it does not alter the law the provides that Plaintiff cannot pursue her claim against an [sic] purchaser of assets from such estate in a civil action in district court while the bankruptcy proceeding is ongoing." Reply at 6.
In Zerand-Bernal, plaintiff filed a products liability claim in federal district court in Pennsylvania against the asset-purchaser, among others. Zerand-Bernal, 23 F.3d at 161. The asset-purchaser attempted to re-open the bankruptcy case and have the plaintiff enjoined from proceeding. The bankruptcy court held that it lacked jurisdiction despite the reservation of jurisdiction in the orders approving the sale of the assets and the plan of reorganization. Id. Because the bankruptcy proceedings had been closed over four years prior to the suit, the Seventh Circuit engaged in an analysis of whether this suit "arose under" its jurisdiction (a legal analysis irrelevant to the instant motion). Id. The Seventh Circuit noted that in that case, the injury occurred after the bankruptcy sale, but stated that:
[h]ad the [plaintiffs] been parties to the bankruptcy proceeding, they would have had no possible basis for suit against [the asset purchaser]. But that is not because the bankruptcy court could and would enjoin such a suit; it is because the successorship doctrine on which they rely is inapplicable if the plaintiff had a chance to obtain a legal remedy against the predecessor, even so limited a remedy as that afforded by filing a claim in bankruptcy.
Id. 23 F.3d at 163. Plaintiff argues that it was the application of Pennsylvania law that prohibited successor liability, which she contrasts to California law. Opposition at 14. While the cited language in Zerand-Bernal is persuasive, it is dicta; the holding of the case does not clearly answer the question here.
The U.S. Supreme Court has held that Congress did not intend the Bankruptcy Code to preempt all state laws. Midlantic Nat'l Bank v. New Jersey Dept. of Environmental Protection, 475 U.S. 1090, 106 S.Ct. 1482, 89 L.Ed.2d 736 (1986). However, it is a "familiar and well-established principle that the Supremacy Clause, U.S. Const., Art. VI, cl. 2, invalidates states laws that `interfere with or are contrary to' federal laws." Hillsborough Cty. v. Automated Medical Labs., Inc., 471 U.S. 707, 712, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985). In considering a preemption claim, the court must first look to the intent and sweep of the federal statute. Holman v. Laulo-Rowe Agency, 994 F.2d 666, 668 (9th Cir.1993). The statutes preemptive intent may be either express or implied:
Under the Supremacy Clause, federal law may supersede state law in several different ways. First, when acting within constitutional limits, Congress is empowered to pre-empt state law by so stating in express terms. In the absence of express pre-emptive language, Congress' intent to pre-empt all state law in a particular area may be inferred where the scheme of federal regulations is sufficiently comprehensive to make reasonable the inference that Congress `left no room' for supplementary state regulation. Pre-emption of a whole field also will be inferred where the field is one in which `the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject.' Even where Congress has not completely displaced state regulation in a specific area, *784 state law is nullified to the extent that it actually conflicts with federal law. Such a conflict arises when `compliance with both federal and state regulations is a physical impossibility,' or when state law `stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'
The Ninth Circuit interpreted this principle and other Supreme Court precedent to "suggest that federal bankruptcy preemption is more likely (1) where a state statute facially or purposefully carves an exception out of the Bankruptcy Code, or (2) where a state statute is concerned with economic regulation rather than with protecting the public health and safety." Baker & Drake, Inc. v. Public Serv. Comm. of Nevada, 35 F.3d 1348, 1353 (9th Cir.1994) (holding that the Bankruptcy Code did not preempt Nevada's ban on taxi leasing, a regulation intended to secure the public convenience and safety).
Under the facts of this case, I find that the Bankruptcy Code preempts California state law in this case regarding successor liability. The public policy statements in White Motor are compelling. Here, Plaintiff knew of the bankruptcy action and asked to participate. Plaintiff never sought or got permission to sue Shaw from the Bankruptcy Court. Plaintiff never asked the Bankruptcy Court to reconsider its order barring successor liability as to Shaw and itself. Plaintiff never appealed the Bankruptcy Court Order. Rather, Plaintiff sued Shaw in this action.
In Chapter 11 proceedings, the court is trying to obtain and preserve as many assets as it can to protect secured and unsecured creditors. To do so, it needs to approve sales of assets to third parties. A key factor to a third party in purchasing assets is the "worth" of the asset. Third parties cannot assess "worth" if the Bankruptcy Court orders that they take the assets free and clear of any and all claims whatsoever, but nonetheless, unsecured creditors can "lie in the weeds" and wait until the bankruptcy court approves a sale before it sues the purchasers. In sum, the court finds the policy considerations outlined in White Motor are compelling and adopts them in holding that Plaintiff's claims are pre-empted.
3. California Law regarding Successor Liability
Alternatively, assuming there is no preemption, the court looks to California law regarding successor liability. As a general rule, under California law a purchaser does not assume the seller's liability. Ray v. Alad Corp., 19 Cal.3d 22, 28, 136 Cal.Rptr. 574, 560 P.2d 3 (1977). There are, however, five exceptions to this rule: (1) there is an express or implied agreement of assumption; (2) the transaction amounts to a consolidation or merger of the two corporations; (3) the purchasing corporation is a mere continuation of the seller; (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability; or (5) the product line theory, which imposes liability for damages resulting from defective products when a party acquires a manufacturing business and continues the output of its line without any outward indication of a change in ownership and the selling company has gone out of business. Id. 19 Cal.3d at 28, 34, 136 Cal.Rptr. 574, 560 P.2d 3. Plaintiff concedes that this is not a product-line case, and therefore this exception would not be applicable.
a. Express or Implied Agreement of Assumption
Plaintiff argues that the Asset Purchase Agreement provided that limiting successor liability was a condition precedent to entering into the agreement, and Shaw could cancel if these conditions were not *785 met. Opposition at 16. Plaintiff contends that because the Bankruptcy Court excluded some of Shaw's proposed language limiting liability, and went ahead with the agreement, this implies Shaw assumed liability. This court has already found the fact that the Bankruptcy Court omitted some of the proposed language is unpersuasive as to whether the bankruptcy Order shielded Shaw from successor liability; it is equally unavailing here. The key is that the final wording of the Order and the Delaware Bankruptcy Court Order, of which I take judicial notice and by its clear terms, limits successor liability. Hence there is no implied agreement of assumption.
b. Transaction Amounts to a Consolidation or Merger and Purchasing Corporation is a Mere Continuation
The consolidation or merger exception applies when either (1) one corporation takes all of another's assets without providing any consideration that could be made available to meet the claims of another's creditors, or (2) where the consideration consists wholly of shares of the purchaser's stock which are promptly distributed to the seller's shareholders in conjunction with the seller's liquidation. Ray, 19 Cal.3d at 28, 136 Cal.Rptr. 574, 560 P.2d 3.
The mere continuation exception applies when: (1) no adequate consideration was given for the predecessor corporation's assets and made available for meeting the claims of its unsecured creditors; or (2) one or more persons were officers, directors, or stockholders of both corporations. Ray, 19 Cal.3d at 29, 136 Cal.Rptr. 574, 560 P.2d 3.
Defendant argues that Plaintiff has failed to adequately plead either of these exceptions. Additionally, Shaw alleges that IT and OHM are "separate and distinct entities undergoing a reorganization" defeating Plaintiff's claim that either of these exceptions apply. Motion at 15.
Plaintiff, however, argues that it has adequately plead both exceptions. Moreover, Plaintiff states that Shaw's purchase of OHM's assets was a reorganization. Citing Marks v. Minnesota Mining and Manufacturing Co., 187 Cal.App.3d 1429, 1437-38, 232 Cal.Rptr. 594 (Cal. 1st Dist.1986), Plaintiff contends that a "corporate reorganization has been held to constitute `mere continuation' or `de facto' merger by at least one leading California case." Opposition at 18. Plaintiff also states that she does not have sufficient information due to lack of discovery to know exactly what happened in the transactions involving IT and OHM. Id.
First, Shaw argues that the asset transfer was neither a "de facto merger" nor a "mere continuation" as a matter of law because: (i) the Bankruptcy Court found adequate consideration was paid by Shaw and would be available to creditors; (ii) the consideration consisted of $52.5 million in cash and $52.5 million in stock, not "wholly shares;" (iii) this amount was distributed to creditors, not the seller's shareholders; and (iv) both corporations continue to exists as separate corporations after the sale [Shaw does not state if the "both corporations" referred to are IT and OHM or Shaw]. Reply at 9.
Second, Defendant argues that Plaintiff is attempting to create a new exception to the general rule, and that the Ninth Circuit has rejected such attempts. Defendant does not, however, explain this attempted new exception. Defendant cites to Nelson v. Tiffany Industries, Inc., 778 F.2d 533 (9th Cir.1985) and Kline v. Johns-Manville, 745 F.2d 1217 (9th Cir.1984) in support of this proposition. Plaintiff, however, argues that Nelson and Kline are both uninstructive and inapplicable. *786 Plaintiff contends that Nelson and Kline apply the product-line theory exception, which requires a showing that the purchaser of assets caused the "virtual destruction of the plaintiff's remedies against the original manufacturer." Opposition at 19, quoting Kline, 745 F.2d at 1219. Plaintiff argues that this exception does not apply to her case, and therefore she does not need to show that the "successor's actions caused the destruction of Plaintiff's remedies against the original company." Opposition at 20.
At oral arguments, Plaintiff pointed to the voluntary petition for bankruptcy submitted by IT and OHM in the Delaware bankruptcy proceeding. Plaintiff stated that the assets were listed at $1.344 billion, liabilities were listed at $1 billion, and the sale of $105 million was grossly inadequate consideration because all of the liabilities were wiped out by the bankruptcy order.
Both sides agreed that I could take judicial notice of the Delaware Bankruptcy Court Order, and what Plaintiff is asking this court to do is either find that the Bankruptcy Court is in collusion with the Defendants or did not do its job in this bankruptcy proceeding. The court cannot make that finding based on the sale price. On the face of the Order, the sale of IT and OHM's shares to Shaw was at approximately fifty cents on the dollar. Without more, or without some case law clearly stating fifty cents on the dollar is enough to support a claim for a "consolidation" or "merger" claim based on successor liability, this figure and the $105 million sales price do not state a viable claim of collusion here. The Delaware Bankruptcy Court was in possession of all documentation and reached an Order approving the sale of assets for $105 million. If Plaintiff felt that the consideration was unconscionable, Plaintiff should have objected to the sale in the Bankruptcy Court or appealed the order approving the sale, neither of which Plaintiff did.
The court, therefore, does not find that the sales price is sufficient to validly state a claim under a de facto merger or a mere continuation theory.
III. Conclusion
For the foregoing reasons, the court GRANTS Defendant's motion to dismiss Plaintiff's claims against Shaw. Because it appear to a certainty that the Plaintiff would not be entitled to relief under any set of facts that could be proven, Reddy v. Litton Indus., 912 F.2d 291, 293 (9th Cir.1990), cert. denied, 502 U.S. 921, 112 S.Ct. 332, 116 L.Ed.2d 272 (1991), the dismissal is WITH PREJUDICE.
IT IS SO ORDERED.
NOTES
[1] Although the pleadings refer to The Shaw Group and Shaw Environmental, Inc. as two separate entities, they are referred to throughout the pleadings and the underlying documents as one single entity, "Shaw." For purposes of simplicity, the court will refer to both The Shaw Group and Shaw Environmental, Inc. as one Defendants, using the name Shaw. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8326578/ | Curran, Dennis J., J.
This is a civil action seeking certain statutory and constitutional relief arising from the denial of inmate Robert Grady’s grievance which sought the removal of certain disposition records resulting from two Department of Correction disciplinary hearings. The adjudications on the disciplinary matters were continuances without a finding. Grady does not challenge the validity of those disciplinary hearings, raise any procedural defect relating to them, or question the dispositions themselves; rather, he argues that the Department of Correction has no right to maintain such records within its institution.
Mr. Grady’s challenge under G.L.c. 249, §4 must fail. Given his concessions that neither the proceedings nor the dispositions were improper, the question is whether the Department of Correction committed a substantial error of law in its record-keeping proceedings.
After reviewing the moving and opposition papers and a hearing, the Court concludes that there is no such error, as revealed by the following statutory and constitutional analysis.
First, Grady has no private right of action arising from Department of Correction regulation 103 C.M.R. 430. See e.g. Loffredo v. Center for Addictive Behaviors, 426 Mass. 542, 545 (1998), and also Martino v. Hogan, 37 Mass.App.Ct. 710, 720 (1994).
Second, Grady has no valid complaint under 42 U.S.C. §1983 because the action complained of did not violate his secured federal right. The Department’s adherence to a state regulation cannot serve as the basis for a §1983 claim.
Third, the Department of Correction did not violate 103 C.M.R. 430. That regulation states: “At the end of any such continuance, the disciplinary report which was continued without a finding shall be filed ...” Grady would interpret this regulation as ordering the expungement of continuance without findings at the dismissal period. But the regulation contains no such language or authority.
Fourth, Grady’s invocation of the due process liberty interest by the prison’s record-keeping system must fail. No such right can plausibly be involved here. The inmate grievance system (and by implication, its prison record-keeping function attendant to that process) establishes no such liberty interest. See Olim v. Wakinekona, 461 U.S. 238, 250 (1983).
Fifth, Grady cannot invoke a direct cause of action under the state Constitution’s Declaration of Rights where the legislative has already provided a statutory scheme (i.e. the state civil rights act, G.L.c. 12, §§11H-*630111) to address such violations. Here, however, the Commonwealth is not subject to suit under that Act, and the complaint fails to allege that Mr. Grady suffered “threats, coercion, or intimidation,” as statutorily required.
Moreover, a violation of the state’s civil rights act does not occur simply by adverse administrative action. Freeman v. Planning Board of West Boylston, 419 Mass. 548, 555-56 (1995).
In summary, neither violations of statutory rights nor constitutional protections are implicated by the Department’s record-keeping of its own inmates’ disciplinary histories. They are mere administrative procedures attendant to a proper grievance procedure, and by implication, necessary to maintain institutional order. They are deserving of deference, not detriment.
ORDER
For these reasons, the defendants’ motion to dismiss is ALLOWED. | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/1882856/ | 792 F.Supp. 84 (1992)
The PEOPLE OF the STATE OF CALIFORNIA, Plaintiff,
v.
STEELCASE INC., etc., et al., Defendants.
No. CV 92-1618 AWT.
United States District Court, C.D. California.
April 30, 1992.
*85 Ira Reiner, Dist. Atty., Michael J. Delaney, Martin L. Herscovitz, Deputy Dist. Attys., Los Angeles, Cal., for plaintiff.
John H. Brinsley, William Billick, Peter J. Most, Nicki M. Varyu, Paul, Hastings, Janofsky & Walker, Los Angeles, Cal., for defendant Steelcase Inc.
MEMORANDUM OPINION AND ORDER
TASHIMA, District Judge.
This is a civil enforcement action brought by the People of the State of California (People) by and through the District Attorney of the County of Los Angeles, State of California. The complaint charges two violations of state law: the state antitrust statute, known as the Cartwright Act, Cal. Bus. & Prof.Code, § 16720 et seq., and the state unfair competition statute, Cal.Bus. & Prof.Code, § 17200 et seq. The complaint seeks injunctive relief under both statutes and civil penalties under the unfair competition statute. Cal.Bus. & Prof.Code, § 17206.
The action was removed to this court on the asserted jurisdictional basis of diversity of citizenship. Because of substantial doubt as to the existence of diversity jurisdiction, the court sua sponte issued an order to show cause (OSC) why this action should not be remanded to state court. The issues have now been fully briefed in the parties' responses to the OSC.[1] For the reasons stated below, the court concludes that diversity of citizenship jurisdiction does not exist in this case and that the Eleventh Amendment prohibits removal of this case to federal court.
I
Defendant first contends that diversity jurisdiction exists because the real party in interest[2] is "the County as purchaser of Steelcase furniture," and counties are citizens of the state for purposes of diversity jurisdiction. Moor v. County of Alameda, 411 U.S. 693, 721, 93 S.Ct. 1785, 1801-02, 36 L.Ed.2d 596 (1973). Defendant argues that although the action is purportedly brought in the name of the People, under the Cartwright Act, a district attorney is authorized to prosecute civil actions only on behalf of the county or public agencies located within the county. Cal.Bus. & Prof.Code § 16750(g).
While defendant accurately quotes the Cartwright Act, it fails to mention that the unfair competition statute expressly authorizes this action to be prosecuted in the name of the People. An action for civil penalties under that statute expressly may be "brought in the name of the people of the State of California by the Attorney General or by any district attorney...." Cal.Bus. & Prof.Code § 17206(a). That act also authorizes a district attorney to prosecute actions for injunctive relief. Cal.Bus. & Prof.Code § 17204.[3]
Thus, at least with respect to the Second Cause of Action, which seeks both civil penalties and injunctive relief under Cal.Bus. & Prof.Code § 17200 et seq., the *86 People is the proper party plaintiff and the real party in interest. Civil penalties are not damages recovered for the benefit of private parties; they are more akin to a criminal enforcement action and are brought in the public interest.[4]
The People are the same party as the State of California (State) and the district attorney has the authority to bind the State. People of the State of California v. Mendez, 234 Cal.App.3d 1773, 1783 (1991). Thus, in this civil penalty enforcement action, the State of California is the real party in interest. This has at least two consequences.
II
First, for diversity purposes, a state is not a citizen of itself. Therefore, it cannot sue or be sued in a diversity action. Moor, 411 U.S. at 717. Even assuming arguendo that defendant is correct that the County of Los Angeles is the real party in interest and the proper party in the Cartwright Act claim, diversity jurisdiction does not lie because, under long-established teaching, there must be complete diversity, i.e., all plaintiffs must be diverse from defendant. E.g., Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806). Here, there cannot be complete diversity because, to repeat, the State of California is not a citizen of any state.[5]
III
Independent of its failure to meet the complete diversity test, the court lacks jurisdiction over this case because of the bar of the Eleventh Amendment to the Constitution. The Eleventh Amendment is a grant of sovereign immunity to a state against suit in federal court. It is in "the nature of a jurisdictional bar." Alabama v. Pugh, 438 U.S. 781, 782 n. 1, 98 S.Ct. 3057, 3058 n. 1, 57 L.Ed.2d 1114 (1978) (per curiam), quoting from Edelman v. Jordan, 415 U.S. 651, 678, 94 S.Ct. 1347, 1363, 39 L.Ed.2d 662 (1974).
Defendant, relying on the literal wording of the Eleventh Amendment, contends that this is not a "suit ... against one of the United States ..." (emphasis added) because the State is the plaintiff. However, since the immunity granted by the Eleventh Amendment is an immunity from being made an involuntary party to an action in federal court, it should apply equally to the case where the state is a plaintiff in an action commenced in state court and the action is removed to federal court by the defendant.
The statute under which this action was removed requires, for an action to be removable, that the district courts "have original jurisdiction" over the action. 28 U.S.C. § 1441(a). Because of the jurisdictional bar of the Eleventh Amendment, the district courts would not have original jurisdiction over this action, absent the consent of the State. The State does not consent to removal. Therefore, subject matter jurisdiction is lacking, at least as to the claim under the unfair competition statute.
IV
Although, where removal is predicated on federal question jurisdiction, removal is permitted even where a "nonremovable" claim is joined with the removable claim, see 28 U.S.C. § 1441(c), no such exception exists for diversity-based removals. *87 In the latter case, the entire action must be removable. Since the entire case is not removable, even assuming that a removable diversity claim was separately stated, it cannot be removed.
V
Plaintiff seeks its attorney's fees in opposing removal under 28 U.S.C. § 1447(c). It contends that the claimed grounds for removal were "tenuous." See Samura v. Kaiser Found. Health Plan, Inc., 715 F.Supp. 970, 972 (N.D.Cal.1989). The grant of attorney's fees on removal and remand is a matter which rests within the sound discretion of the trial court. In this case, defendant's arguments for removal jurisdiction, while novel, are at least colorable. See Hom v. Service Merchandise Co., 727 F.Supp. 1343, 1345 (N.D.Cal. 1990). Under these circumstances, the court declines to exercise its discretion in favor of granting attorney's fees.
VI
Finally, defendant has "conditionally" applied for a certification of an interlocutory appeal, "if the Court determines that it lacks diversity jurisdiction." It cites National Audubon Soc'y v. Department of Water & Power, 858 F.2d 1409 (9th Cir. 1988), in support of its application. The citation is inapposite. National Audubon did not involve an appeal from an order of remand. The governing statute is clear:
An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise....
28 U.S.C. § 1447(d). This case does not fit within the narrow exception to the statute's prohibition against appellate review of remand orders. See, e.g., Clorox Co. v. United States Dist. Court, 779 F.2d 517 (9th Cir.1985). It is true that the interlocutory appeal statute states that it applies to orders "not otherwise appealable under this section," 28 U.S.C. § 1292(b), and an order of remand is not appealable under § 1292. The court concludes, however, that § 1292(b) was never intended to apply to remand orders in the face of the clear and direct prohibition against appellate review of such orders in 28 U.S.C. § 1447(d). This construction of § 1292(b) is supported by the Ninth Circuit's treatment of remand orders as final orders under 28 U.S.C. § 1291. Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 278 (9th Cir.1984). If they are final orders under § 1291, remand orders cannot also be interlocutory orders under § 1292. Thus, the application must be denied.
VII
IT IS ORDERED:
1. This action, having been removed improvidently and without jurisdiction, hereby is REMANDED to the Superior Court of the State of California for the County of Los Angeles. 28 U.S.C. § 1447(c).
2. Plaintiff's request for attorney's fees is DENIED. Each party shall bear its own costs and attorney's fees on removal and remand. 28 U.S.C. § 1447(c).
3. Defendant's application that this order by certified for an interlocutory appeal, pursuant to 28 U.S.C. § 1292(b), is DENIED. 28 U.S.C. §§ 1291 & 1447(d).
NOTES
[1] In its notice of removal, defendant contended that this action was removable because it was a parens patriae action. It argued that such an action is brought on behalf of the citizens of California who are the real parties in interest; therefore, that complete diversity of citizenship existed because all plaintiffs are citizens of California and defendant is a citizen of Michigan. In its response to the OSC, defendant has abandoned this contention and the court need not pursue it further.
[2] Defendant correctly notes that the existence of diversity of citizenship jurisdiction should be based on an examination of the citizenship of the real parties in interest. Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 460-61, 100 S.Ct. 1779, 1781-82, 64 L.Ed.2d 425 (1980).
[3] Section 17204 does not expressly state that an injunctive action may be brought in the name of the People. Because of the express grant of authority to the district attorney in § 17206(a), to proceed in the name of the People, the court need not decide whether such a right may be implied under § 17204. It also need not decide the related issue of whether, under either the Cartwright Act or the unfair competition statute, the district attorney retains any common law power to proceed in the name of the People in a civil enforcement action.
[4] All criminal actions are brought in the name of the People. Cal.Pen.Code § 684. The vast majority of felony prosecutions are instituted by district attorneys who prosecute them through the trial court. Cal.Gov't Code § 26501 (this section also appears impliedly to recognize the district attorney's authority to engage in "civil cases on behalf of the people"). In most criminal appeals, as a perusal of the California appellate reports discloses, the People are represented by the Attorney General. Cf. Cal.Pen.Code § 1256 (district attorney to assist and cooperate with attorney general in criminal appeals). In sum, the attorney general and district attorneys represent the same party in criminal actions, the People. See Cal. Const., Art. 5, § 13; Cal. Gov't Code § 12550 (attorney general's supervisory authority over district attorneys).
[5] This situation is similar to citizens of the United States who are domiciled abroad, who are not citizens of any state. They cannot sue or be sued in federal court on the basis of diversity of citizenship jurisdiction. Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 828-29, 109 S.Ct. 2218, 2220-21, 104 L.Ed.2d 893 (1989). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2185345/ | 96 N.Y.2d 770 (2001)
749 N.E.2d 158
725 N.Y.S.2d 589
THE PEOPLE OF THE STATE OF NEW YORK, Respondent,
v.
JOHN BARTKOW, Appellant.
Court of Appeals of the State of New York.
Argued January 10, 2001.
Decided February 20, 2001.
*771 Legal Aid Society of Nassau County, Hempstead (Christopher M. Cevasco, Matthew Muraskin and Kent V. Moston of counsel), for appellant.
Denis Dillon, District Attorney of Nassau County, Mineola (Andrea M. DiGregorio, Daniel T. Butler and Peter A. Weinstein of counsel), for respondent.
*774 Before: Chief Judge KAYE and Judges SMITH, LEVINE, CIPARICK, WESLEY and GRAFFEO concur; Judge ROSENBLATT dissents in an opinion.
OPINION OF THE COURT
MEMORANDUM.
The order of the Appellate Term should be affirmed.
The issue is whether harassment in the second degree is a lesser included offense of menacing in the second degree. We conclude that it is not.
On the morning of June 13, 1997, a mental health caseworker in the course of his duties visited the home of defendant. The defendant opened the door, holding an aluminum baseball bat. He cursed and swung the bat, missing the caseworker who ducked. The caseworker wrestled the bat away from defendant and notified his supervisor, who called the police. Defendant was arrested, charged with menacing in the second degree (Penal Law § 120.14) and tried on an information. During the pre-charge conference, defense counsel requested a charge on harassment in the second degree as a lesser included offense of menacing in the second degree. District Court denied the request. Defendant was found guilty of menacing in the second degree. Appellate Term affirmed, and a Judge of this Court granted defendant leave to appeal.
Criminal conduct constitutes a lesser included offense when "it is impossible to commit a particular crime without concomitantly committing, by the same conduct, another offense of lesser grade or degree" (CPL 1.20 [37]). Defendants are entitled to such a jury charge only if the offense they desire to have charged is a lesser included offense and a reasonable view of the evidence supports the defendants' guilt of the lesser offense, but not of the greater (People v Glover, 57 NY2d 61, 63). Criminal Procedure Law § 360.50 (2) governs trial on an information and authorizes a court, in its discretion, to submit to a jury a lesser included offense (see, People v Hoag, 51 NY2d 632).
Penal Law § 120.14 (1) defines menacing in the second degree as occurring when a party "intentionally places or attempts to place another person in reasonable fear of physical injury, serious *772 physical injury or death by displaying a deadly weapon, dangerous instrument or what appears to be a pistol, revolver, rifle, shotgun, machine gun or other firearm." Penal Law § 240.26 (1) defines harassment in the second degree as occurring when a party with "intent to harass, annoy or alarm another person * * * strikes, shoves, kicks or otherwise subjects such other person to physical contact, or attempts or threatens to do the same."
The crux of section 240.26 (1) is the element of physical contact: actual, attempted or threatened. Although not rising to the level of an assault causing physical injury (Penal Law § 10.00 [9]), petty forms of offensive touching, such as striking, shoving and kicking, are prohibited when committed with the intent to annoy, harass or alarm the victim. Under the rule of construction requiring courts "to limit general language of a statute by specific phrases which have preceded" it (McKinney's Cons Laws of NY, Book 1, Statutes § 239 [b]), the general language "physical contact" is properly confined to the preceding "strikes, shoves, kicks" and the like contemplated by the statute.
Distinct from harassment, menacing does not require any form of "physical contact," actual, attempted or threatened. Menacing simply requires an intent to place another person in "reasonable fear of physical injury" by "displaying" a weapon or dangerous instrument (Penal Law § 120.14 [1] [emphasis added]). Thus, it is possible to commit menacing without harassment, and the trial court properly refused to submit the harassment charge to the jury.
ROSENBLATT, J. (Dissenting).
In my view, it is impossible to commit second degree menacing under Penal Law § 120.14 (1)the greater offensewithout concomitantly committing second degree harassment under Penal Law § 240.26 (1)the lesser offense (see, People v Van Norstrand, 85 NY2d 131; People v Glover, 57 NY2d 61; People v Green, 56 NY2d 427). To prove second degree menacing under section 120.14 (1), the People must establish that the defendant, with intent to place a victim in reasonable fear of physical injury or death, displays a deadly weapon or dangerous instrument. Second degree harassment under section 240.26 (1) is made out when the defendant, with intent to alarm a victim, threatens the victim with physical contact. A defendant cannot display a deadly weapon or dangerous instrument with the intent to place a victim in reasonable fear of physical injury without at the same time threatening physical contact with the intent to alarm.
*773 The majority's holding rests on a single premise: "[d]istinct from harassment, menacing does not require any form of `physical contact,' actual, attempted or threatened." (Majority mem, at 772.) The premise, I submit, is flawed. Menacing, to be sure, does not require actual or attempted physical contact. But neither does harassment. Menacing does, however, require the threat of physical contact. Trying to frighten someone by displaying a deadly weapon or dangerous instrument carries an obvious threat of physical contact (see, 2 CJI[NY] PL 120.15 [1979 ed]: ["For you to find the defendant guilty of (menacing), the People are required to prove * * * that (defendant) acted in a threatening manner"] [emphasis added]). By definition, a dangerous instrument is an object "readily capable of causing" physical injury (see, Penal Law § 10.00 [13]).[*] Obviously, a dangerous instrument must make physical contact before it produces physical injury. The defendant who displays one, when acting with intent to frighten a victim, is manifestly threatening physical contact.
Under the majority's analysis, purposely scaring someone with a gun does not entail a threat of physical contact. I disagree. Bullets, when they pierce bodies, make physical contact. That is what they are designed to do. If they did not make physical contact, they would pose no threat. Thus, the defendant who displays a gun to scare the victim surely threatens physical contactby shooting. Similarly, the defendant who displays a knife with the intent to instill fear threatens physical contactby stabbing. Indeed, it is the very threat of physical contact (i.e., the fear being shot or stabbed) that lies at the heart of menacing.
Accordingly, I dissent.
Order affirmed in a memorandum.
NOTES
[*] In this context, the possibility of a dangerous instrument producing physical injury without some form of physical contact is virtually inconceivable. Moreover, all of the objects defined as deadly weapons under Penal Law § 10.00 (12) (loaded guns, various knives, billies, blackjacks, metal knuckles) obviously contemplate physical contact. Indeed, they are deadly precisely because of the consequences they produce when they make physical contact. Even rubber boots can be dangerous instruments when used to stomp onmake physical contact withthe victim (see, People v Carter, 53 NY2d 113).
Similarly, it is well settled that to establish criminal possession of a handgun, rifle or shotgun, the People must prove that the weapon was operable, because these weapons are "capable of inflicting serious injury or death only if operable" (see, People v Longshore, 86 NY2d 851, 852; see, generally, Donnino, Practice Commentary, McKinney's Cons Laws of NY, Book 39, Penal Law art 265, at 78). An inoperable gun cannot possibly subject the victim to physical contact, unless, of course, it is used as a bludgeon, in which case it would most certainly produce physical contact and thus qualify as a dangerous instrument (see, e.g., People v Wooden, 275 AD2d 935). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2328306/ | 282 N.J. Super. 111 (1995)
659 A.2d 527
STATE OF NEW JERSEY, PLAINTIFF-RESPONDENT,
v.
LAWRENCE WALKER, DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Submitted June 1, 1995.
Decided June 19, 1995.
*112 Before Judges SHEBELL, SKILLMAN and KLEINER.
Susan Reisner, Public Defender, attorney for appellant (John H. Norton, Designated Counsel, of counsel and on the brief).
Clifford J. Minor, Essex County Prosecutor, attorney for respondent (Elizabeth Miller-Hall, Assistant Prosecutor, of counsel and on the brief).
The opinion of the court was delivered by SKILLMAN, J.A.D.
Defendant was indicted for possession of cocaine, in violation of N.J.S.A. 2C:35-10(a)(1), and second degree possession of cocaine with the intent to distribute, in violation of N.J.S.A. 2C:35-5(b). The trial court denied defendant's motion to suppress. A jury subsequently found defendant guilty of both charges. The court merged defendant's conviction for possession of cocaine into his conviction for possession with the intent to distribute and sentenced him to an indeterminate term at the Youth Correction Complex. The court also imposed a $2,000 DEDR penalty, a $50 *113 lab fee and a $30 VCCB penalty and suspended defendant's driver's license for eighteen months.
On appeal, defendant makes the following arguments:
I. THE TROOPER LACKED A LEGAL BASIS TO ORDER BOTH OCCUPANTS OUT OF THE VEHICLE AND OBTAIN CONSENT TO SEARCH THE VEHICLE.
II. THE TROOPER LACKED A LEGAL BASIS TO SEARCH THE PERSON OF THE DEFENDANT.
III. THE PAT DOWN OF THE DEFENDANT EXTENDED BEYOND A CHECK FOR WEAPONS AND WAS THEREFORE ILLEGAL.
We conclude that the patdown search of defendant which revealed the cocaine on which his conviction is based violated the Fourth Amendment. Therefore, we reverse.
Defendant was a passenger in a motor vehicle being operated on the New Jersey Turnpike near Newark Airport in the late afternoon on September 3, 1991. A state trooper stopped the driver for failing to use his directional signal and tailgating another vehicle. According to the trooper, the driver appeared nervous, spoke very quickly, stuttered, and failed to make eye contact. Moreover, in response to the trooper's inquiry, the driver said that he was coming from Newark Airport. This response increased the trooper's suspicion because the location of the stop was north of where persons ordinarily would enter the turnpike to travel in a southerly direction. The trooper's suspicions were increased further when the driver and defendant gave conflicting answers as to the identity of the person they had dropped off at the airport. The trooper then obtained the driver's consent to search his vehicle, and around the same time he called the Newark station of the State Police to send a back-up trooper to assist him. At this point, the trooper ordered defendant to step out of the car and he conducted a patdown search for weapons. This search revealed a hard object near the ankle of defendant's right pants leg. The trooper retrieved this object, which turned out to be a piece of tinfoil wrapped around cocaine.
In Terry v. Ohio, 392 U.S. 1, 27, 88 S.Ct. 1868, 1883, 20 L.Ed.2d 889, 909 (1968), the Court held that a police officer may conduct a *114 reasonable search for weapons upon a person he is investigating "where he has reason to believe that he is dealing with an armed and dangerous individual, regardless of whether he has probable cause to arrest the individual for a crime." "The officer need not be absolutely certain that the individual is armed; the issue is whether a reasonably prudent man in the circumstances would be warranted in the belief that his safety or that of others was in danger." Ibid. However, "[n]othing in Terry can be understood to allow a generalized `cursory search for weapons.'" Ybarra v. Illinois, 444 U.S. 85, 93-94, 100 S.Ct. 338, 343, 62 L.Ed.2d 238, 247 (1979).
Based on Terry and its progeny, our Supreme Court concluded in State v. Thomas, 110 N.J. 673, 542 A.2d 912 (1988) that a policeman's reasonable suspicion that a person possesses illegal drugs does not by itself provide a basis for a reasonable suspicion that that person is armed and dangerous. Rather, the record must provide "a specific and particularized basis for an objectively reasonable suspicion that defendant was armed and dangerous." Id. at 683, 542 A.2d 912.
More recently, the Court has held that "the standard that justifies an order to a passenger to step out of a vehicle does not rise to the Terry standard that must be met for a protective pat-down." State v. Smith, 134 N.J. 599, 618, 637 A.2d 158 (1994). "[T]o justify a pat-down of an occupant once alighted from a vehicle, specific, articulable facts must demonstrate that a `reasonably prudent man in the circumstances would be warranted in the belief that his safety or that of others was in danger.'" Id. at 619, 637 A.2d 158 (quoting Terry v. Ohio, supra, 392 U.S. at 27, 88 S.Ct. at 1883, 20 L.Ed.2d at 909). "A `hunch' forms an insufficient basis on which to conduct the uncomfortable and often embarrassing invasion of privacy that occurs in a pat-down of a person's body." Ibid. The Court also indicated that the factors a court should consider in determining the reasonableness of a police officer's belief that a suspect may be armed and dangerous include the time of day and the amount of traffic on the roadway. Ibid.; *115 see also State v. Otero, 245 N.J. Super. 83, 92-93, 584 A.2d 260 (App.Div. 1990).
We conclude that the police officer who stopped the vehicle in which defendant was riding did not have "a specific and particularized basis for an objectively reasonable suspicion that defendant was armed and dangerous." State v. Thomas, supra, 110 N.J. at 683, 542 A.2d 912. Although the driver's demeanor and the responses that the driver and defendant gave to the officer's questions may have created a reasonable suspicion that they were engaged in some form of wrongdoing, such as being in possession of illegal drugs, they did not provide a reasonable basis for a belief that defendant might be armed and dangerous. Compare State v. Dale, 271 N.J. Super. 334, 339, 638 A.2d 886 (App.Div. 1994). In explaining his reason for conducting a patdown search of defendant, the officer simply stated:
[F]or my own safety, being that I was it was two on one, and also the fact that I felt something was wrong here, the fact that the it might have been something amiss inside the vehicle and also due to my past experience with searching cars, for my own safety, I patted Mr. Walker down for weapons.
Similarly, on cross-examination, the officer indicated that he had a "generalized suspicion" that "something was amiss." Thus, the officer failed to identify any objective basis for a belief that defendant was armed and dangerous that would not exist any time a passenger in a car stopped for a motor vehicle violation is suspected of some form of unspecified unlawful conduct. Such generalized suspicion does not provide a reasonable basis for a belief that an individual is armed and dangerous, especially when the suspect is standing on the shoulder of the Turnpike in daylight during commuting hours.
Furthermore, the simple fact that the driver consented to a search of his vehicle did not give the trooper the right to frisk the passenger. Even in connection with the execution of a search warrant, which must be issued by an impartial magistrate upon a showing of probable cause, the Supreme Court has held that the police may not seek to control the site of the search by routinely conducting a patdown frisk for weapons of any person present on *116 the scene, because "[t]he `narrow scope' of the Terry exception does not permit a frisk for weapons on less than reasonable belief or suspicion directed at the person to be frisked." Ybarra v. Illinois, supra, 444 U.S. at 95, 100 S.Ct. at 343, 62 L.Ed.2d at 247. Similarly, in State v. Dolly, 255 N.J. Super. 278, 283, 605 A.2d 238 (App.Div. 1991), we stated:
A search or seizure must be supported by probable cause "particularized" with respect to that individual or vehicle. This requirement cannot be undercut or avoided by simply pointing to the fact that coincidentally there exists probable cause to search or seize another or to search the premises where the person or car may happen to be.
Since the police may obtain consent for a search without probable cause or even reasonable suspicion, State v. Allen, 254 N.J. Super. 62, 66, 603 A.2d 71 (App.Div. 1992), it is even clearer in the present context than in a search warrant case that the authorization to search one person's property does not provide authorization to frisk another person absent "a specific and particularized basis for an objectively reasonable suspicion [that that person is] armed and dangerous." State v. Thomas, supra, 110 N.J. at 683, 542 A.2d 912; cf. State v. Suazo, 133 N.J. 315, 321, 627 A.2d 1074 (1993) ("[A] driver's apparent authority to consent to a search of the car does not include the authority to permit a search of the personal belongings of other passengers.").
Accordingly, the order denying defendant's motion to suppress and the judgment of conviction are reversed and the matter is remanded to the trial court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2257710/ | 16 Cal.Rptr.3d 296 (2004)
120 Cal.App.4th 1267
Fred NYULASSY, Plaintiff and Respondent,
v.
LOCKHEED MARTIN CORPORATION, Defendant and Appellant.
No. H026704.
Court of Appeal, Sixth District.
July 27, 2004.
*298 Michele C. Coyle, David R. Singer, Los Angeles, Hogan & Hartson, for Defendant and Appellant.
Randall M. Widmann, Palo Alto, Law Office of Randall M. Widmann, Attorney for Plaintiff and Respondent.
*297 WALSH, J.[*]
Our Supreme Court has upheld employment agreements that require the employee to arbitrate disputes, so long as the arbitration clause does not impair the employee's statutory rights and is not unconscionable. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669 (Armendariz).) We are called upon here to examine whether a mandatory employment arbitration agreement-executed by the employee in connection with the settlement of a previous dispute with the employer's predecessor after advice from the employee's attorney-is unconscionable or otherwise unenforceable.
Plaintiff Fred Nyulassy sued his employer, defendant Lockheed Martin Corporation, alleging that defendant demoted him in retaliation for his protected workplace activity (i.e., complaints about treatment of employees and resistance to employer-sanctioned illegal activity). Plaintiff asserted claims for breach of contract, breach of the covenant of good faith and fair dealing, wrongful demotion in violation of public policy, and violation of section 6310 of the Labor Code. Defendant moved to compel arbitration and stay all proceedings (motion), based upon a mandatory arbitration clause in plaintiff's employment agreement. The trial court denied the motion, and defendant appeals that decision.
Defendant claims that the court erred in holding that the subject arbitration agreement was unconscionable, and that the court improperly extended the holding in Armendariz to a post-dispute arbitration agreement as defendant claims is presented here. For the reasons stated below, we conclude that the trial court correctly decided that the arbitration agreement was unconscionable. Accordingly, we affirm the order denying the motion to compel arbitration.
FACTS
I. Prior Dispute
Plaintiff was employed for approximately 20 years by Western Development Labs and/or Loral Aerospace Corporation, company/companies subsequently acquired by defendant (collectively, defendant's predecessor).[1] In December 1994, defendant's predecessor terminated plaintiff.
*299 As a result of his termination, plaintiff brought an action in Santa Clara Superior Court, case No. CV 747363 (prior case), asserting, inter alia, a claim for age discrimination. Plaintiff was represented in that prior case by Randall Widmann, his attorney in the present action. The parties to the prior case settled their dispute in November 1997 and signed the agreements that are central to the issue of the arbitrability of the present dispute. The terms of the settlement included a payment to plaintiff[2] and an agreement that defendant would hire plaintiff as an employee.
II. Settlement Agreement
In or about November 1997, the parties to the prior case-plaintiff and defendant's predecessor-entered into a written agreement (settlement agreement) entitled, "Confidential Settlement Agreement And Release Of Claims." (Capitalization omitted.) The settlement agreement was signed by plaintiff; it was also signed by Attorney Widmann, as plaintiff's counsel, below the block lettering, "APPROVED AS TO FORM."
Paragraph 18 of the settlement agreement provided in part: "The parties stipulate that any action involving the validity, interpretation or enforcement of the Agreement, or for any claim for breach of this Agreement shall be subject to the arbitration provision in Exhibit C." The document referenced as "Exhibit C" was the employment agreement (discussed post), entered into by the parties at the time of the settlement. The settlement agreement contained a confidentiality provision, which referenced further the remedy of arbitration under the employment agreement. The settlement agreement also contained a general provision that the parties in the prior case had been represented by counsel; it included a statement that the parties had carefully read and reviewed the terms of the agreement with their respective counsel and were "freely and voluntarily entering into it."
III. Employment Agreement
At or about the time the settlement agreement was signed, plaintiff and defendant signed an employment agreement.[3] That agreement was a standard form document; it was modified or supplemented, however, in several respects by the settlement agreement. One notable change made plaintiff's employment relationship terminable only for good cause for a period of three years after the date of his employment, notwithstanding the "at-will" provision in the form employment agreement. The settlement agreement also contained supplemental terms of plaintiff's employment, including starting salary, the identity of plaintiff's supervisor, and other specifics.
The employment agreement provided that all disputes or controversies that plaintiff had concerning his employment would be subject to binding arbitration conducted under the employment dispute resolution rules of the American Arbitration *300 Association. Under this arbitration agreement, plaintiff waived all rights to pursue any claims against defendant through judicial proceedings. Plaintiff-as a precondition to arbitration-was also required to attempt to resolve any employment disputes by engaging in discussions with various levels of management. The employment agreement provided further that plaintiff waived his arbitration remedy if he did not exercise it (a) within 180 days of his employment termination (if a termination claim), or, alternatively, (b) within 180 days after such other dispute or controversy arose.[4]
IV. Declarations Submitted In Connection With Motion
Plaintiff submitted two declarations in opposition to defendant's motion to compel arbitration: Widmann's and plaintiff's own declaration. Plaintiff declared that, as part of settling the prior case, he was required to sign the employment agreement and a proprietary information agreement, and that "[t]here was no negotiation over any of the terms of these agreements, as Lockheed will not negotiate the terms of its proprietary information agreement and employment agreement."[5] He stated further that he had been out of work after *301 being terminated by defendant's predecessor, and that, "if [he] wanted to settle [his] case[, he] would have to do what all-new [sic] employees do and that is sign the employment agreement and proprietary information agreements concerning which no negotiations were tolerated by LOCKHEED."
Widmann declared that he had represented plaintiff in both the prior case and in the instant action. He summarized the allegations in the prior case and described it as "hard fought" litigation that lasted nearly three years. During settlement negotiations shortly before trial scheduled in September 1997, defendant "abruptly" made an employment offer to plaintiff. Widmann declared that, under the terms of the settlement reached in the prior case, in order to be hired, plaintiff "was required to submit a resume, complete an employment application, sign a proprietary agreement and the standard employment agreement which LOCKHEED was using at that time. These documents were not negotiated by the parties and, indeed, were non-negotiable." Widmann twice repeated in his declaration that the terms of the employment agreement were nonnegotiable. He declared that, if plaintiff "wanted to settle his case at all on any terms he had to sign the standard employment agreement .... Thus, if Mr. Nyulassy wanted to obtain the other benefits of the settlement aside from obtaining employment from LOCKHEED he had to sign the standard agreements which were non-negotiable."[6] (Underscoring in original.)
Defendant's evidence in support of the motion consisted of a declaration from its counsel (in the present case),[7] principally reciting the language contained in the settlement documents from the prior case. Exhibits to that declaration included copies of the settlement agreement (redacted), the employment agreement, and correspondence between counsel involving defendant's request that plaintiff arbitrate his dispute pursuant to the arbitration clause in the employment agreement. Defendant submitted no declarations in reply to the Nyulassy and Widmann declarations.
PROCEDURAL HISTORY
Plaintiff filed his complaint on May 15, 2003. The complaint alleged four causes of action arising out of plaintiff's employment relationship with defendant, namely, (1) wrongful demotion in violation of public policy (claimed under, inter alia, Lab.Code, § 6310), (2) violation of statute (Lab.Code, § 6310), (3) breach of employment contract,[8] and (4) breach of implied good faith covenant.
The complaint alleged that, as of March 2001, plaintiff managed defendant's QA department in Santa Clara County, and at that time, he was given additional responsibility *302 for the management of the QA department in the "RSAIIA project," located in Santa Maria. Plaintiff alleged that he made complaints to management both about his employer's abusive treatment of his subordinates in Santa Maria, and regarding its insistence that defendant deliver a product to the United States government that the company knew was defective. The complaint alleged further that, sometime[9] after receiving extremely favorable reviews in January 2002 and June 2002, plaintiff was "abruptly" given an "[u]nsatisfactory" interim performance review, removed from his management position, and was told that he should retire. He claimed that defendant took this adverse employment action as a result of his protected activities of complaining "about the treatment of ... employees and his complaining about and resisting [defendant's] efforts to sell defective products to the government."
Defendant filed its motion on August 1, 2003, requesting that the court issue an order compelling arbitration and staying the action until the matter was resolved through binding arbitration. It asserted that the written employment contract and settlement agreement between the parties expressly mandated that the controversy alleged in the complaint be resolved through binding arbitration.
In his opposition to the motion, plaintiff contended, inter alia, that the mandatory employment arbitration agreement was unenforceable because (1) it was unconscionable, and (2) it was against public policy in that it failed to meet the minimum requirements enunciated in Armendariz, supra, 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669. After a hearing on September 11, 2003, the court ordered supplemental briefing, which the parties filed thereafter. A second hearing on the motion took place on October 21, 2003.
In its order entered on October 24, 2003, the court denied the motion. The court stated: "After consideration of the papers on file and the arguments of counsel, the motion is DENIED. The agreement is unenforceable because it is unconscionable. The unconscionability cannot be cured through severance or restriction. [Armendariz]."
Defendant filed timely its notice of appeal on November 6, 2003. The order denying defendant's motion to compel arbitration is directly appealable. (See Code Civ. Proc., § 1294 ["aggrieved party may appeal from: [¶] (a) An order dismissing or denying a petition to compel arbitration"]; see also Mercury Ins. Group v. Superior Court (1998) 19 Cal.4th 332, 349, 79 Cal.Rptr.2d 308, 965 P.2d 1178.)
DISCUSSION
I. Standard Of Review
The determination of arbitrability is a legal question subject to de novo review. (Arista Films, Inc. v. Gilford Securities, Inc. (1996) 43 Cal.App.4th 495, 501, 51 Cal.Rptr.2d 35.) We will uphold the trial court's resolution of disputed facts if supported by substantial evidence. (Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 653, 35 Cal.Rptr.2d 800.) Where, however, there is no disputed extrinsic evidence considered by the trial court, we will review its arbitrability decision de novo. (Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 650, 9 Cal.Rptr.3d 422 (Abramson).)
*303 In this instance, the only extrinsic evidence concerning the subject arbitration agreement was that presented by plaintiff, namely, the Nyulassy and Widmann declarations to the effect that the employment agreement (including its mandatory arbitration clause) was nonnegotiable. Defendant offered no conflicting evidence that was extrinsic to the settlement agreement and employment agreement themselves. Accordingly, we review de novo the trial court's denial of the motion.
II. Issues On Appeal
Defendant contends that the trial court erred in concluding that the arbitration clause in the employment agreement was unconscionable. It asserts that the court's ruling disregarded the public policy favoring arbitration. Defendant claims that the court ignored the critical distinction between the "postdispute" circumstances surrounding the execution of the employment agreement here, and the typical "predispute" situation proscribed by Armendariz in which a mandatory arbitration agreement is imposed upon the employee by the employer. Defendant argues further that, because plaintiff executed the employment agreement as part of an overall settlement of a prior dispute with defendant and defendant's predecessor, plaintiff's claims that the arbitration clause is unconscionable and against public policy necessarily fail.
Our analysis of defendant's contentions requires a brief overview of general law concerning arbitration agreements, unconscionable contracts, and the Supreme Court's holdings in Armendariz, supra, 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669, and in Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 130 Cal.Rptr.2d 892, 63 P.3d 979 (Little).
III. Applicable Law
A. Arbitration agreements
Code of Civil Procedure section 1281 provides: "A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract." The California statute corresponds with federal law (i.e., the Federal Arbitration Act), which states that arbitration agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." (9 U.S.C. § 2.)
California courts have uniformly acknowledged that "[t]here is a strong public policy in favor of arbitration agreements." (Blake v. Ecker (2001) 93 Cal.App.4th 728, 741, 113 Cal.Rptr.2d 422; see also Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 971-972, 64 Cal.Rptr.2d 843, 938 P.2d 903; Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9, 10 Cal.Rptr.2d 183, 832 P.2d 899.) In light of this policy favoring arbitration, "doubts concerning the scope of arbitrable issues are to be resolved in favor of arbitration. [Citations.]" (Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak Street (1983) 35 Cal.3d 312, 323, 197 Cal.Rptr. 581, 673 P.2d 251.)
"Despite the strong policy favoring arbitration, there are circumstances in which California courts may invalidate or limit agreements to arbitrate. Employing `general contract law principles,' courts will refuse to enforce arbitration provisions that are `unconscionable or contrary to public policy.' [Citation.]" (Abramson, supra, 115 Cal.App.4th at p. 651, 9 Cal. Rptr.3d 422, quoting Armendariz, supra, 24 Cal.4th at p. 99, 99 Cal.Rptr.2d 745, 6 P.3d 669.)
*304 B. Public policy considerations: Armendariz & Little
Four years ago, in Armendariz, the Supreme Court considered a challenge to a mandatory arbitration clause contained in the employment agreements of two employees. (Armendariz, supra, 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669.) The employees claimed that, as a matter of law, they could not be compelled to arbitrate their statutory discrimination claims under the Fair Employment and Housing Act, Government Code section 12900 et seq. (FEHA). (Armendariz, supra, 24 Cal.4th at p. 90, 99 Cal.Rptr.2d 745, 6 P.3d 669.) The court rejected the blanket view that such mandatory employment arbitration agreements are per se invalid with respect to the assertion of FEHA claims. (Id. at p. 96, 99 Cal.Rptr.2d 745, 6 P.3d 669.) Instead, it "conclude[d] that such claims are in fact arbitrable if the arbitration permits an employee to vindicate his or her statutory rights." (Id. at p. 90, 99 Cal.Rptr.2d 745, 6 P.3d 669.)
Such vindication of statutory rights meant that the arbitration agreement perforce needed to "meet certain minimum requirements." (Armendariz, supra, 24 Cal.4th at p. 91, 99 Cal.Rptr.2d 745, 6 P.3d 669.) Adopting the standards described by the District of Columbia Circuit in Cole v. Burns Intern. Security Services (D.C.Cir.1997) 105 F.3d 1465 (Cole), the court in Armendariz held that "[s]uch an arbitration agreement is lawful if it `(1) provides for neutral arbitrators, (2) provides for more than minimal discovery, (3) requires a written award, (4) provides for all of the types of relief that would otherwise be available in court, and (5) does not require employees to pay either unreasonable costs or any arbitrators' fees or expenses as a condition of access to the arbitration forum.'" (Armendariz, supra, 24 Cal.4th at p. 102, 99 Cal.Rptr.2d 745, 6 P.3d 669, quoting Cole, supra, 105 F.3d at p. 1482.)
Last year, the Supreme Court extended its holding in Armendariz to certain employee claims other than FEHA discrimination claims. (Little, supra, 29 Cal.4th 1064, 130 Cal.Rptr.2d 892, 63 P.3d 979.) The employee in Little asserted that he was wrongfully demoted and then terminated in retaliation for his reporting of warranty fraud. (Id. at p. 1069, 130 Cal.Rptr.2d 892, 63 P.3d 979.) He therefore alleged, inter alia, a Tameny claim[10] for wrongful termination in violation of public policy. (Ibid.) Plaintiff urged that, as was the case with FEHA claims, a mandatory arbitration agreement relating to an employee claim for wrongful termination in violation of public policy was subject to the same "minimum requirements" enunciated in Armendariz. (Id. at p. 1076, 130 Cal.Rptr.2d 892, 63 P.3d 979.)
The Supreme Court agreed. It held that "a legitimate Tameny claim is designed to protect a public interest and therefore `"cannot be contravened by private agreement."' (Armendariz, supra, 24 Cal.4th at p. 100, 99 Cal.Rptr.2d 745, 6 P.3d 669.) In other words, an employment agreement that required employees to waive claims that they were terminated in violation of public policy would itself be contrary to public policy. Accordingly, because an employer cannot ask the employee to waive Tameny claims, it also cannot impose on the arbitration of these claims such burdens or procedural shortcomings as to preclude their vindication. Thus, the Armendariz requirements are as appropriate *305 to the arbitration of Tameny claims as to unwaivable statutory claims." (Little, supra, 29 Cal.4th at p. 1077, 130 Cal.Rptr.2d 892, 63 P.3d 979.) The court reasoned that "[t]he Armendariz requirements are therefore applications of general state law contract principles regarding the unwaivability of public rights to the unique context of arbitration, ... And ... there is no reason under Armendariz's logic to distinguish between unwaivable statutory rights and unwaivable rights derived from common law." (Id. at p. 1079, 130 Cal.Rptr.2d 892, 63 P.3d 979.)
As noted, Plaintiff argues that the mandatory employment arbitration agreement is both unconscionable and fails to meet the five Cole requirements as enunciated in Armendariz. As we discuss post, we agree that the arbitration agreement is unconscionable; thus, the trial court's decision to deny the motion to compel arbitration on that basis was proper. Therefore, we need not address whether the trial court could have also denied enforcement of the arbitration agreement because it violates public policy, in that it fails to meet the five minimum requirements for lawful arbitration agreements enunciated in Armendariz, supra, 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669. (See Hiser v. Bell Helicopter Textron, Inc. (2003) 111 Cal.App.4th 640, 655, 4 Cal.Rptr.3d 249 [appellate courts generally "decline to decide questions not necessary to the decision"].)
C. Unconscionable contracts
An arbitration agreement-in order to be enforceable, and irrespective of whether public or only private rights are implicated-must also satisfy traditional contract standards of conscionability. As we have recently held: "[I]n addition to satisfying the Armendariz requirements, an agreement to arbitrate public rights necessarily must be conscionable as well. That conclusion inevitably follows from the great deference accorded unwaivable public rights by both the Legislature and the California Supreme Court. (See, e.g., Armendariz, supra, 24 Cal.4th at pp. 101-102, 99 Cal.Rptr.2d 745, 6 P.3d 669; Little, supra, 29 Cal.4th at p. 1079, 130 Cal.Rptr.2d 892, 63 P.3d 979.) If agreements to arbitrate claims arising from ordinary private rights must meet conscionability standards, then certainly those that affect revered public values warrant the same consideration." (Abramson, supra, 115 Cal.App.4th at p. 655, 9 Cal.Rptr.3d 422.)
"Unconscionability is a judicially created doctrine, which the Legislature codified in 1979. (Civ.Code, § 1670.5, subd. (a). [Citations.]) Whether an agreement is unconscionable depends on circumstances at the time it was made. (Civ.Code, § 1670.5, subd. (a).)" (Abramson, supra, 115 Cal.App.4th at p. 655, 9 Cal.Rptr.3d 422.)
In Little, the Supreme Court succinctly described the applicable law: "To briefly recapitulate the principles of unconscionability, the doctrine has `"both a `procedural' and a `substantive' element," the former focusing on "`oppression'" or "`surprise'" due to unequal bargaining power, the latter on "`overly harsh'" or "`one-sided'" results.' (Armendariz, supra, 24 Cal.4th at p. 114, 99 Cal.Rptr.2d 745, 6 P.3d 669.) The procedural element of an unconscionable contract generally takes the form of a contract of adhesion,[11]*306 `"which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it."' [Citation.]" (Little, supra, 29 Cal.4th at p. 1071, 130 Cal.Rptr.2d 892, 63 P.3d 979, quoting Armendariz, supra, 24 Cal.4th at p. 113, 99 Cal.Rptr.2d 745, 6 P.3d 669.)
"`Substantive unconscionability' focuses on the terms of the agreement and whether those terms are "so one-sided as to `shock the conscience.'" [Citations.]" (Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322, 1330, 83 Cal.Rptr.2d 348 [citation].) A contractual provision that is substantively unconscionable "may take various forms, but may generally be described as unfairly one-sided." (Little, supra, 29 Cal.4th at p. 1071, 130 Cal.Rptr.2d 892, 63 P.3d 979.) "[T]he paramount consideration in assessing [substantive] conscionability is mutuality." (Abramson, supra, 115 Cal.App.4th at p. 657, 9 Cal.Rptr.3d 422.)
We have recently identified on a nonexclusive basis certain types of provisions in mandatory employment arbitration contracts that have been held substantively unconscionable. (See Abramson, supra, 115 Cal.App.4th at pp. 656-657, 9 Cal. Rptr.3d 422.) Those cases include: (1) where the agreement unfairly favored the employer by allowing for appeal of arbitration awards in excess of $50,000 (Little, supra, 29 Cal.4th at pp. 1072-1074, 130 Cal.Rptr.2d 892, 63 P.3d 979); (2) where the employer imposed forum costs on the employee (McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 93, 134 Cal.Rptr.2d 446); (3) where the employee's damage remedy was limited, the employee was required to pay all costs, and the required hearing location was Oakland (Pinedo v. Premium Tobacco Stores, Inc. (2000) 85 Cal.App.4th 774, 781, 102 Cal.Rptr.2d 435); and (4) where the contract provided that, pending the arbitration hearing, the employee lost his job, salary, and benefits. (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1542, 60 Cal.Rptr.2d 138.)
"`Procedural unconscionability' concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. [Citation.] It focuses on factors of oppression and surprise. [Citation.] The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party. [Citations.]" (Kinney v. United HealthCare Services, Inc., supra, 70 Cal.App.4th at p. 1329, 83 Cal.Rptr.2d 348.) "The component of surprise arises when the challenged terms are `hidden in a prolix printed form drafted by the party seeking to enforce them. [Citation.]' (Kinney v. United HealthCare Services, Inc., supra, 70 Cal.App.4th at p. 1329, 83 Cal.Rptr.2d 348.) Where an adhesive contract is oppressive, surprise need not be shown." (Abramson, supra, 115 Cal.App.4th at p. 656, 9 Cal.Rptr.3d 422.)
In evaluating a claim of unconscionability, courts are mindful of the interplay between "procedural" and "substantive" *307 unconscionability: "`The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.' (Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at p. 1533 [60 Cal.Rptr.2d 138] But they need not be present in the same degree. `Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.' [Citations.] In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa." (Armendariz, supra, 24 Cal.4th at p. 114, 99 Cal.Rptr.2d 745, 6 P.3d 669.)
IV. The Arbitration Agreement Is Unconscionable
We apply the above stated principles to our de novo review of the arbitration clause at issue in the employment agreement between plaintiff and defendant. We start with what is, in this instance, the easier issue: the question of substantive unconscionability.
A. Substantive unconscionability
The employment agreement requires plaintiff only to arbitrate any and all of his employment claims. The arbitration clause plainly contains only a unilateral agreement to arbitrate; any claims that defendant may have that arise out of plaintiff's employment are not subject to the arbitration clause. Defendant's argument to the contrary notwithstanding, the parties' agreement to arbitrate disputes concerning "the validity, interpretation, or enforcement" of the settlement agreement does not infuse an element of bilaterality into the employment agreement. It is true that the settlement agreement contains a bilateral agreement to arbitrate settlement-related disputes; that agreement, however, does not extend to all disputes arising after plaintiff and defendant's predecessor settled the prior case and plaintiff commenced employment with defendant. A dispute arising out of plaintiff's employment, occurring many years after the settlementsuch as the present disputewould not invoke the arbitration provision of the settlement agreement.
The employment agreementin addition to compelling plaintiff to arbitrate all of his disputes with defendantrequires him to submit to discussions with his supervisors in advance of, and as a condition precedent to, having his dispute resolved through binding arbitration. While on its face, this provision may present a laudable mechanism for resolving employment disputes informally, it connotes a less benign goal. Given the unilateral nature of the arbitration agreement, requiring plaintiff to submit to an employer-controlled dispute resolution mechanism (i.e., one without a neutral mediator) suggests that defendant would receive a "free peek" at plaintiff's case, thereby obtaining an advantage if and when plaintiff were to later demand arbitration.
Moreover, the unilateral arbitration clause places time limitations upon plaintiff's assertion of any claims against defendant. In limiting the time to assert a claim to a maximum of 180 days of the date of his employment termination or "such other dispute or controversy first arose," plaintiff's time for bringing a claim is shortened, in some instances, by a period of more than three and one-half years.[12]*308 Of course, the employment agreement limits none of the employer's rights against the employee (including the statutory time for bringing suit against him).
We have little trouble concluding that, taken together, these three aspects of the mandatory employment arbitration agreement render it substantively unconscionable.[13] We now turn to the issue of procedural unconscionability.
B. Procedural unconscionability
The evidence is less dominant on the question of whether the mandatory arbitration clause in the employment agreement is procedurally unconscionable. We first summarily dispose of any claim that the employment agreement is procedurally unconscionable due to "surprise."
Plaintiff did not submit evidence that he was "surprised" by the arbitration clause. The subject agreement is less than two pages, and the arbitration clause is in all capital letters, thereby alerting the reader that it might contain matters of particular importance. Further, plaintiff was represented by an attorney at the time he executed the settlement agreement and employment agreement. That attorneythe same attorney representing plaintiff in the present casepresumably explained the terms of the documents to his client. The mandatory employment arbitration agreement is not procedurally unconscionable due to "surprise." We simply cannot conclude that the challenged terms are "hidden in a prolix printed form drafted by the party seeking to enforce them. [Citations.]" (Kinney v. United HealthCare Services, Inc., supra, 70 Cal.App.4th at p. 1329, 83 Cal.Rptr.2d 348.)
Turning then to "oppression," the employment agreement was a standard form utilized by defendant at the time for the hiring of its employees. It was undisputed that plaintiffas part of the process of being hired by defendant in connection with the settlement of the prior casewas required to sign the employment agreement. Likewise, the undisputed evidence was that the terms of the agreement (other than the "at-will" provision) were nonnegotiable.
Defendant attempts to distinguish this case from others in which courts have held mandatory employment arbitration agreements unconscionable; here, the parties agreed to certain changes and additions to the employment agreement that were confirmed in the settlement agreement. Of the greatest significance in this respect, the parties agreed that plaintiff could be terminated only for good cause for a period of three years after his employment commenced. Defendant also urges that the arbitration agreement is not unconscionable because it was entered into as part of the settlement of a prior dispute. Defendant characterizes the agreement as a "postdispute" arbitration agreement that *309 is excepted from the requirements of Armendariz.
We reject defendant's contentionas a general propositionthat the discussion of unconscionability contained in Armendariz expressly excepted the circumstance where an employer and employee entered into a binding arbitration agreement after a dispute had arisen.[14] There, the Supreme Court emphasized that the five Cole requirements for a mandatory employment arbitration agreement "would generally not apply in situations in which an employer and an employee knowingly and voluntarily entered into an arbitration agreement after a dispute has arisen. In those cases, employees are free to determine what trade-offs between arbitral efficiency and formal procedural protections best safeguard their statutory rights." (Armendariz, supra, 24 Cal.4th at p. 103, fn. 8, 99 Cal.Rptr.2d 745, 6 P.3d 669.) This limitation plainly applies to the minimum requirements discussed in Armendariz for lawful employment arbitration agreements implicating nonwaivable statutory rights. We do not read Armendariz to hold that mandatory employment arbitration agreements are necessarily conscionable because they are entered into by the parties "postdispute."[15]
Moreover, we do not agree that the mandatory employment arbitration agreement here is a "postdispute" agreement. We acknowledge that the parties' settlement agreement (including the arbitration provisions therein) is a "postdispute" agreement; any action to enforce or interpret that agreement, in our view, would relate back to the prior dispute between plaintiff and defendant's predecessor. The employment agreement, however, contemplated that the parties were starting a new employer-employee relationship with specific terms. Unlike an action concerning the settlement agreement, a dispute arising out of the new employment relationship between the partieswhich dispute might occur many years after the 1997 settlement of the prior casewould not be one that related to the prior dispute.
Further, we cannot agree that the facts emphasized by defendant negate a finding of procedural unconscionability. Plaintiff had been unemployed for nearly three years while the prior case was pending and he needed the job from defendant to support his family. The fact that plaintiff was able to negotiate a three-year "good cause" provision in the employment agreement did not, of itself, place him on equal footing with defendant in the negotiation process. We recentlyin Abramson, suprarejected a similar argument by the employer: "Plaintiff's ability to negotiate other aspects of his employment with [his employer] *310 has no bearing on the question of whether he had power to negotiate the arbitration provision." (Abramson, supra, 115 Cal.App.4th at p. 662, 9 Cal.Rptr.3d 422; see also Graham v. Scissor-Tail, Inc., supra, 28 Cal.3d at p. 812, 171 Cal.Rptr. 604, 623 P.2d 165 [unconscionability claim upheld, notwithstanding plaintiff's status as "an experienced promoter and producer of musical concerts"]; Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at p. 1533, 60 Cal.Rptr.2d 138 [contract determined to be adhesive, despite plaintiff being "a successful and sophisticated corporate executive"].)
Defendant urges that the agreement here was not unconscionable because plaintiff was represented by an attorney at the time it was executed. We agree that this fact has significanceparticularly in the context of any claim that the agreement was procedurally unconscionable because of "surprise." The uncontroverted evidence, however, from plaintiff and his counsel was that the mandatory arbitration provision in the employment agreement was nonnegotiable. Thus, on the facts presented here, we are not prepared to say that the mere fact that plaintiff was represented by counsel in the negotiation and execution of the employment agreement prevents him from later asserting that the agreement is unconscionable.[16]
Admittedly, plaintiff's negotiating position in this case is not at the far end of the spectrum customarily seen in cases where the employee has an absence of any bargaining power.[17] There was nonetheless-based upon the evidence presented, including the absence of negotiation of the standard form arbitration clause and plaintiff's need for employmenta degree of "inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party." (Kinney v. United HealthCare Services, Inc., supra, 70 Cal.App.4th at p. 1329, 83 Cal.Rptr.2d 348.)
In short, we conclude that there is oppression presented in the parties' mandatory employment arbitration agreement. The facts presented hereincluding the significant degree of substantive unconscionability discussed above, and the absence of evidence that the arbitration clause was the subject of specific bargaining by the partieswarrant such a finding. We therefore conclude that the employment agreement is procedurally unconscionable.
C. Interplay between procedural and substantive unconscionability
Having found that the mandatory employment arbitration agreement is both *311 substantively and procedurally unconscionable, we next evaluate the interplay between these two findings upon the ultimate determination of whether the agreement is unconscionable. In doing so, we apply a "sliding scale" described in Armendariz; we compare the extent of regularity in the procedural process by which the contract was entered into with the degree of harshness or unreasonableness of the substantive terms of the contract. (Armendariz, supra, 24 Cal.4th at p. 114, 99 Cal.Rptr.2d 745, 6 P.3d 669.)
As we have noted, the mandatory arbitration clause in the employment agreement has at least three features that make it substantively unconscionable. Of the greatest overall significance is the fact that it imposes on the employee only a unilateral obligation to arbitrate: "In assessing substantive unconscionability, the paramount consideration is mutuality." (Abramson, supra, 115 Cal.App.4th at p. 664, 9 Cal.Rptr.3d 422.) Given the high degree of substantive unconscionability therefore, we readily hold that this fact-coupled with the lower quantum of procedural unconscionability discussed ante-warrants the conclusion that the mandatory arbitration agreement is unconscionable.
D. Severability
Having found consistent with the trial court's conclusion that the mandatory employment arbitration agreement is unconscionable, it remains for us to consider whether the court's refusal to sever the agreement's unconscionable provisions was appropriate. We conclude that it was.
Civil Code section 1670.5, subdivision (a) provides that "[i]f the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result." Our Supreme Court concluded, after a review of the legislative history of Civil Code section 1670.5, that "the statute appears to give a trial court some discretion as to whether to sever or restrict the unconscionable provision or whether to refuse to enforce the entire agreement. But it also appears to contemplate the latter course only when an agreement is `permeated' by unconscionability." (Armendariz, supra, 24 Cal.4th at p. 122, 99 Cal. Rptr.2d 745, 6 P.3d 669.)
Under the facts before it in Armendariz, the Supreme Court held that there were "two factors [that] weigh[ed] against severance of the unlawful provisions." (Armendariz, supra, 24 Cal.4th at p. 124, 99 Cal.Rptr.2d 745, 6 P.3d 669.) One concerned the existence of multiple unlawful provisions. (Ibid.) Second, the arbitration agreement there lacked mutuality to such an extent "that there [was] no single provision a court [could] strike or restrict in order to remove the unconscionable taint from the agreement. Rather, the court would have to, in effect, reform the contract, not through severance or restriction, but by augmenting it with additional terms." (Id. at pp. 124-125, 99 Cal.Rptr.2d 745, 6 P.3d 669.)
The mandatory arbitration clause in the employment agreement here is substantively unconscionable because it lacks any degree of mutuality, imposes upon plaintiff a prearbitration resolution procedure controlled by defendant, and severely limits the time within which plaintiff may demand arbitration to vindicate his rights. As was true in Armendariz, there are multiple provisions in the agreement rendering it substantively unconscionable. Further, the subject agreement lacks any *312 degree of mutuality; there is no single provision that may be stricken or restricted "in order to remove the unconscionable taint." (Armendariz, supra, 24 Cal.4th at p. 125, 99 Cal.Rptr.2d 745, 6 P.3d 669.) We conclude that the arbitration clause is permeated by unconscionability. Therefore, we hold that the trial court complied with Civil Code section 1670.5 by refusing to sever or restrict the unconscionable provision of the employment agreement.
DISPOSITION
Our de novo review of the record leads us to conclude that the arbitration clause in the employment agreement is unconscionable. Therefore, we affirm the trial court's order denying defendant's motion to compel arbitration.
WE CONCUR: RUSHING, P.J., and PREMO, J.
NOTES
[*] Judge of the Santa Clara County Superior Court assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
[1] The settlement agreement entered into in the prior case (discussed post) contains a recital that plaintiff was originally employed by Philco-Ford, a company which subsequently became Ford Aerospace and Communications Company, which was the predecessor of Loral. The agreement identified Western Development Labs as having previously been a business unit of Loral and later an operating company of defendant. It is undisputed that defendant succeeded to the rights and liabilities of plaintiff's prior employers and that defendant participated in the prior employment suit brought by plaintiff that was settled in 1997.
[2] We acknowledge that the settlement agreement entered into by the parties in the prior case contained a confidentiality clause. Accordingly, we decline to describe the specifics of the monetary payment to plaintiff that was a part of that settlement.
[3] The settlement agreement acknowledged that plaintiff was also required to execute an employment application (identified as "Exhibit `B'"), and a proprietary information agreement (identified as "Exhibit `D'").
[4] Paragraph 6 of the employment agreement read in pertinent part as follows: "If I object to or disagree with any Lockheed Martin personnel decision relating to or affecting the terms and conditions of my Lockheed Martin employment (INCLUDING, WITHOUT LIMITATION, ANY AND ALL CLAIMS OR ALLEGATIONS OF (a) DISCRIMINATION BASED ON SEX, RACE, AGE, NATIONAL ORIGIN, OR ANY OTHER FORM OF DISCRIMINATION, OR (b) HARASSMENT BASED ON SEX OR ANY OTHER FORM OF HARASSMENT), I agree I shall seek to resolve my objection or disagreement through discussions within successive levels of my supervisory chain of command, until the objection or disagreement is resolved or I have had the opportunity to discuss the matter with the Vice President, Human Resources, or such other senior management official responsible for human resources matters within the Lockheed Martin business unit to which I am assigned. I UNDERSTAND AND AGREE THAT IF THE DISPUTE OR CONTROVERSY IS NOT RESOLVED TO MY SATISFACTION BY MEANS OF SUCH DISCUSSION(S), MY SOLE AND EXCLUSIVE REMEDY AND AVENUE OF REDRESS IS THROUGH ARBITRATION PROCEEDINGS CONDUCTED IN ACCORDANCE WITH THE EMPLOYMENT DISPUTE RESOLUTION RULES OF THE AMERICAN ARBITRATION ASSOCIATION.... I UNDERSTAND THAT BY AGREEING TO ARBITRATION OF ANY AND ALL SUCH DISPUTES AND CONTROVERSIES, INCLUDING, WITHOUT LIMITATION, THOSE RELATING TO OR INVOLVING CLAIMS OR ALLEGATIONS OF (a) DISCRIMINATION BASED ON SEX, RACE, AGE, NATIONAL ORIGIN, OR ANY OTHER FORM OF DISCRIMINATION, OR (b) HARASSMENT BASED ON SEX OR ANY OTHER FORM OF HARASSMENT, I HEREBY KNOWINGLY, WILLINGLY AND ADVISEDLY WAIVE ANY AND ALL RIGHTS TO PURSUE JUDICIAL PROCEEDINGS OR ACTIONS AND REMEDIES WHICH I MIGHT OTHERWISE HAVE BEEN ENTITLED TO PURSUE, OR WHICH MIGHT OTHERWISE HAVE BEEN AVAILABLE TO ME, IN THE ABSENCE OF THE WAIVER ESTABLISHED BY THIS SENTENCE.... The arbitration decision shall be final and binding to the full extent permitted by law.... I FURTHER UNDERSTAND AND AGREE I WILL WAIVE MY SOLE AND EXCLUSIVE ARBITRATION REMEDY UNLESS I FILE A WRITTEN DEMAND THEREFOR WITH THE DIVISION VICE PRESIDENT, HUMAN RESOURCES (OR SUCH OTHER SENIOR MANAGEMENT OFFICIAL RESPONSIBLE FOR HUMAN RESOURCES MATTERS WITHIN THE LOCKHEED MARTIN DIVISION TO WHICH I AM, OR IN THE CASE OF A TERMINATION CLAIM WAS, ASSIGNED), WITHIN 180 DAYS OF THE DATE (I) OF MY TERMINATION FROM LOCKHEED MARTIN EMPLOYMENT, OR (II) SUCH OTHER DISPUTE OR CONTROVERSY FIRST AROSE."
[5] Plaintiff acknowledged (somewhat contradictorily) in his declaration that the at-will portion of his employment agreement was "[t]he only portion of [his] employment that was negotiable."
[6] At the hearing on the motion-reiterated on appeal-defendant made blanket parol evidence objections to the Nyulassy and Widmann declarations. (See Code Civ. Proc., § 1856, subd. (a).) Defendant does not make clear what specific aspects of the declarations it claims are objectionable. We disagree, however, that the substance of the declarations contradicts the parties' agreement "by evidence of any prior agreement or of a contemporaneous oral agreement." (Ibid.) Accordingly, we overrule defendant's evidentiary objection.
[7] There was no declaration by defense counsel in the prior case that was submitted in connection with the motion.
[8] The complaint failed to allege whether the employment contract was written or oral. It is clear, however, from the papers filed in connection with defendant's motion that the parties had a written contract, namely, the employment agreement containing the arbitration provision at issue in this appeal.
[9] The complaint did not allege when this unsatisfactory evaluation and demotion occurred; we infer, however, from the pleading that the adverse employment action took place sometime between December 2002 and May 2003.
[10] Tameny v. Atlantic Richfield Co. (1980) 27 Cal.3d 167, 178, 164 Cal.Rptr. 839, 610 P.2d 1330.
[11] While procedural unconscionability usually occurs through a finding that the contract is one of adhesion, this is not necessarily the case. "So let us be quite clear about it: Adhesion is not a prerequisite for unconscionability." (Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1409, 7 Cal.Rptr.3d 418.) "What was oblique in Graham [v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 171 Cal.Rptr. 604, 623 P.2d 165], though, has now become clear in Little. `The procedural element of an unconscionable contract generally takes the form of a contract of adhesion.' (Little, supra, 29 Cal.4th at p. 1071, 130 Cal.Rptr.2d 892, 63 P.3d 979, emphasis added; [citation.]) That is, you can show procedural unconscionability by a showing of adhesion, but it is not the only way. There will be cases ... where procedural unconscionability is obvious without the need to establish that the
contract is one of adhesion." (Harper v. Ultimo, supra, at p. 1410, 7 Cal.Rptr.3d 418.)
[12] Potential claims arising out of plaintiff's employment carry a variety of statutes of limitation; however, claims for breach of his employment agreement with defendant would have a four year statute of limitations. (See Code Civ. Proc., § 337, subd. 1; Sequeira v. Rincon-Vitova Insectaries, Inc. (1995) 32 Cal.App.4th 632, 634, 38 Cal.Rptr.2d 264.) Furthermore, while we conclude that the shortened limitations period in the employment agreement is one factor leading us to hold that the contract is substantively unconscionable, we do not mean to suggest that this factor, by itself, would compel this conclusion. (See Soltani v. Western & Southern Life Ins. Co. (9th Cir.2001) 258 F.3d 1038, 1044 [holding that, under the facts presented there, shortened limitations provision was not substantively unconscionable].)
[13] Defendant arguesin only the briefest of termsthat the employment agreement is substantively conscionable. For the reasons we have enumerated, we obviously reject defendant's contention.
[14] Defendant cites footnote 8 of Armendariz for this assertion. (Armendariz, supra, 24 Cal.4th at p. 103, fn. 8, 99 Cal.Rptr.2d 745, 6 P.3d 669.)
[15] Defendant at oral argumentover plaintiff's objectionbrought to this court's attention a case decided after briefing was completed: Omar v. Ralphs Grocery Co. (2004) 118 Cal.App.4th 955, 13 Cal.Rptr.3d 562 (Omar). Defendant argues that this recent decision supports its contention that the mandatory employment arbitration agreement here is a "postdispute" agreement that is therefore conscionable. We exercise our discretion to consider this authority cited by defendant, but conclude that Omar is both distinguishable on its facts and does not hold that a "postdispute" mandatory employment arbitration agreement is necessarily conscionable. Indeed, the court in Omar did not decide the question of conscionability of either of the two arbitration agreements (predispute and postdispute) being considered; it remanded the case to the trial court to determine whether either agreement was enforceable, and if so, whether the employee's claims were covered by the enforceable arbitration agreement. (Id. at p. 961, 14 Cal.Rptr.3d 562.)
[16] But see American Software, Inc. v. Ali (1996) 46 Cal.App.4th 1386, 54 Cal.Rptr.2d 477, in which the court held that a provision in a two-and-one-half page employment agreement limiting recovery of commissions was not unconscionable because, inter alia, the employee was a sophisticated businesswoman who had the agreement reviewed by her counsel before she signed it. (Id. at pp. 1391-1392, 54 Cal.Rptr.2d 477.) The court stated in a footnote: "Some courts have considered the presence and advice of counsel to constitute circumstantial, if not conclusive, evidence that a contract is not unconscionable. (See e.g., Resource Management Co. v. Weston Ranch (Utah 1985) 706 P.2d 1028, 1045; Bernina Distributors, Inc. v. Bernina Sewing Mach. (10th Cir.1981) 646 F.2d 434, 440.)" (American Software, Inc. v. Ali, supra, at p. 1392, fn. 3, 54 Cal.Rptr.2d 477.)
[17] The Supreme Court in Armendariz acknowledged that, "in the case of preemployment arbitration contracts, the economic pressure exerted by employers on all but the most sought-after employees may be particularly acute, for the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration requirement." (Armendariz, supra, 24 Cal.4th at p. 115, 99 Cal.Rptr.2d 745, 6 P.3d 669.) | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1477756/ | 874 F. Supp. 1161 (1994)
In re the DEPARTMENT OF ENERGY STRIPPER WELL EXEMPTION LITIGATION.
CONOCO INC., (formerly Continental Oil Co.), Plaintiff,
v.
UNITED STATES DEPARTMENT OF ENERGY, et al., Defendants.
M.D.L. 378. Civ. A. No. 79-1321.
United States District Court, D. Kansas.
December 30, 1994.
*1162 *1163 *1164 *1165 *1166 Robert F. Ochs, Conoco Inc., Legal Dept., Houston, TX, and Morris, Laing, Evans, Brock & Kennedy, Chartered, Joseph W. Kennedy, Dennis M. Feeney, Wichita, KS, for plaintiff.
Paul Michael, Edward P. Levy, Economic Regulatory Admin., Judicial Litigation Div., U.S. Dept. of Energy, Washington, DC, for Dept. of Energy.
MEMORANDUM AND ORDER
THEIS, District Judge.
This matter is before the court on cross motions for summary judgment. Defendant Department of Energy (DOE) has moved for summary judgment on its counterclaim against plaintiff Conoco, Inc. DOE requests that the court enter an order requiring Conoco to deposit into the escrow account established by the court the sum of $8,635,074 plus additional prejudgment interest accruing after September 30, 1993. Doc. 2150 (DOE's amended cross motion for summary judgment). Conoco opposes DOE's motion and seeks summary judgment in its favor on DOE's counterclaim. Conoco seeks a ruling that it has paid into the court's escrow all monies owed. Doc. 2103. The court heard oral argument on the motions, has considered the voluminous briefs and is now prepared to rule.
Introduction and Background
This action began in 1976 with the filing of the first action by an oil producer seeking to enjoin the Federal Energy Administration, now the DOE, from enforcing Ruling 1974-29. This Ruling, and the regulations it interpreted, required the exclusion of injection wells from the well count in calculating the average daily production per well for qualification for the stripper well exemption from price controls. This court enjoined enforcement of the regulations in question, but ordered the plaintiff oil producers to deposit into escrow the difference between the stripper well price and the controlled price of crude oil affected by the injunction.
In response to the DOE's position that it would continue to enforce Ruling 1974-29 against oil producers who were not parties to the original action and who did not have the benefit of this court's injunction, other oil producers filed suit in this and other federal district courts. Similar injunction and escrow orders were entered, allowing the oil producers to charge the stripper well price and ordering the price differential escrowed. In July 1979, these cases were consolidated by the Judicial Panel on Multidistrict Litigation and were assigned to this court as M.D.L. 378. This court has presided over these consolidated cases since that time.
The Temporary Emergency Court of Appeals (TECA) upheld the validity of the regulations and Ruling 1974-29 in In re The Department of Energy Stripper Well Exemption Litigation, 690 F.2d 1375 (TECA 1982), cert. denied sub nom. Energy Reserves Group, Inc. v. Hodel, 459 U.S. 1127, 103 S. Ct. 763, 74 L. Ed. 2d 978 (1983). Pursuant to *1167 TECA's mandate, the court entered judgment for DOE. At that point, the court considered the action to be, in effect, a government enforcement action under § 209 of the Economic Stabilization Act, 12 U.S.C. § 1904 note, in which the fact of overcharge had been determined and the court was faced with effecting restitution. See In re: The Department of Energy Stripper Well Exemption Litigation, 578 F. Supp. 586, 593 (D.Kan. 1983).
Following negotiations among the parties as to the proper distribution of the escrowed overcharge funds, the parties reached a settlement. The court approved the Final Settlement Agreement (FSA) on July 7, 1986. See In re: The Department of Energy Stripper Well Exemption Litigation, 653 F. Supp. 108 (D.Kan.1986). Since the entry of the FSA, the court has issued numerous opinions adjudicating disputes among various signatories to the FSA regarding the interpretation of the FSA. The court has overseen the distribution of multi-billions in escrowed overcharges to the thousands of participants in the FSA, including oil refiners and resellers, gasoline retailers, airlines, utility companies, the states and territories, and the federal government.
The FSA did not resolve the issue of any remaining liability of the parties for payment of overcharge funds into escrow. The parties to M.D.L. 378 specifically reserved their rights to litigate the issue of remaining liability for overcharges. FSA § II.A.6. A number of parties settled their liability for overcharges with DOE and have paid funds into the court's escrow for distribution via the mechanism set up by the FSA.
In September 1988, the United States of America filed a counterclaim on behalf of DOE against the remaining parties, pursuant to §§ 209 and 211 of the Economic Stabilization Act (ESA), 12 U.S.C. § 1904 note, as incorporated into section 5(a)(1) of the Emergency Petroleum Allocation Act (EPAA), 15 U.S.C. § 754(a)(1). The DOE's counterclaim alleges that the remaining parties have not deposited sufficient funds into the court's escrow to satisfy their overcharge liability. In previous opinions, the court has granted judgment in favor of the DOE against other oil producers. See In re: The Department of Energy Stripper Well Exemption Litigation (Sun Company, Inc. and Oryx Energy Company v. Department of Energy), 752 F. Supp. 1527 (D.Kan.1990), aff'd, 944 F.2d 918 (TECA 1991); In re: The Department of Energy Stripper Well Exemption Litigation (Chevron U.S.A., Inc. v. Department of Energy), 746 F. Supp. 1452 (D.Kan.1990), aff'd in part, 944 F.2d 914 (TECA 1991) (reversing only the application of the United States Rule prior to February 1983); In re: The Department of Energy Stripper Well Litigation (Mobil Oil Corp. v. Department of Energy), 722 F. Supp. 649 (D.Kan.1989), on reconsideration, 739 F. Supp. 1446 (D.Kan.1990) (imposing operator liability).
Conoco operated seven properties on which overcharges are still in issue here, and held the division orders for some but not all of the interests in each property. Conoco received and deposited into escrow the overcharges attributable to those interests for which it held the division orders. Conoco states that oil attributable to the remaining interests on those properties was taken in kind. Conoco asserts that it cannot be held liable as operator for oil taken in kind by working interest owners and royalty interest owners.
Summary Judgment Standards
The court is familiar with the standards governing the consideration of a motion for summary judgment. The Federal Rules of Civil Procedure provide that summary judgment is appropriate when the documentary evidence filed with the motion "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A principal purpose "of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses...." Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986). The court's inquiry is to determine "whether there is the need for a trial whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby, Inc., 477 *1168 U.S. 242, 250, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986).
The burden at the summary judgment stage is similar to the burden of proof at trial. The court must enter summary judgment, "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S.Ct. at 2552. The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact on its claim. Rule 56, however, imposes no requirement on the moving party to "support its motion with affidavits or other similar materials negating the opponent's claim." Id. at 323, 106 S.Ct. at 2552 (emphasis in original). Once the moving party has properly supported its motion for summary judgment, the nonmoving party may not rest upon mere allegations or denials contained in the nonmoving party's pleadings, but must set forth specific facts showing a genuine issue for trial, relying upon the types of evidentiary materials contemplated by Rule 56. Fed.R.Civ.P. 56(e). Each party must demonstrate to the court the existence of contested facts on each claim it will have to prove at trial. Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. The court reviews the evidence on summary judgment under the substantive law and based on the evidentiary burden the party will face at trial on the particular claim. Anderson, 477 U.S. at 254, 106 S.Ct. at 2513.
At the summary judgment stage, the judge's function is not to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249, 106 S.Ct. at 2510. Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are functions of the finder of fact, not the functions of the judge when ruling on a motion for summary judgment. The evidence of the nonmoving party is to be believed. All justifiable inferences are to be drawn in favor of the nonmovant. Id. at 255, 106 S.Ct. at 2513.
Statement of Facts
On December 24, 1974, the Federal Energy Administration (FEA) issued Ruling 1974-29, which prohibited the inclusion of injection wells in the well count when certifying a property pursuant to the stripper well exemption.
On or about October 6, 1976, the first suit challenging the validity of Ruling 1974-29 was filed in this court by Braden-Zenith, Inc., styled Braden-Zenith, Inc. v. Federal Energy Administration, Case No. 76-0429-C6. This case was later consolidated with Energy Reserves Group, Inc. v. Federal Energy Administration, Case No. 77-1146, for briefing on motions for preliminary injunction.
On or about June 16, 1977, this court granted the plaintiffs' request for a preliminary injunction, enjoining the FEA from enforcing Ruling 1974-29 against the plaintiffs and requiring the plaintiffs to escrow with the court the incremental price difference received by plaintiffs as a result of their court-approved stripper certifications.
On or about March 17, 1978, Conoco filed suit in the United States District Court for the Northern District of Texas against the DOE, also seeking to invalidate Ruling 1974-29 and to enjoin DOE from imposing civil or criminal penalties against Conoco for any violations of that ruling. Conoco's suit was later consolidated in that district with similar suits brought by Prosper Energy Corporation, Exxon Corporation, Hunt Oil Company, and Crystal Oil Company against the DOE, collectively styled as Prosper Energy Corp., et al. v. DOE, Civil Action No. CA-3-78-0244-W.
On April 7, 1978, a hearing was held on plaintiffs' application for preliminary injunction, and on March 22, 1979 Judge Woodward issued a preliminary injunction order in favor of Conoco and the other plaintiffs, enjoining DOE's enforcement of the ruling against Conoco. In that injunction order, in addition to finding that plaintiffs had demonstrated a substantial likelihood of prevailing on the merits, the court also ordered that *1169 Conoco and the other plaintiffs escrow the incremental stripper monies, as follows:
(a) At the time of the creation of the escrow account ordered herein, Exxon Corporation, Continental Oil Company, Hunt Oil Company, and Crystal Oil Company shall pay, or cause to be paid, computing from the date these actions were filed by those plaintiffs, the difference between the price received by them from other parties who purchased crude oil produced and sold from the properties in dispute after such properties were certified as stripper well properties and the maximum price for which such crude oil could have been sold to such purchasers without such certifications;
(b) Thereafter, until the final determination of this cause or until further order of the Court, Exxon Corporation, Continental Oil Company, Hunt Oil Company, and Crystal Oil Company shall compute on a monthly basis the difference between the price received by them in the previous month from other parties who purchased crude oil sold from the properties in dispute and the maximum price for which such crude oil could have been sold to such purchasers without certification of such properties as stripper well properties and shall deposit such difference in the escrow account.
Pursuant to the preliminary injunction order, an escrow account was set up by Conoco at First National Bank in Dallas and, in April 1979, an escrow agreement was entered into between Conoco and the First National Bank in Dallas and filed with the Texas Court.
On or about July 3, 1979, the Judicial Panel on Multidistrict Litigation ordered that the consolidated Texas stripper well cases involving Conoco and the other Texas plaintiffs be transferred to this court for further proceedings.
On or about July 1, 1985, this court ordered Conoco and the other Texas plaintiffs to transfer the incremental stripper monies from the various Texas escrow accounts to this court's stripper well escrow account at Bank IV, Wichita, Kansas.
Following the entry of the court's order and judgment approving the Final Settlement Agreement in July 1986, and pursuant to the Final Settlement Agreement, Conoco permitted DOE to audit the stripper properties operated by Conoco to ascertain whether any escrow deficiencies existed. By letter dated December 21, 1987, the DOE advised Conoco of the results of its audit, and of DOE's position that Conoco failed to deposit $4,439,301 in overcharges pertaining to 29 stripper properties operated by Conoco.
On or about March 18, 1988, Conoco responded to the DOE's letter of December 21, 1987, and put the DOE on notice that approximately 80% of the alleged escrow deficiency was attributable to oil taken in kind by third-party interest owners:
The individual property folders [enclosed with this letter], except where Conoco held all basic division orders, provide the names and percentages of ownership of third parties in these properties, which are almost all unitized operations. The relevance of this information pertains to the issue comprising practically the entire DOE claim, being the barrels of oil and associated severance taxes which were taken "in kind" by these third-party interest owners. Conoco never certified, sold or received any revenues regarding these barrels. Nor is Conoco knowledgeable regarding the tier certifications or prices received by the owners of this crude oil.
Several unit agreements are included in the material which are instructive as to the rights of interest owners to obtain their interest in production by taking their oil "in kind", as well as to dispose of such oil different than and apart from the operator's interest in the common production. A comparison of the statement of pipeline runs to the MDL Statement of Amounts Escrowed furnished for each property by month, evidence that Conoco certified only the division of interests held for these properties or for production purchased therefrom. Thus, that sum, including severance taxes, was deposited with the Court's escrow account, with minor variations indicated on the Recap.
*1170 On August 7, 1989, Conoco made a supplemental deposit of $2,496,524 into the escrow account at Bank IV, Wichita, Kansas, and filed a "Notice of Supplemental Deposit into Escrow Account by Conoco, Inc." which identified the properties involved and the amounts being deposited or credited for each identified property.
On August 3, 1990, Conoco filed an "Amended Notice of Supplemental Deposit into Escrow Account by Conoco Inc." Attached to this document was an affidavit of Gary Brown, explaining why the document was being filed and the basis for various adjustments and corrections to Conoco's deposits which were being made at the time. The Amended Notice and Brown's affidavit reflected Conoco's belief that it had overpaid the escrow account and was entitled to a net credit of $113,483.
On December 31, 1992, Conoco filed a "Notice of Final Deposit into Escrow Account by Conoco Inc." This notice was accompanied by a payment into this court's escrow account in the amount of $1,157,038.15. Conoco asserts that this payment represented the payment in full of all its liability.
Conoco has identified eight properties for which questions remain as to its liability for oil taken "in kind": Eumont Hardy, North East Hennessey, North West Hewitt, Plum Bush Creek, North East Cherokee, North West Adell, O'Brien Strawn, and North West Velma Hoxbar. Conoco was the sole operator and the largest interest owner as to each of these properties. The court shall address each of these properties in turn.
A. Eumont Hardy, Lea County, New Mexico: This unit was certified as a stripper property by including injection wells in the well count from January 1978 through August 1978. Conoco made escrow deposits based on 95.5923% of the working interest. Third parties owned 4.40477% of the working interest. Conoco asserts that, as to these in-kind third parties, it does not know what these third parties did with their share of the oil; to which purchaser they sold their oil; whether any of them certified their share of such oil as stripper exempt; whether any of them received stripper well prices on their shares; or what price any of them received for their share of oil.
DOE has responded that Conoco certified this property as stripper to Shell, the purchaser of the oil produced from the property. The 4.40477% working interest on this property that is alleged to have been taken in kind was a royalty interest owned by the State of New Mexico. The State of New Mexico was unable to locate any records showing that it took the oil in kind. Doc. 2131, Exh. 10. Shell did not purchase the State of New Mexico's in kind barrels. Doc. 2131, Exh. 11. DOE has conceded in its reply brief (Doc. 2152, at p. 12, n. 8) that the 4.40477% was taken in kind.
Neither DOE nor Conoco has been able to produce evidence from the purchaser or interest owner as to the price charged for the oil taken in kind from this property. The evidence does establish that Conoco received stripper prices for 95.6% of the oil produced from this property. DOE asserts that there is no basis for concluding that stripper prices were not paid for the remaining 4.4%. DOE concludes that it is reasonable to infer that overcharges occurred on the 4.4% of the oil on the Eumont Hardy property for which Conoco did not hold the division order.
Except for New Mexico's interest, all of this unit's production has been accounted for. There is no evidence regarding what happened to New Mexico's 4.4% interest. The court cannot determine who purchased it and what price was paid. The court cannot accept DOE's conclusion that the stripper price was paid on New Mexico's 4.4% interest. As to this property, the DOE has failed to meet its burden of proving that overcharges occurred.
B. North East Hennessey, Kingfisher County, Oklahoma: This unit was certified as a stripper property by including injection wells in the well count from January 1978 through August 1978. Conoco made escrow deposits based on 77.42593% of the working interest. In kind third parties own 22.574% of the working interest. Conoco asserts that, as to these in kind takers, third parties owning 4.63087% of the working interest sold their oil at non-stripper prices. As to the in kind third parties owning the remaining *1171 17.94320% of the working interest, Conoco asserts that it does not know what these third parties did with their share of the oil; to which purchaser they sold their oil; whether any of them certified their share of such oil as stripper exempt; whether any of them received stripper well prices on their share; or what price any of them received for their share.
In response, DOE has stated that it does not claim overcharges for any of the oil that Conoco alleges was taken in kind. Overcharges occurred only for the oil which Conoco sold to itself (i.e., to Conoco's refining division). This property is no longer at issue.
C. North West Hewitt, Carter County, Oklahoma: This unit was certified as a stripper property by including injection wells in the well count from January 1978 through November 1979. Conoco made escrow deposits based on 72.710519% of the working interest. In kind third parties own 27.89481% of the working interest. As to these parties, Conoco asserts that it does not know what these third parties did with their share of the oil; to which purchaser they sold their oil; whether any of them certified their share of such oil as stripper exempt; whether any of them received stripper well prices on their share; or what price any of them received for their share.
In response, DOE asserts as follows. Conoco certified this property as stripper to Cities Service Company, the purchaser of the oil produced from the property. The 27.289481% of the working interest on this property that is alleged to have been taken in kind was owned by 26 working interest owners. DOE has conceded in its reply brief (Doc. 2152, at p. 12, n. 8) that the 27.289481% was taken in kind. Cities paid unlawful stripper prices for all of the oil. Doc. 2153, Exh. 18 (letter from Conoco to Cities, stating that Conoco's records indicate that Cities was the purchaser of the oil for which Conoco did not hold the division order); Doc. 2131, Exh. 15 (documentation from Cities that it purchased all the production from the property and paid stripper prices).
The documentary evidence before the court shows no genuine issue of fact regarding Cities' purchase of crude oil from this property at stripper prices.
D. Plum Bush Creek, Washington County, Colorado: This unit was certified as a stripper property by including injection wells in the well count from January 1978 through March 1980. Conoco made escrow deposits based on 40.375% of the working interest. In kind third parties own 59.625% of the working interest. Conoco asserts that owners of 28.25% of the working interest sold their oil at non-stripper prices. Conoco asserts that it has no first hand knowledge regarding whether owners of the remaining 31.375% either certified their oil as stripper or sold it at stripper prices.
DOE has responded that a portion of the oil produced from this property (28.25%) was sold at lawful prices. Doc. 2131, Exh. 16 (letter from Amoco to Conoco indicating volume and price for Amoco's 28.25% in kind share). Unlawful stripper prices were paid with respect to the remainder. The 31.375% of the working interest on this property that is alleged to have been taken in kind and that was sold at unlawful prices was owned by seven working interest owners. Unocal Corporation and ARCO Oil and Gas Company paid stripper prices with respect to the remaining 31.375% in kind working interests on the property. Doc. 2131, Exh. 17 and 18.
The documentary evidence before the court shows no genuine issue of fact regarding the sales of crude oil from this property at stripper prices as asserted by DOE.
E. North East Cherokee, Alfalfa County, Oklahoma: This unit was certified as a stripper property by including injection wells in the well count from May 1980 through January 1981. Conoco made escrow deposits based on 37.68129% of the working interest. In kind third parties own 62.31871% of the working interest. A portion of this oil was purchased by Sun Oil Company (now Oryx Energy, Inc.) at stripper prices. As to the remaining working interest, Conoco asserts that it has no first hand knowledge regarding whether these third party owners either certified their oil as stripper or sold it at stripper prices.
*1172 DOE has responded that Conoco certified this property as stripper to Sun Oil Company. Sun purchased all of the oil produced from the property (Affidavit of John D. West, Doc. 2151), and Sun paid unlawful stripper prices with respect to all of the working interests. Doc. 2131, Exh. 19, 20, 21. The 62.31871% of the working interest on this property that is alleged to have been taken in kind was owned by 39 working interest owners.
The documentary evidence before the court shows no genuine issue of fact regarding the sales of crude oil from this property at stripper prices as asserted by DOE.
The impact of DOE's settlement with Phillips, the owner of 12.79% of the working interest, shall be addressed later in this opinion.
F. North West Adell, Decatur County, Kansas: This unit was certified as a stripper property by including injection wells in the well count from February 1979 through January 1981. Conoco made escrow deposits based on 91.95395% of the working interest. In kind third parties own 8.058% of the working interest. Conoco asserts that it has no first hand knowledge regarding whether these owners either certified their oil as stripper or sold it at stripper prices.
DOE responds that Conoco certified this property as stripper to Mobil Oil Corporation, Mobil purchased all of the oil produced from the property, and Mobil paid unlawful stripper prices with respect to all of the working interests. Doc. 2131, Exh. 22, Doc. 2153, Exh. 38. The 8.058% of the working interest on this property that is alleged to have been taken in kind was owned by two working interest owners.
The DOE concedes that there is a four month gap in the evidence it has offered. Mobil's data does not cover the first four months of the overcharge period, February through May 1979. However, it is appropriate to infer that Mobil paid the stripper price for the 8.058% working interest during those four months, given the undisputed evidence that Mobil paid Conoco the stripper price for the 91.95395% working interest during the entire period (including the four months for which documentation is missing) and that Mobil purchased the additional 8.058% of the working interest during that same time period.
G. O'Brien Strawn, Haskell County, Texas: This unit was certified as a stripper property by including injection wells in the well count from January 1978 through March 1979. Conoco made escrow deposits based on 84.71861% of the working interest. In kind third parties own 15.28139% of the working interest. Conoco asserts that it has no first hand knowledge regarding whether these owners either certified their oil as stripper or sold it at stripper prices.
DOE responds that Conoco certified this property as stripper to Koch Oil Company, and Koch purchased all of the oil produced from the property at unlawful stripper prices. Doc. 2131, Exh. 24, Doc. 2153, Exh. 40. The 15.28139% of the working interest on this property that is alleged to have been taken in kind was owned by one working interest owner.
The DOE concedes that there is a three month gap in its evidence. Documents provided by Koch cover the period of January 1978 through December 1978. Koch's data does not cover the final three months of the overcharge period on this property, January through March 1979. It is appropriate to conclude based on the evidence before the court that overcharges occurred on 100% of the oil produced. Conoco received stripper prices from Koch for the entire period. Having paid stripper prices to Conoco throughout the period of overcharges, and to the other interest owner prior to January 1979, it is unlikely that Koch would have paid the other interest owner the controlled price for the period January through March 1979.
The impact of DOE's two consent orders with Getty, the 15.28% working interest owner, shall be addressed later in this opinion.
H. North West Velma Hoxbar, Stephens County, Oklahoma: This unit was certified as a stripper property by including injection wells in the well count from January 1978 through January 1981. Conoco made escrow deposits based on 52.32674% of the working interest. In kind third parties own *1173 47.67326% of the working interest. Conoco asserts that it has no first hand knowledge regarding whether these owners either certified their oil as stripper or sold it at stripper prices.
DOE responds that Conoco certified this property as stripper to Mobil Oil Corporation, Mobil purchased all of the oil produced from the property, and Mobil paid unlawful stripper prices with respect to all of the working interests. Doc. 2131, Exh. 26, Doc. 2153, Exh. 41. The 47.67326% of the working interest on this property that is alleged to have been taken in kind was owned by five working interest owners.
Data provided by Mobil to Conoco covering June 1979 through January 1981 indicates that Mobil paid stripper prices for all of the oil produced from this unit. Mobil's data does not cover the first seventeen months of the overcharge period, January 1978 through May 1979. It is undisputed that Conoco received stripper prices from Mobil for the entire period. Texaco, Inc., the second largest interest owner on this property and the largest in kind interest owner, deposited overcharges for this property for the entire period that overcharges occurred on this property, demonstrating that it had received stripper prices for the entire period. It is appropriate to infer that the stripper price was paid for all of the oil produced from this unit for the entire overcharge period.
The impact of DOE's settlements with working interest owners Phillips, Texaco and Getty shall be addressed later in this opinion.
The following additional facts, as set forth by DOE, appear to be uncontroverted.
Conoco operated 28 properties that it had certified as stripper well properties based on the inclusion of injection wells in the well count and on which overcharges occurred.
Generally each owner of an interest on an oil producing property executes a "division order" under which the owner of such interest agrees on general terms for the sale of oil attributable to that interest.[1] For 10 of the properties involved in this case, Conoco held the division orders for some but not all of the interests. Each time Conoco certified one of these properties as stripper based on inclusion of injection wells in the well count, it notified every working interest owner on the property of its action. The notices sent to the interest owners for which it did not hold division orders included the following language (except for appropriate changes in the dates);
Continental [Conoco] is now pursuing its own case against the D.O.E. ... challenging the validity of Ruling 1974-29.... Concurrent with and subsequent to the filing of the suit, Continental is certifying all Continental-operated properties qualifying for stripper well exemption based on an average daily production calculation which includes injection wells in the well count.
The above-captioned property was certified in this manner effective January 1, 1978.... Thus, your purchaser's settlements on this property will be based on stripper prices commencing with oil sales made in January, 1978. However, should the Court's decision be adverse and require refunds to purchasers by or on behalf of Continental, we will need to recover either in cash or from future production any excess amounts that may have been paid to you as a result of the stripper prices, including your proportionate share of any interest ordered by the Court. Therefore, Continental recommends that the additional monies derived from the "injection well certifications" be suspensed until current litigation is resolved.
Doc. 2130, Exh. B (emphasis added).
Conoco sent similar letters to royalty and working interest owners for which it did hold division orders. The key difference is contained in the following paragraph:
The above-captioned property was certified in this manner effective January 1, 1978, 1978.... The additional revenue resulting from the stripper certification will be suspensed until final resolution of our *1174 litigation with D.O.E., at which time we will either book the suspensed monies or, should the Court's decision be adverse, make the necessary refunds to purchasers. Thus, until such time, Continental's settlements with you on the referenced property will continue to be based on the otherwise applicable ceiling prices.
Doc. 2143, Exh. 1 (emphasis added).
During each month of the period from March 1978[2] through the end of January 1981, overcharges occurred on one or more of the 28 Conoco-operated properties involved in this matter. The total amount of these overcharges (including oil owned both by Conoco and by other interest owners) was $26,999,482, according to DOE's calculations.
Deposits into the escrow account for these overcharges commenced in December 1978. Interest had already accrued on overcharges prior to that time. DOE's calculations do not include interest on any overcharges that were deposited into escrow at any time during the month following the month in which the overcharges occurred.
The amounts deposited for the overcharges were less than the amounts of overcharges outstanding at the time of each deposit. Additional interest accrued during the remainder of the overcharge period on these unpaid overcharge amounts.
As of April 1981, the escrow deposits for overcharges totalled $23,743,858 and the unpaid overcharges totalled approximately $3,255,625. The total amount of escrow deposits for the properties at issue here was $29,803,290. Doc. 2153, Exh. 4, 7.
Subsequent to April 1981, interest has continued to accrue on unpaid amounts that have remained outstanding. Escrow deposits were made during the months of July 1981, October 1983, August 1989, March 1990, and December 1992, and each was sufficient to pay only a portion of the total amount outstanding at the time of the payment.
Using the interest rates set forth in DOE's Policy Statement on Interest, 46 Fed.Reg. 21,412 (1981), and, for the period subsequent to January 1983, the United States Rule that deposits are applied first to interest, and the revisions made by DOE in its amended motion for summary judgment (Doc. 2150), Conoco's remaining liability (with interest as of September 30, 1993) totals $8,635,074, according to DOE's calculations.
Discussion
Conoco argues that DOE bears the burden of proving that overcharges did in fact occur; that the operator liability doctrine does not vary the DOE's burden of proof; and that the DOE has not met its burden of proof with respect to the third-party working and royalty interest owners who took their share of production in kind. Conoco asserts that the evidence DOE has submitted is insufficient to sustain that burden of proof, because it is inadmissible hearsay. Conoco further argues that DOE's settlements with three working interest owners bar recovery of a portion of the claimed overcharges.
Burden of proof and evidentiary issues
The court first turns to whether DOE has met its burden of proving that the overcharges included in its claim against Conoco have occurred. The DOE assumes that it bears the burden of proving that overcharges occurred. The court sees no need to address this issue further.
DOE argues that it has proven that the overcharges it alleges have occurred. DOE states that the evidence relied upon is of the same type which the court has found to be sufficient in previous proceedings and which the DOE has relied upon in previous audits. DOE has submitted the documentation it relied upon in concluding that the overcharges had occurred. DOE asserts that some of the documents are admissible as business records under Fed.R.Evid. 803(6); that most of the documents about which Conoco complains were provided by Conoco; *1175 and that the remaining documents fit within the generic exception to the hearsay rule, Fed.R.Evid. 803(24).
The parties are familiar with the requirements of Rule 803(6). The documents which DOE asserts are admissible as business records include Sun's crude oil ticket listings for the North East Cherokee property, Cities' crude oil run statements for the North West Hewitt property, and Koch Industries' statements of crude oil purchases from the O'Brien Strawn property. Doc. 2131, Exh. 15, 20, 24. With respect to the Sun documents, the affidavit of John D. West establishes their admissibility under the business records exception. Doc. 2151. The contents of the Cities and Koch documents as well as the other matters of record are sufficient to establish their status as business records kept in the course of regularly conducted business activity. The failure to call a records custodian from the entities that generated these documents is not determinative of their admissibility under Rule 803(6). The court finds that the record as a whole establishes a sufficient foundation for admission of the records under Rule 803(6). See United States v. Johnson, 971 F.2d 562, 572 (10th Cir.1992).
DOE argues that other documents data compilations and correspondence are admissible under the residual hearsay exception, Fed.R.Evid. 803(24). DOE discusses in particular four sets of data compilations which were provided to Conoco: from Unocal regarding the Plum Bush Creek Unit, Doc. 2131, Exh. 17; from ARCO regarding the Plum Bush Creek Unit, Doc. 2131, Exh. 18; and two from Mobil one regarding the North West Adell Unit, Doc. 2131, Exh. 22 and one regarding the North West Velma Hoxbar Unit, Doc. 2131, Exh. 26.
Rule 803(24) excepts from the hearsay rule any statement "not specifically covered by any of the foregoing exceptions but having equivalent circumstantial guarantees of trustworthiness," provided that the following elements are met: (1) the statement is offered as evidence of a material fact; (2) the statement is more probative than any other evidence which can reasonably be procured; (3) the interests of justice would be served by admission of the statement; and (4) advance notice of the intent to use the statement has been given to the other side. Fed.R.Evid. 803(24). The documents proffered by DOE fit squarely within the requirements of the rule. These documents are offered to prove a material fact, i.e., that the oil for which Conoco did not hold division orders was sold at stripper prices. Conoco has been provided sufficient notice of DOE's intent to use these documents. The documents are more probative than any other evidence available through reasonable efforts. To obtain equivalent information, DOE would have had to take discovery from several oil companies and the 75 owners of the interests for which Conoco did not hold the division orders. The burden of obtaining equivalent information would be great.
The court finds that these documents have sufficient circumstantial guarantees of trustworthiness. The purchasers of crude oil from Conoco-operated properties have no stake in the outcome of this case and thus would have no reason to falsify the information. As further evidence of trustworthiness, Conoco itself has relied and acted upon some of these documents and documents of the same type.
Conoco relied upon Unocal's documentation as identifying the seller and the prices paid for certain production from the Plum Bush Creek Unit. The data compilation that Conoco received from Unocal identified Kimbark Operating Company as the seller. On the basis of this material, Conoco demanded that Kimbark pay Conoco the escrow deficiency attributable to Kimbark's production. Doc. 2153, Exh. 31.
Conoco received documentation from Amoco regarding the Plum Bush Creek property which was similar to the documentation received from Unocal, except that it demonstrated that lawful prices were charged on Amoco's share of production. Doc. 2131, Exh. 16. Conoco thanked Amoco for its response, and stated, "This information should be satisfactory to the DOE, ..." Doc. 2153, Exh. 30. Conoco relies upon the Amoco documents as proof that no overcharges occurred on Amoco's share of production. *1176 DOE also relies upon these same Amoco documents and has found them sufficient proof that no overcharges occurred on Amoco's share of production.
Conoco has also relied on similar "hearsay" documents from Champlin and Exxon as proof that overcharges did not occur. Doc. 2104, App. 1, Exh. B, Exh. 4 to Affidavit of Gary Brown; Doc. 2131, Exh. 12. Again, DOE has concluded based on these documents that overcharges had not occurred.
From the court's examination of the briefs and exhibits, it appears that Conoco is relying on some hearsay documents which are favorable to its position while objecting to the use of hearsay documents that are favorable to DOE. Certain of these hearsay documents were generated or produced in response to Conoco's requests for information from various purchasers of crude oil from Conoco operated properties. Conoco requested the information by sending similarly worded requests to a variety of entities. Having requested the information, and having chosen to rely upon the favorable responses, Conoco should in all fairness be bound by the unfavorable responses.
The court shall not burden this opinion any further with a discussion on the hearsay rule and its exceptions. The key issue before the court is the trustworthiness of the proffered evidence. The evidence proffered by DOE is the type of evidence it relies on in performing its audits of oil companies. It is the type of evidence that the DOE has relied on in previous summary judgment motions in this case. It is the type of evidence previously relied upon by this court in ruling on those summary judgment motions. It is evidence which is readily available. Unlike the memories of witnesses, such documentary evidence does not fade with time. And, perhaps most importantly, it is the type of evidence which Conoco itself relies on when favorable to Conoco. Conoco cannot be heard to complain about the use of this evidence in the present proceedings. The court finds that the interests of justice would be served by the admission of this evidence.
The court next turns to the issue of the admitted gaps in the documentary evidence. The court shall first address the North West Adell, O'Brien Strawn and North West Velma Hoxbar properties. These properties all involved a single purchaser. As discussed above in the statement of facts, the evidence proffered by DOE demonstrates that the purchaser paid stripper prices for a substantial portion of the oil. The court finds that it is appropriate to infer, in the absence of evidence to the contrary, that the remaining oil was sold at the stripper price.
The court does not arrive at the same conclusion regarding the Eumont Hardy property. The State of New Mexico owned a 4.4% royalty interest in the Eumont Hardy property. There is no evidence before the court regarding who purchased that oil or what price was paid for that oil. Thus, the court cannot accept DOE's conclusion that the stripper price was paid.
Restitution standards and operator liability
The Temporary Emergency Court of Appeals (TECA)[3] has stated in several cases that restitution is a remedy by which the defendant is made to disgorge illgotten gains, or to restore the status quo, or to accomplish both objectives. Kern Oil & Refining Co. v. Tenneco Oil Co., 868 F.2d 1279, 1282 (TECA 1989); United States v. Exxon Corp., 773 F.2d 1240, 1278 (TECA 1985), cert. denied, 474 U.S. 1105, 106 S. Ct. 892, 88 L. Ed. 2d 926 (1986); Sauder v. Department of Energy, 648 F.2d 1341, 1348 (TECA 1981). It is not necessary that there be both unjust enrichment and injury to third parties before restitution may be ordered. United States v. Sutton, 795 F.2d 1040, 1061 (TECA 1986), cert. denied, 479 U.S. 1030, 107 S. Ct. 873, 93 L. Ed. 2d 828 (1987). Thus, it is not necessary to find that the infringer actually received or benefitted *1177 from the overcharges before ordering restitution. Citronelle-Mobile Gathering, Inc. v. Herrington, 826 F.2d 16, 27 (TECA), cert. denied sub nom. Chamberlain v. United States, 484 U.S. 943, 108 S. Ct. 327, 98 L. Ed. 2d 355 (1987); Sauder, 648 F.2d at 1348.
The parties agree that Conoco can be held liable only through the application of the operator liability doctrine. Under the operator liability doctrine, DOE may hold the operator of a crude oil producing property liable for overcharges attributable to other interest owners on that property. Case law from the Temporary Emergency Court of Appeals supports the application of this theory of liability. See United States v. Exxon Corp., 773 F.2d 1240 (TECA 1985), cert. denied, 474 U.S. 1105, 106 S. Ct. 892, 88 L. Ed. 2d 926 (1986); Sauder v. Department of Energy, 648 F.2d 1341 (TECA 1981). This court has previously applied the operator liability doctrine in this case. In re: Department of Energy Stripper Well Exemption Litigation (Mobil v. DOE), 739 F. Supp. 1446 (D.Kan.1990); In re: Department of Energy Stripper Well Exemption Litigation (Chevron v. DOE), 746 F. Supp. 1452 (D.Kan.1990), rev'd in part on other grounds, 944 F.2d 914 (TECA 1991).
Under the operator liability doctrine, the DOE may hold the operator of a crude oil producing property liable for the entire amount of overcharges which occurred, even though the operator may have received only a portion of the overcharges corresponding to its percentage ownership interest in the property. Operator liability has been imposed in at least two general situations: when the operator is the animating force responsible for the overcharges, or when the operator is held liable as a matter of administrative convenience. See Sauder, 648 F.2d at 1347-48 (sole operator certified the leases as stripper well leases and caused the overcharges); United States v. Exxon Corp., 561 F. Supp. 816, 850 (D.D.C.1983), aff'd 773 F.2d 1240, 1270 (TECA 1985), cert. denied, 474 U.S. 1105, 106 S. Ct. 892, 88 L. Ed. 2d 926 (1986) (requiring DOE to proceed against over 200 working interest owners and over 2200 royalty interest owners would plunge DOE into an "administrative quagmire"). Imposition of operator liability is discretionary. See Sauder, 648 F.2d at 1347-48.
The courts have stated, however, that the operator "is not without recourse against the other interest owners, ..." Exxon, 561 F.Supp. at 850. Following imposition of liability on the operator, the operator has the burden of pursuing each individual working interest and royalty interest owner to recover the overcharges which that interest owner received. Sauder, 648 F.2d at 1348. Imposition of liability on the operator does not depend on a finding that the operator is entitled to contribution for the overcharges from the other interest owners in the property. Exxon, 773 F.2d at 1272.
A government enforcement action is not the appropriate vehicle for the determination of the operator's rights against third parties. Exxon, 773 F.2d at 1272. Thus, during the overcharge proceedings, the court does not determine the nature or extent of the operator's right to contribution or indemnity, if any. Nor does the court adjudicate the rights or liabilities of absent interest owners. See id. at 1271.
DOE need not seek restitution from each individual working interest owner. See Sauder, 648 F.2d at 1347-48. Nor does the government need to prove that an attempt by the operator to recover from the interest owners would be successful. Exxon, 773 F.2d at 1272.
It is undisputed that Conoco did not sell all the stripper well oil at issue and that Conoco did not receive all the overcharges. Conoco argues that it should not be held liable because it was not the animating force behind the deficiencies to the escrow. Conoco additionally contends that administrative convenience to DOE should not prevail.
The court finds that the present case is one in which operator liability is appropriate. Although it is not necessary to find both causation and administrative convenience before imposing operator liability, the court finds that both of these alternatives have been met. Conoco was the animating force *1178 behind the overcharges and caused the overcharges to occur. Conoco obtained an injunction from this court permitting it to certify the properties at issue as stripper well properties. Further, pursuing the individual interest owners would place an enormous burden on the DOE.
Conoco argues that this case presents an issue which the court has not "truly addressed" in any prior opinion: whether operator liability may be imposed upon an operator with respect to production taken in kind by other interest owners. Conoco argues that the cases previously decided by this court involved an operator that sold all the oil itself.
Contrary to Conoco's position, both TECA and this court have previously addressed and rejected the arguments presented by Conoco. TECA has addressed the "in kind" issue and has resolved it against the operator. In Exxon, TECA specifically affirmed the district court's ruling that Exxon was liable for the share of production owned, taken in kind, and sold by Texaco, Exxon, 773 F.2d at 1272-73. Thus, Exxon was held liable for overcharges that it did not actually receive. Further, TECA's decision in Sauder specifies that an operator may be held liable for overcharges that it did not actually receive. 648 F.2d at 1347-49.
Contrary to Conoco's assertion, this court's Mobil decision did not involve an operator that sold all the oil itself. The court imposed liability on Mobil as operator even though Mobil had not sold all the oil or collected all the overcharges. Conoco is technically correct in stating that this court's summary judgment opinion in the Mobil case did not address operator liability with respect to oil taken in kind. However, the court did resolve that issue in ruling on Mobil's motion for reconsideration. The court corrected a factual misstatement from its earlier opinion and recognized that Mobil had not sold all of the oil it had miscertified as stripper. The court then held Mobil liable as operator for the overcharges because Mobil had decided to certify the oil as stripper and had obtained injunctive relief permitting the stripper certifications, and because pursuit of the interest owners would place an enormous burden on the DOE. In re: Department of Energy Stripper Well Exemption Litigation (Mobil Oil Corp. v. DOE), 739 F. Supp. 1446, 1447-48 (D.Kan.1990).
In the present case, Conoco did not sell all of the oil at issue. The in kind oil was sold by other interest owners. Conoco did not receive or handle the money for the sale of that oil. In this regard, the present case does not differ from the Mobil case. Even though Conoco did not sell all the oil at issue, it can be held liable for all the overcharges. The fact that Conoco received none of the overcharges attributable to interest owners for whom it did not hold division orders is not a barrier to recovery by DOE.
Like the Mobil case, Conoco brought suit and obtained an injunction to permit it to certify the properties at issue as stripper. The injunction does not excuse Conoco from liability. Absent the benefit of the court's injunction, these properties would not have qualified for the stripper well exemption from price controls. Without the injunction, Conoco could not have certified the property as stripper. No overcharges could have occurred absent the stripper certifications issued by Conoco. Rather than excusing the operator, the injunction demonstrates that the operator is responsible for the overcharges. The overcharges at issue would not have occurred otherwise. Mobil, 739 F.Supp. at 1448. Conoco's asserted good faith is not a defense.
Conoco understood that the injunction it obtained and the stripper certifications it issued in reliance on the injunction would result in the payment of stripper prices by the purchasers. The letters sent by Conoco to the in kind interest owners (Doc. 2130, Exh. B) indicate that Conoco anticipated that the in kind interest owners would receive the stripper price based on Conoco's certification. The letters also indicated that restitution might be in order if the final decision in the case was in favor of DOE. If so, Conoco cautioned the interest owners that it would seek to recover the overcharges from them. Conoco clearly anticipated the possibility that it would have to pursue the interest owners for the overcharges which Conoco itself did not receive and escrow.
*1179 Conoco argues that the other interest owners were required to and did issue their own stripper well certifications to their immediate purchasers. Putting aside the legal issue of whether such certifications were required, Conoco's factual assertion is speculation at best. Conoco has proffered no evidence to support its assertion that any of the other interest owners did in fact issue such certifications. Conoco has provided the court with no such certifications. The court must conclude that no such certifications were issued by the other interest owners.
Finally, the court finds that administrative convenience would be served by imposing operator liability on Conoco. To require the DOE to pursue the 75 individual interest owners would place an enormous burden on the DOE.
Conoco has the possibility of recourse against the interest owners. As noted above, imposition of liability on the operator does not depend on whether the operator has already recovered from the interest owners or will be able to recover from the interest owners. Nor is the court required to inquire about the financial solvency of the interest owners before imposing liability on the operator. The operator liability doctrine places the risk upon the operator, and not the DOE, to pursue any claims against the interest owners who received the overcharges.
Before concluding this discussion of operator liability, the court must address one final issue raised by Conoco regarding causation. Conoco has argued that it did not cause the working interest owners to charge the stripper price and that it cannot therefore be held liable for the interest owners' independent pricing decisions. Conoco has submitted certain materials dealing specifically with Phillips' working interest in the North East Cherokee and North West Velma Hoxbar properties. Phillips' counsel M.C. Cunningham II has submitted an affidavit, Doc. 2187. In it, he states that after this court's ruling in January 1978 in the Energy Reserves Group case, Phillips decided to count injection wells in determining the applicability of the stripper well exemption. Doc. 2187, ¶ 6. Cunningham states that in February or March 1978, Phillips began to review its secondary recovery properties which it operated or in which it held a working interest to identify those that would qualify as stripper properties with the inclusion of injection wells. Phillips thereafter made a corporate decision to count injection wells in making stripper certifications. Id. ¶ 7. Cunningham asserts that Phillips relied on the Energy Reserves Group decision. Id. ¶ 8.
On April 7, 1978, Phillips filed suit in this court. Id. ¶ 9. Phillips' complaint alleged that Phillips was the operator of or had a working interest in 22 properties which would be entitled to the stripper well lease exemption if injection wells were included in the well count. Doc. 2187, Exh. A, ¶ 24. On April 21, 1978 a hearing was held on Phillips' motion for a preliminary injunction. The exhibits presented at the preliminary injunction hearing list North West Velma Hoxbar, operated by Conoco, as one of the affected properties. Id., Exh. C. The injunction (drafted by counsel for Phillips) included both Phillips-operated properties and properties in which Phillips owned a working interest. Doc. 2187, Exh. D.
Cunningham asserts that Phillips' decision to charge stripper prices was not based on Conoco's stripper property certification for the North West Velma Hoxbar property or the letter from Conoco dated June 14, 1978. Cunningham states that Phillips' decision was an independent judgment made by Phillips' management establishing a general policy for pricing all of Phillips' affected properties. Cunningham asserts that the primary impetus in this decision was the January 1978 decision of this court in the Energy Reserves Group case. Id. ¶ 23. While Cunningham's affidavit denies any reliance by Phillips on Conoco's stripper certification, there is nothing in the record to indicate how Phillips might have determined as a factual matter that the properties Conoco operated would have qualified for the stripper well exemption, i.e., that the average daily production did not exceed ten barrels per well over the previous twelve month period.
As noted above, Conoco has argued that the in kind interest owners must separately certify their oil as stripper. Generally, the operator has the information necessary to *1180 determine the average daily production per well for the twelve month stripper qualification period. Second Wesner Declaration, Doc. 2153, ¶ 14(b). This information is not generally available to the non-operating interest owners.
Conoco's certifications appeared to apply to entire properties. There is nothing on the face of Conoco's certifications to indicate that these certifications applied to less than the entire properties. Conoco's letters to the interest owners for which Conoco did not hold division orders (including Phillips) stated that these interest owners would receive stripper prices. Doc. 2130, Exh. B. This confirms that the certifications covered all interests in a property, and not just those for which Conoco held the division orders.
There is no evidence that Phillips actually issued its own stripper certifications to the purchasers of its working interests in the North West Velma Hoxbar or North East Cherokee properties. Cunningham's affidavit (Doc. 2187 ¶ 11) and Phillips' memorandum in support of motion for preliminary injunction (Id. Exh. B) assert that the properties in which Phillips had interests had been recertified as stripper well properties. These documents do not state that Phillips recertified these properties. Phillips has provided the court with no certifications for North West Velma Hoxbar or North East Cherokee. In fact, Phillips has provided the court with no certifications of any of the properties in which it held working interests. The court must conclude that Phillips did not itself recertify as stripper the properties in which it owned a working interest but which it did not operate.
Phillips' general corporate policy regarding the counting of injection wells did not cause the overcharges. Before charging the stripper price, either Conoco or Phillips had to determine which properties would qualify as stripper with the inclusion of injection wells. This determination required production data from the previous twelve months. Conoco possessed this information as operator. There is no indication that Phillips possessed this information. Conoco obtained an injunction and certified the properties at issue as stripper. There is no evidence in the record to indicate that Phillips certified the properties which it did not operate. Conoco's stripper well certifications caused the overcharges to occur.
Impact of DOE's settlements with Phillips, Texaco, Getty
Phillips Petroleum Company owned working interests on the North East Cherokee and North West Velma Hoxbar properties for which Conoco did not hold the division orders. Texaco, Inc. owned a working interest on the North West Velma Hoxbar property for which Conoco did not hold the division order. Getty Oil Company owned working interests on the O'Brien Strawn and North West Velma Hoxbar properties for which Conoco did not hold the division orders. Overcharges attributable to these interests are included within DOE's calculations of Conoco's liability.
Conoco argues that DOE is barred as a matter of law from recovering any overcharges attributable to the in kind working interests of Phillips, Texaco, and Getty because of prior settlements with those companies covering the properties at issue here. Conoco argues that DOE released Phillips, Texaco, and Getty from any further liability for stripper overcharges in their capacity as working interest owners. Conoco argues that no liability may be imposed on it as the operator when the underlying interest owner has been released.
DOE argues that it has given Conoco full credit for escrow deposits and refunds of overcharges by interest owners on Conoco-operated properties, and that the settlements between DOE and the interest owners do not warrant any further reduction in the amount of Conoco's liability. DOE's calculations have given Conoco full credit for amounts paid into the escrow for overcharges attributable to Texaco and Phillips. Getty made no payments for any of the properties at issue.
After considering the language of the various consent orders and the agreed judgment, the court agrees with DOE's position. The settlements absolved Phillips and Texaco from any further liability to DOE. However, that does not resolve the issue of whether Conoco may be held liable for overcharges *1181 attributable to those working interests for which restitution has not yet been made. The settlements with Phillips, Texaco and Getty do not address the liability of Conoco to DOE for Conoco operated properties. Nor do the settlements affect whether, or to what extent, Conoco may recover from Phillips or Texaco via contribution or indemnity for any overcharges Conoco must pay on account of the working interests of Phillips, Texaco and Getty.
Phillips consent order
Conoco argues that, as to Phillips' working interests on the North East Cherokee and North West Velma Hoxbar properties, DOE released its right to recover any portion of those overcharges by virtue of a Consent Order dated November 9, 1979 between DOE and Phillips. Pursuant to this Consent Order, Phillips refunded to its first purchaser Sun the sum of $219,659.03 (via a recoupment exercised by Sun) in June 1984 for overcharges on North East Cherokee. On March 16, 1987, Phillips refunded $235,738.02 to its first purchaser, Mobil, for overcharges on North West Velma Hoxbar.
In its computation of Conoco's liability, DOE has given Conoco credit for both of these refunds by Phillips. DOE has given credit to Conoco for Phillips' refund to Mobil in March 1987 in the amount of $235,738.02 for overcharges on the North West Velma Hoxbar property. DOE has credited that amount to Conoco's liability as of March 1987. Second Wesner Declaration, Doc. 2153, ¶ 13(h)(2).
DOE has given credit to Conoco for Sun's deposit of $1.9 million for overcharges attributable to the working interests of five oil companies (including Phillips) in the North East Cherokee property. Included within that amount was the $219,659.03 which Sun recouped from Phillips for overcharges attributable to Phillips' working interest in the North East Cherokee property. Second Wesner Declaration, Doc. 2153, ¶ 13(e)(4).
Conoco argues that paragraph 447(b) of the Consent Order released Phillips from any and all liability for stripper well issues. That paragraph provides:
Phillips and DOE shall stipulate to the dismissal of Phillips' claims against DOE in Robert F. Johnson and Phillips Petroleum Company v. Department of Energy, No. 78-1140 (D.Kansas), and to the return to Phillips of all funds which Phillips has theretofore paid or caused to be paid to the Clerk pursuant to the Court's Order of May 3, 1978, together with all accrued interest thereon. The dismissal shall be with prejudice as to such claims and issues in such case as relate exclusively to the period before November 1, 1979, and without prejudice otherwise. Phillips and DOE agree to be bound by any final determination of Energy Reserves Group, Incorporated v. Department of Energy, No. 77-1146 (D.Kansas), as to whether or not injection wells are counted as wells that produce crude petroleum in determining the eligibility of property for treatment as a stripper-well property. If that question is finally decided adversely to the plaintiffs in that case, Phillips shall (notwithstanding paragraph 448 hereof) promptly refund to each of its crude oil purchasers the difference between the amount the purchaser actually paid Phillips for crude oil sold from and after November 1, 1979 pursuant to any certification of a property as a stripper-well property, and the amount such purchaser would have paid Phillips for such oil had injection wells not been counted as wells that produce crude petroleum in determining the eligibility of the property for treatment as a stripper-well property, together with interest at the rates provided for refunds under the federal petroleum price and allocation requirements.
Doc. 2142, App. A.
Conoco argues that the consent order expressly included any liability Phillips had incurred or might incur as a working interest owner: "References in this Consent Order to Phillips include (without limitation) its officers, directors, employees, subsidiaries, affiliates, and successors in interest, and its petroleum-related activities as refiner, producer, operator, working or royalty interest owner, reseller, natural gas processor, or otherwise." Id. ¶ 301.
*1182 Paragraph 101 of the Phillips Consent Order provides that it "settles all claims and disputes against Phillips by DOE." Doc. 2142, App. A. The Consent Order does not address the resolution of disputes between DOE and Conoco (or DOE and any third party). The fact that this court has previously upheld the refund provisions in the Phillips Consent Order does nothing to prevent DOE from recovering the overcharges that have not been refunded. DOE is not seeking to recover the amounts that have been refunded by Phillips. It is the additional, unrefunded amounts attributable to Phillips which DOE is seeking to recover.
Texaco consent order and agreed judgment
Conoco argues that a Consent Order and Agreed Judgment between Texaco and DOE extinguish any liability attributable to Texaco's interest in the North West Velma Hoxbar property and to Getty's interests in North West Velma Hoxbar and O'Brien Strawn. (Prior to the execution of the settlements, Getty had been acquired by Texaco.) Conoco asserts that in the Texaco Consent Order and Agreed Judgment, DOE agreed not to seek recovery from the operators of properties in which Texaco held a working interest.
After considering the terms of the Consent Order and Agreed Judgment, the court disagrees with Conoco's position. Conoco has argued that the settlements between DOE and Phillips, Texaco and Getty bar DOE from recovering from Conoco any amounts attributable to the interests of those owners on the properties at issue. However, only one of the settlements contains a limitation, and that limitation is not as broad as Conoco asserts. The Agreed Judgment between DOE and Texaco provides that DOE is not permitted to recover from the operator of the North West Velma Hoxbar property (i.e., Conoco) the amounts paid by Texaco for overcharges on that property. Texaco made deposits into the escrow for overcharges on that property. DOE's calculations have given Conoco full credit for the amount of money deposited by Texaco into the escrow. DOE is not attempting to recover the amounts already paid by Texaco.
The Texaco Consent Order contains the following language:
Except as otherwise provided herein, compliance by Texaco with this Consent Order shall be deemed by the DOE to constitute full compliance for administrative and civil purposes with all federal petroleum price and allocation regulations for matters covered by this Consent Order.
Doc. 2142, App. C, Exh. A, ¶ 502(a).
Paragraph 502(b) of the Consent Order provides:
Except for the matters excluded by paragraph 501, this Consent Order settles and finally resolves all aspects of Texaco's liability to the DOE under the federal petroleum price and allocation regulations, including but not limited to its capacity as an operator or working interest or royalty interest owner of a crude oil producing property. In addition, if Texaco was the operator of a property that produced crude oil for all or part of the period covered by this Consent Order, the DOE shall not initiate or prosecute any enforcement action against any person for noncompliance with the federal petroleum price and allocation regulations during such period relative to such property. Otherwise, the DOE reserves the right to initiate and prosecute enforcement actions against any person other than Texaco for noncompliance with the federal petroleum price and allocation regulations, including suits against operators for overcharges for crude oil when Texaco is a working interest or royalty interest owner in such crude oil production. In that connection, Texaco and the DOE agree that the amount paid to the DOE pursuant to this Consent Order is not attributable to Texaco's activities as a working interest or royalty interest owner on properties on which it is not the operator. Furthermore, Texaco and the DOE agree that the Consent Order and the payments hereunder do not resolve, reduce or release the liability of any other person for violations on properties of which (but only for the times during which) Texaco is or was a working interest or royalty interest owner (and not the operator) or affect any rights or obligations *1183 between Texaco and the operator or any other working interest or royalty interest owner.
Id. ¶ 502(b) (emphasis added).
One of the matters addressed in the Consent Order was the present litigation. The parties agreed to execute, and did execute, an Agreed Judgment resolving Texaco's liability in this litigation. The Agreed Judgment was filed in this case on September 16, 1988. The Agreed Judgment provides as follows:
It is further ORDERED that, notwithstanding the terms of this Judgment, the DOE may initiate and prosecute civil and administrative enforcement actions against any party other than Texaco for non-compliance with the federal petroleum price and allocation regulations, including suits for overcharges for crude oil against operators of properties of which Texaco was a working or royalty interest owner of such crude oil production, but in no event shall the DOE be permitted to recover amounts from such operators for alleged overcharges paid by Texaco in connection with the properties described in Exhibit 2 attached hereto, nor shall this Judgment prejudice the rights of Texaco or any third party in any private action, including an action for contribution by or against Texaco; ...
Doc. 2142, App. C, Exh. B, ¶ 3 (emphasis added). Exhibit 2 to that Agreed Judgment listed two properties, North West Velma Hoxbar and a second property not involved here.
As for Texaco operated properties, the DOE agreed not to prosecute any enforcement action against any person for any overcharges. The Consent Order contains no similar provision for non-Texaco operated properties. The Consent Order specifically reserved DOE's right to bring actions against operators for overcharges on oil produced from properties on which Texaco was a working or royalty interest owner. The Agreed Judgment and Consent Order specifically recognize that the DOE was free to pursue operators for overcharges on properties in which Texaco held a working interest.
The limitation contained in the Agreed Judgment provides that "in no event shall the DOE be permitted to recover amounts from such operators for alleged overcharges paid by Texaco" in connection with North West Velma Hoxbar. If the Agreed Judgment provided, for example, that DOE could not recover amounts from such operators for alleged overcharges attributable to Texaco's working interest in the Velma Hoxbar property, the result might be different. However, the Agreed Judgment does not so provide. DOE agreed not to seek recovery for the amounts paid by Texaco. This means the amounts actually paid by Texaco in settlement of the alleged overcharges on the Velma Hoxbar property.
The DOE is not seeking a double recovery. DOE has given full credit to Conoco for Texaco's payments for the Velma Hoxbar property. DOE is not attempting to recover any amounts already paid by Texaco for its working interest. The Consent Order and Agreed Judgment recognize the possibility that DOE would pursue the operators of properties in which Texaco held a working interest (such as Conoco). The last sentence of paragraph 502(b) of the Consent Order (quoted above) specifically provides that it did not affect the liability of any other person for violations on properties on which Texaco was a working interest owner and not the operator.
Getty consent orders
Getty entered into two Consent Orders with DOE. The first was executed in November and December 1979 and covered the period August 19, 1973 through December 31, 1978 (for matters relating to compliance with applicable price and allocation regulations in sales of crude oil) and through September 1, 1979 (for matters pertaining to computation of interaffiliate crude oil prices and pass through of crude oil costs). The second Consent Order covered the time period from January 1, 1973 through January 27, 1981.
Conoco asserts that the first Getty Consent Order specifically provides that Getty's performance under the Consent Order constituted full compliance with the petroleum price regulations:
*1184 Performance under this Consent Order by Getty constitutes full compliance with all statutes and applicable regulations administered by the Cost of Living Council, the Federal Energy Office, the Federal Energy Administration, and the Department of Energy pertaining to the cost, price, and allocation of crude oil, residual fuel oil, NGLs, NGLPs, motor gasoline, and all other refined petroleum products for the period covered by this Consent Order (except as to those matters specifically excluded from this Consent Order as set forth above). DOE will not initiate an administrative or judicial proceeding with respect to Getty for the period covered by this Consent Order or cause any such proceeding to be initiated. DOE will not voluntarily participate in any such proceeding as a party adverse to Getty.
Doc. 2142, App. C, Exh. C, ¶ 8.
The second Consent Order contains a similar provision: "Compliance by Getty with this Consent Order shall be deemed by DOE to constitute full compliance for civil purposes with the Federal petroleum price and allocation regulations, ..." Doc. 2142, App. C, Exh. D, ¶ 501.
Conoco argues that Getty has fully complied with the Consent Orders, that Getty was thus in full compliance with the DOE regulations (including the stripper well regulations) and that, therefore, there are no longer any stripper violations or overcharges attributable to Getty's interests in any properties operated by Conoco.
It appears undisputed that Getty made no payments for any properties involved here. Conoco is seeking to reduce its liability by the unrefunded amounts that are attributable to Getty's interests.
The first Getty Consent Order provides that it "settles all claims and disputes between Getty Oil Company ... and the United States Department of Energy...." Doc. 2142, App. C, Exh. C. The second Getty Consent Order recites that its purpose is to settle "all civil and administrative disputes, claims and causes of action by DOE not resolved by previous Consent Orders, whether or not heretofore asserted, against Getty, ..." Id. Exh. D. Resolution of disputes between DOE and Conoco (or between DOE and any third party) are not addressed in the Consent Orders. Section 502 of the second Consent Order specifies, "This Consent Order resolves only matters between DOE and Getty, ..." Id. There is nothing in these two Consent Orders which resolves Conoco's liability for the overcharges at issue here.
Vicarious liability
Conoco argues that the various settlements bar DOE as a matter of law from recovering from Conoco any overcharges attributable to Texaco's, Getty's and Phillips' working interests. Conoco argues that operator liability is a vicarious liability or derivative liability principle and that DOE's release of the working interest owners also operates to release Conoco. This argument has been rejected by the Temporary Emergency Court of Appeals in United States v. Exxon Corp., 773 F.2d 1240 (TECA 1985). The DOE brought an action for civil penalties and restitution against Exxon, which was the operator of the Hawkins Field Unit, for overcharges occurring on that property. Exxon did not own all of the oil produced from that Unit and did not receive all the overcharges from the sale of that oil. Exxon argued on appeal that it could not be held vicariously liable for portions of the overcharges, because it was acting merely as the agent of other interest owners. 773 F.2d at 1270. TECA rejected Exxon's agency theory of liability. TECA held that Exxon could properly be held solely responsible for the overcharges and that this liability was not dependent on a finding that Exxon was entitled to contribution for such overcharges from other interest owners. Id. at 1272.
TECA's decision in Exxon also addressed the issue of settlements with other interest owners in the Hawkins Field Unit. Exxon had argued that DOE's settlements with various interest owners (such as Mobil, Sun and Conoco) released the claims that DOE had asserted against Exxon as operator. TECA flatly rejected this argument:
Our examination of the Consent Orders contained in the Record reveals that Exxon was not a party to any of the settlements, it did not pay any sum of money to *1185 the Government for release of any Exxon liability under these settlements, none of the consent orders mentions Exxon, or the Hawkins Field Unit, and, although some of the consent orders identify certain litigation terminated by the settlements, none mentions this litigation which was pending in the District of Columbia at the time the consent orders were executed. In the settlements, the Government agreed not to bring suit "against" the settling parties, and in the Conoco agreement "only civil claims by DOE against Conoco" were settled, while the Sun consent order only required the DOE to terminate actions "against Sun." None of the consent orders could, or did they, purport to release Sun, Conoco, etc., from suits by private parties for damages under Section 210 of the ESA, or for their liability to other parties, if any, for contribution, indemnification, unjust enrichment, or for other relief.
Any rights under the consent orders accrued solely to the settling parties and not to Exxon.
Id. at 1276 (citation omitted).
Exxon also argued that these settlements barred DOE from imposing derivative liability upon Exxon as operator. Exxon argued that any liability imposed upon it as operator was vicarious liability. TECA also rejected this argument:
It is readily apparent that Exxon's concern about settlements which may have been made by companies who are not parties to this litigation is in fact a concern about whether or not it will be successful in any future attempt to seek contribution or indemnity from those parties on account of any payment Exxon might make upon the judgment here. As we have previously pointed out, Exxon's liability is not a vicarious one, based upon ordinary notions of "agency." It has been found that Exxon was the "animating force" responsible for violating the crude oil pricing regulations, and this liability is not dependent upon finding of "joint liability" on the part of third parties who are not defendants in this action, or upon proof of Exxon's right to contribution or indemnity from those third parties.
Id. at 1276-77.
Conoco's liability as operator is not vicarious or derivative. The Agreed Judgment and various Consent Orders do not preclude DOE from pursuing Conoco for overcharges on properties which Conoco operated and in which Phillips, Texaco and/or Getty had a working interest. Whether Conoco is able to recover from the interest owners for overcharges received by them is not an issue in this action.
Computation issues and prejudgment interest
DOE seeks prejudgment interest at interest rates based on DOE's Policy Statement on Interest, 46 Fed.Reg. 21,412 (April 10, 1981). Normally, an award of restitution under ESA § 209 will include prejudgment interest. Lea Exploration, Inc. v. Department of Energy, 843 F.2d 510, 513 (TECA 1988). The standards for awarding prejudgment interest must be applied consistently, "since one of the principal reasons for the establishment of the Temporary Emergency Court of Appeals was Congress' intent that there be consistency throughout the United States for cases decided under the ESA." Id.
TECA has upheld this court's application of DOE's policy rates in the present case. In re: The Department of Energy Stripper Well Exemption Litigation (Chevron U.S.A., Inc. v. Department of Energy), 944 F.2d 914 (TECA 1991); In re: The Department of Energy Stripper Well Exemption Litigation (Oryx Energy Company v. Department of Energy), 944 F.2d 918 (TECA 1991). The court shall continue to use the DOE's policy rates.
DOE revised its calculations to account for Conoco's retroactive certification of certain properties. These new calculations delay the commencement of interest on overcharges attributable to properties which Conoco retroactively certified as stripper. Second Wesner Declaration, Doc. 2153 ¶ 8. The court finds this revision fair and appropriate.
DOE seeks the application of the United States Rule, that in applying partial *1186 payments to an interest bearing debt which is due, the payment should first be applied to the interest due. TECA has addressed the application of the United States Rule in this case, and has held that it shall apply to payments due after January 1983. In re: The Department of Energy Stripper Well Exemption Litigation (Chevron U.S.A., Inc. v. Department of Energy), 944 F.2d 914, 917 (TECA 1991).
Conoco argues that its partial payments should be applied first to compound interest. Pursuant to DOE's interest rate policy, DOE imposed simple interest prior to October 1, 1979. After that date, DOE began imposing compound interest on overcharges. Conoco argues that simple interest should be treated as principal and that its partial payments should be applied to the outstanding compound interest amounts. The difficulty with Conoco's position is that it has no support in the law or under basic accounting principles. DOE has applied partial payments first to the oldest outstanding interest amountsthe outstanding simple interest accruing prior to October 1, 1979. After the older simple interest amounts were paid off, partial payments were applied to the newer compound interest amounts. DOE's methods are consistent with generally accepted accounting principles. In previous decisions, the court has followed DOE's methodology. To be consistent with prior decisions in this case, the court must reject Conoco's argument regarding the application of partial payments first to compound interest.
Conoco next argues that overcharges should not begin to accrue interest until it actually received the monies from its purchaser, approximately two months after the sale. Under DOE's calculation methodology, interest begins to accrue at the end of the month in which the overcharge occurred (even if the overcharge occurred on the first day of the month). DOE credits payments to the first of the month in which the payment is made (even if the payment was made on the last day of the month). DOE's own computation methodology gives the oil producers a grace period of up to two months.
As noted by DOE, this court has given no other oil producer the benefit of a greater grace period. Indeed, restitution for overcharges should not hinge upon the specific accounting methods of each individual oil producer. The overcharge occurred at the time of sale. The fact that payment might not have been made immediately does not alter when the overcharge occurred. Keeping in mind the goal of consistency in these cases, the court must reject Conoco's argument. DOE's computations give Conoco a sufficient grace period to account for any delays in the actual receipt of payment.
The so-called "Cosden credit" (arising from a purchaser's refusal to pay the stripper price on oil from six properties) has already been taken into account in DOE's calculations. In its computation of Conoco's liability, DOE has included no overcharges for Cosden's purchases at controlled prices. The escrow deposits which Conoco mistakenly made for the Cosden purchases have been credited to other outstanding overcharges. Second Wesner Declaration, Doc. 2153, ¶¶ 5-6. Conoco is not entitled to a double credit. No further credit is due to Conoco for this matter.
Conclusion
With the exception of the State of New Mexico's interest in the Eumont Hardy property, the court finds that DOE has proven the existence of the alleged overcharges on the Conoco-operated properties. Imposition of operator liability on Conoco is appropriate in this case. The settlements with Phillips, Texaco and Getty do not bar recovery from Conoco. The computational arguments raised by Conoco are without merit. Judgment shall be entered in favor of DOE with prejudgment interest at DOE's policy rates until the date of judgment, and post-judgment interest as allowed by statute. Counsel for DOE shall prepare the journal entry of judgment.
IT IS BY THE COURT THEREFORE ORDERED that DOE's amended motion for summary judgment (Doc. 2150) is hereby granted in part and denied in part as set forth in this opinion and order.
IT IS FURTHER ORDERED that Conoco's motion for summary judgment (Doc. 2103) is hereby denied.
*1187 Counsel for the DOE shall prepare and submit the appropriate journal entry of judgment within thirty (30) days from the date of this opinion and order.
NOTES
[1] There is a great deal of discussion of division orders in the briefs, but no division orders have been provided to the court.
[2] DOE regulations permitted a property to be retroactively certified for two months prior to the month in which the certification was issued, thus allowing a retroactive price increase. Until the certification was issued, no basis existed for charging or collecting the higher price. Conoco retroactively certified some of the properties at issue here. Although some of Conoco's overcharges were effective in January 1978, DOE has agreed that they did not commence until March 1978. DOE has revised its initial calculations accordingly.
[3] Until it was abolished in 1993, TECA was the court which heard all appeals from cases arising under the Economic Stabilization Act and the Emergency Petroleum Allocation Act, including all appeals from the present multidistrict litigation. Any future appeals from this case now lie within the jurisdiction of the United States Court of Appeals for the Federal Circuit. 28 U.S.C. § 1295(a). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1301166/ | 629 S.E.2d 739 (2006)
218 W.Va. 680
Linda FARLEY and Clinton Farley, Plaintiffs Below, Appellants,
v.
Jeffrey SHOOK, D.P.M., Kirt Miller, D.P.M., Gabriel C. Fornari, M.D., Huntington Podiatry Associates, Inc., St. Mary's Hospital of Huntington, Inc., a corporation, and Does 1-10, Defendants Below, Appellees.
No. 32770.
Supreme Court of Appeals of West Virginia.
Submitted: February 15, 2006.
Decided: March 16, 2006.
*741 Frank M. Armada, Armada, Rogers & Thompson, Hurricane, for the Appellants, Linda Farley and Clinton Farley.
Tamela J. White, Anne O'Hare, Farrell, Farrell & Farrell, L.C., Huntington, for the Appellee, Gabriel C. Fornari, M.D.
Richard J. Bolen, Scott K. Sheets, Melissa Dodd Veltri, Erin E. Rich, Huddleston Bolen LLP, Huntington, for the Appellees, Jeffrey Shook, D.P.M., and Kirt Miller, D.P.M.
D.C. Offutt, Jr., Steven Burchett, Robert Sellards, Offutt, Fisher & Nord, Huntington, for the Appellee, St. Mary's Hospital of Huntington, Inc.
PER CURIAM.
Linda and Clinton Farley (hereinafter referred to as "the Farleys") appeal from an order entered September 27, 2004, by the Circuit Court of Cabell County. By that order, the circuit court granted summary judgment in favor of the remaining defendants, podiatrists Jeffrey Shook, D.P.M., and Kirt Miller, D.P.M. (hereinafter "Dr. Shook" and "Dr. Miller," respectively), and dismissed the case. Gabriel C. Fornari, M.D. (hereinafter "Dr. Fornari"), an emergency room physician, and St. Mary's Hospital of Huntington (hereinafter "St. Mary's") had already been dismissed by way of summary judgment *742 by order entered March 30, 2004.[1] On appeal, this Court is asked to review both summary judgment awards.[2] Based upon the parties' arguments, the record designated for our consideration, and the pertinent authorities, we affirm the circuit court's award of summary judgment to Dr. Fornari and St. Mary's; we reverse the circuit court's award of summary judgment to Dr. Shook and Dr. Miller; and we remand the case to the circuit court for further proceedings consistent with this opinion.
I.
FACTUAL AND PROCEDURAL HISTORY
The case before us follows the circuit court's final order that granted summary judgment to Doctors Shook and Miller. The factual background of this case is straightforward. On February 21, 2000, Mrs. Farley had outpatient surgery performed by Dr. Shook and assisted by Dr. Miller, both podiatrists, at the facility of St. Mary's. A benign soft tissue mass was excised on Mrs. Farley's right foot near her ankle. The surgery proceeded uneventfully, and Mrs. Farley was discharged that same day.
The next day, Mrs. Farley called Dr. Shook's office on several occasions with complaints of pain. She was instructed to come to the office; however, she was unable to find transportation. Later that night, the pain became unbearable, and Mrs. Farley called for an ambulance and was taken to the emergency department at St. Mary's. Upon arrival, she was seen by Dr. Fornari, an emergency room physician. Dr. Fornari contacted Dr. Shook's office to inform him that one of his recent surgical patients was in the emergency room. Dr. Fornari spoke with Dr. Miller, a resident working with Dr. Shook who had assisted during the subject surgery. Dr. Miller indicated to Dr. Fornari that there was no need to remove the surgical dressing because, during a previous conversation with Dr. Shook's office, Mrs. Farley had informed the office employees that she had already loosened her dressing. Mrs. Farley had no fever and had stable vital signs, as well as good color in her leg and toes; therefore, the plan was to medicate Mrs. Farley for pain, discharge her from the emergency room to home, and for her to be seen the next day in Dr. Shook's office.
Mrs. Farley went to Dr. Shook's office the next morning, February 23, 2000. It was noted that Mrs. Farley's ankle and foot were discolored and that blisters were present near the wound site. Mrs. Farley was sent to the hospital where it was confirmed that she was suffering from necrotizing fasciitis caused by bacteria, clostridium septicum. In lay terms, Mrs. Farley was suffering from gas gangrene, which can occur after surgery or trauma. Her condition was characterized by tissue death requiring removal of the dead tissue to prevent the infection from spreading and to save her life. This condition is *743 rare and life-threatening and resulted in an emergent, above-the-knee amputation of her leg.
A lawsuit was filed on January 10, 2002, alleging that all of the defendants committed malpractice in the medical care provided to Mrs. Farley. An agreed order was entered on March 14, 2002, signed by all counsel, wherein it was recognized that expert testimony would be required on the issues of standard of care and causation. A scheduling order was entered on July 1, 2002, setting December 2, 2002, as the Farleys' expert disclosure deadline. When the Farleys failed to meet this deadline, Dr. Fornari and St. Mary's filed a motion to compel disclosure of the Farleys' expert witness. On December 9, 2002, the Farleys disclosed Dr. Albert Weihl, an emergency medicine doctor, as their expert witness.
The defendant doctors and St. Mary's disclosed expert witnesses on April 7, 2003, after asking for and receiving a stipulation from counsel for the Farleys as to an extension of time in which to disclose their experts. Thereafter, the Farleys' only expert, Dr. Weihl, was deposed. He testified as to deviations from the standard of care as it related to Dr. Fornari and St. Mary's; however, he was unable to testify regarding causation as to Dr. Fornari and St. Mary's. Moreover, because his area of expertise is emergency medicine, he did not testify as to any deviation of the standard of care as it would apply to podiatrists such as Dr. Shook and Dr. Miller. Thus, Dr. Fornari and St. Mary's filed motions for summary judgment based on the lack of any expert who could opine as to a causal link in the care provided to Mrs. Farley and her alleged injuries. The Farleys filed no responsive pleading or affidavits. The circuit court granted Dr. Fornari's and St. Mary's joint motion for summary judgment. In so doing, the circuit court found that "plaintiffs failed to produce evidence, to a reasonable degree of medical probability from expert or treating physicians, or a causal link between the breaches of the standard of care testified to by Dr. Weihl and the amputation."
Subsequently, Dr. Shook and Dr. Miller moved for summary judgment on the ground that the Farleys failed to put forth any requisite expert testimony as to any alleged deviations from the standard of care from the perspective of a doctor of podiatry. In response, the Farleys filed a motion to reconsider the court's previous granting of summary judgment in favor of Dr. Fornari and St. Mary's. The trial court denied the motion for reconsideration, and further granted summary judgment in favor of Dr. Shook and Dr. Miller. In so ruling, the circuit court found that "Dr. Weihl admitted at his deposition that he lacked the competency to testify as to any alleged deviations from the standard of care by either Dr. Shook or Dr. Miller, both of whom are Doctors of Podiatric Medicine[.]" Further, the trial court found that "[t]here are no genuine issues of material fact as to the alleged deviations from the standard of care by Dr. Shook and Dr. Miller as the [p]laintiffs have failed to establish the same via the testimony of a competent expert witness." The case was dismissed from the circuit court's docket. It is from the combination of the circuit court's decisions rendered on March 30, 2004, and September 27, 2004, that the Farleys now appeal.
II.
STANDARD OF REVIEW
The case before this Court on appeal follows the circuit court's ultimate order granting summary judgment in favor of Dr. Shook and Dr. Miller; however, it also involves a previous summary judgment awarded to Dr. Fornari and St. Mary's. In regard to the motions for summary judgment, we have stated that "[a] circuit court's entry of summary judgment is reviewed de novo." Syl. pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994). Thus, in undertaking our de novo review, we apply the same standard for granting summary judgment that is applied by the circuit court:
"`A motion for summary judgment should be granted only when it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law.' Syllabus Point 3, Aetna Casualty & Surety Co. v. Federal Insurance Co. of *744 New York, 148 W.Va. 160, 133 S.E.2d 770 (1963)." Syllabus Point 1, Andrick v. Town of Buckhannon, 187 W.Va. 706, 421 S.E.2d 247 (1992).
Syl. pt. 2, Painter, 192 W.Va. 189, 451 S.E.2d 755. Moreover,
[s]ummary judgment is appropriate where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, such as where the nonmoving party has failed to make a sufficient showing on an essential element of the case that it has the burden to prove.
Syl. pt. 4, Painter, id. We are also mindful that "[t]he circuit court's function at the summary judgment stage is not to weigh the evidence and determine the truth of the matter, but is to determine whether there is a genuine issue for trial." Syl. pt. 3, Painter, id. Mindful of these applicable standards, we now consider the substantive issues herein raised.
III.
DISCUSSION
On appeal to this Court, the Farleys assign error to the circuit court's grant of summary judgment to first Dr. Fornari and St. Mary's, and the subsequent summary judgment granted to Dr. Shook and Dr. Miller. Both summary judgments followed the Farleys' inability to produce expert witnesses to testify against the defendants. The Farleys intimate that they should have had more time in which to identify experts. The defendants below/appellees herein contend that the summary judgment awards were proper. After briefly discussing the need for expert testimony, we will examine separately each summary judgment award: first, the award of summary judgment to Dr. Fornari and St. Mary's; then, the summary judgment award to Dr. Shook and Dr. Miller.
This case alleges medical malpractice. Therefore, it falls under the realm of the Medical Professional Liability Act, which states in pertinent part: "The applicable standard of care and a defendant's failure to meet said standard, if at issue, shall be established in medical professional liability cases by the plaintiff by testimony of one or more knowledgeable, competent expert witnesses if required by the court." W. Va.Code § 55-7B-7 (1986) (Repl.Vol. 2000). It has been explained further that ""`[i]t is the general rule that in medical malpractice cases negligence or want of professional skill can be proved only by expert witnesses." Syl. Pt. 2, Roberts v. Gale, 149 W.Va. 166, 139 S.E.2d 272 (1964).' Syl. pt. 1, Farley v. Meadows, 185 W.Va. 48, 404 S.E.2d 537 (1991)." Syl. pt. 1, Neary v. Charleston Area Med. Ctr., 194 W.Va. 329, 460 S.E.2d 464 (1995) (per curiam). Thus, expert testimony is required for the Farleys to meet their burden of proving negligence and lack of skill on the part of the physician and the causal connection of that negligence to their injuries.
We pause briefly to note that some exceptions exist to the requirement of expert witness testimony. For example, in medical malpractice cases where lack of care or want of skill is so gross as to be apparent, or the alleged breach relates to noncomplex matters of diagnosis and treatment within the understanding of lay jurors by resort to common knowledge and experience, failure to present expert testimony on the accepted standard of care and degree of skill under such circumstances is not fatal to a plaintiff's prima facie showing of negligence. See Banfi v. American Hosp. for Rehabilitation, 207 W.Va. 135, 529 S.E.2d 600 (2000). However, this exception does not apply to this matter.
In the present case pending before this Court, the Farleys alleged malpractice against Dr. Fornari, the emergency room doctor, and contended that he negligently failed to remove Mrs. Farley's surgical dressing when she presented to his department on February 22, 2000. The Farleys also averred that St. Mary's was negligent in that its nurses failed to repeat Mrs. Farley's vital signs during her emergency room visit on February 22, 2000. As to the claims against the podiatric defendants, the Farleys asserted that Dr. Shook and Dr. Miller negligently performed her cyst removal surgery, and that they mismanaged her care postoperatively, including failure to evaluate her while she was a patient in the emergency room. These medical issues and alleged breaches relate to complex matters of diagnosis and *745 treatment that are not within the understanding of lay jurors by resort to common knowledge and experience. Therefore, expert witness testimony was required to establish any breach of the standard of care and any causal connection to Mrs. Farley's injuries.
Significantly, the parties recognized that medical experts would be required. By order entered March 14, 2002, and signed by all counsel, the parties acknowledged that "expert medical testimony as to standard of care and causation will be necessary in this case." Moreover, we recognize that "`a trial court is vested with discretion under W. Va. Code § 55-7B-7 (1986) to require expert testimony in medical professional liability cases, and absent an abuse of that discretion, a trial court's decision will not be disturbed on appeal.' Syl. Pt. 8, McGraw v. St. Joseph's Hosp., 200 W.Va. 114, 488 S.E.2d 389 (1997)." Syl. pt. 3, Daniel v. Charleston Area Med. Ctr., 209 W.Va. 203, 544 S.E.2d 905 (2001). Thus, it is clear that the nature of the case required expert testimony, and the trial court did not abuse its discretion in requiring expert testimony to prove both breaches of the applicable standards of care and to prove causation.
Having set forth the requirements for maintaining a medical malpractice cause of action, we now are able to consider the summary judgment awarded to Dr. Fornari and St. Mary's. The circuit court awarded summary judgment to Dr. Fornari and St. Mary's on the basis that "plaintiffs failed to produce evidence, to a reasonable degree of medical probability from expert or treating physicians, or a causal link between the breaches of the standard of care testified to by Dr. Weihl and the amputation." Thus, our analysis must include an examination of the nature of the Farleys' expert disclosure. The Farleys identified one expert witness, Dr. Albert Weihl, who is a highly-credentialed emergency room physician. The Farleys anticipated that Dr. Weihl would provide testimony regarding Dr. Fornari's and St. Mary's deviations from the applicable standards of care, as well as testimony regarding a causal link to Mrs. Farley's injuries. During his deposition, Dr. Weihl testified regarding breaches in the standard of care provided to Mrs. Farley. He testified that Dr. Fornari failed to perform a complete examination, and failed to remove the surgical dressing and visualize the surgical wound. Dr. Weihl further stated that the emergency room nurses deviated from the standard of care in failing to retake Mrs. Farley's vital signs during her course in the emergency room, thereby implying their deviation to St. Mary's. However, Dr. Weihl was unable to link any of these alleged breaches in care to the ultimate outcome in Mrs. Farley's case. As to any questions regarding causation, Dr. Weihl stated that he would have to defer to another specialty, and he specifically mentioned an infectious disease expert would be the appropriate type of practitioner to answer those questions. Thus, Dr. Weihl was unable to provide any testimony regarding causation as it relates to Dr. Fornari or St. Mary's.
The Farleys bear the burden of proving negligence and lack of skill on the part of the physician proximately caused the injuries suffered. Hicks v. Chevy, 178 W.Va. 118, 121, 358 S.E.2d 202, 205 (1987); Syl. pt. 2, Totten v. Adongay, 175 W.Va. 634, 337 S.E.2d 2 (1985); Syl. pt. 1, Hinkle v. Martin, 163 W.Va. 482, 256 S.E.2d 768 (1979); Syl. pt. 4, Hundley v. Martinez, 151 W.Va. 977, 158 S.E.2d 159 (1967); Syl. pt. 1, Schroeder v. Adkins, 149 W.Va. 400, 141 S.E.2d 352 (1965); Syl. pt. 1, Roberts v. Gale, 149 W.Va. 166, 139 S.E.2d 272 (1964); Syl., White v. Moore, 134 W.Va. 806, 62 S.E.2d 122 (1950). See W. Va.Code § 55-7B-7 (1986) (Repl.Vol. 2000) ("The applicable standard of care and a defendant's failure to meet said standard, if at issue, shall be established in medical professional liability cases by the plaintiff[.]"). Thus, because Dr. Weihl was the only expert designated to provide standard of care and causation testimony against the emergency room physician and the hospital, and because he was unable to provide the necessary causal links, the Farleys were unable to prove their case against these two appellees. The circuit court was correct in awarding summary judgment to Dr. Fornari and St. Mary's, and we accordingly affirm the circuit court's ruling.
*746 Having determined that the first summary judgment award to Dr. Fornari and St. Mary's was appropriate, we now turn to a discussion of the propriety of the second summary judgment that was awarded to Dr. Shook and Dr. Miller. In awarding summary judgment to Dr. Shook and Dr. Miller, the circuit court found "Dr. Weihl admitted at his deposition that he lacked the competency to testify as to any alleged deviations from the standard of care by either Dr. Shook or Dr. Miller, both of whom are Doctors of Podiatric Medicine[.]" Further, the trial court found that "[t]here are no genuine issues of material fact as to the alleged deviations from the standard of care by Dr. Shook and Dr. Miller as the [p]laintiffs have failed to establish the same via the testimony of a competent expert witness."
The circuit court's ruling recognized that if an expert is going to be required by the Court or proffered by a party, the expert must be competent to testify. See W. Va. Code § 55-7B-7 ("The applicable standard of care and a defendant's failure to meet said standard, if at issue, shall be established in medical professional liability cases by the plaintiff by testimony of one or more knowledgeable, competent expert witnesses if required by the court."). "Rule 702 of the West Virginia Rules of Evidence is the paramount authority for determining whether or not an expert is qualified to give an opinion." Syl. pt. 6, in part, Mayhorn v. Logan Med. Found., 193 W.Va. 42, 454 S.E.2d 87 (1994). Rule 702 of the West Virginia Rules of Evidence provides: "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise."
While a physician does not have to be board certified in a specialty to qualify to render an expert opinion, the physician must have some experience or knowledge on which to base his or her opinion. See Fortney v. Al-Hajj, 188 W.Va. 588, 425 S.E.2d 264 (1992) (stating that experience may qualify physician to render an expert opinion and that a physician does not necessarily need to be "board certified" in a medical field to work in that medical field for purposes of physician's qualification to testify as expert). In the present case, Dr. Weihl was the only expert designated by the Farleys. During his deposition, he was clear that he did not have the knowledge or skill to testify as to the applicable standard of care as it would apply to a physician in the field of podiatry. Consequently, he had no ability to opine whether Dr. Shook or Dr. Miller breached the standard of care. Based on the lack of any expert rendering an opinion as to whether the podiatric defendants breached the standard of care, the circuit court granted summary judgment. While we agree with the circuit court that Dr. Weihl was not a competent expert witness based on his lack of familiarity with the field of podiatry to testify against Dr. Shook and Dr. Miller, the particular facts of this case require scrutiny beyond Dr. Weihl's competence to testify about podiatry practices.
We are cognizant of the particular procedural history of this case, and are aware that the summary judgment awarded to Dr. Shook and Dr. Miller was a direct result of the Farleys' failure to identify appropriate expert witnesses. We are also aware that the Farleys filed a motion to extend their expert disclosure deadline, and their request was denied by the circuit court. The Farleys maintain that the circuit court's improper denial of their earlier motion for an extension of their expert disclosure deadline was the sole reason allowing summary judgment to be granted to Dr. Shook and Dr. Miller. Accordingly, to determine the appropriateness of the summary judgment awarded, we must look to the circuit court's denial of the Farleys' motion to enlarge the time in which they could identify expert witnesses.
The applicable standard of review in regards to the denial of the motion to extend the Farleys' expert disclosure time frame is an abuse of discretion standard. West Virginia Rule of Civil Procedure, Rule 16(e) provides:
Pretrial orders. After any conference held pursuant to this rule, an order shall be entered reciting the action taken. This *747 order shall control the subsequent course of the action unless modified by a subsequent order. The order following a final pretrial conference shall be modified only to prevent manifest injustice.
This proposition has been further recognized in our case law. See McCoy v. CAMC, Inc., 210 W.Va. 324, 328, 557 S.E.2d 378, 382 (2001) (per curiam) (reiterating that Rule 16 vests in trial courts the discretion to modify scheduling orders); State ex rel. Crafton v. Burnside, 207 W.Va. 74, 528 S.E.2d 768 (2000) (reviewing the circuit court's decision not to amend the case management order under an abuse of discretion standard); State ex rel. State Farm Fire & Cas. Co. v. Madden, 192 W.Va. 155, 161, 451 S.E.2d 721, 727 (1994) (recognizing that it is within the trial court's discretion to refuse to allow a party to designate or substitute an expert witness after the expiration of the deadline set forth in the scheduling order); Roark v. Dempsey, 159 W.Va. 24, 217 S.E.2d 913 (1975) (discussing discretion of trial court in utilization of Rule 16 of the West Virginia Rules of Civil Procedure). Thus, we apply an abuse of discretion standard to the trial court's denial of the Farleys' motion to enlarge their expert disclosure deadline.
The Farleys sought additional time to find and disclose expert witnesses because they had not yet been able to depose the defendant doctors. Moreover, the Farleys suggested that they could not disclose expert witnesses until such time as they could depose the experts identified by Dr. Shook and Dr. Miller. Even more compelling than the timing of depositions and the rendering of expert opinions, we place great significance on an agreement that was reached between the parties. The record reveals that on two separate occasions, the defendant doctors requested an extension of their expert disclosure deadline. Counsel for the Farleys agreed to the request, without hesitation, as a matter of professional courtesy. During the hearing on the motion, counsel for the Farleys conceded that, when the defendants sought enlargement of their expert disclosure deadlines, no reciprocal request was made on behalf of the Farleys. Because counsel for the Farleys had agreed to allow the defendant doctors an extension of time to identify their experts, he stated to the trial court that he anticipated no opposition to his own request for an extension of time. However, he was not treated with the same civility as he had demonstrated, and the defendant doctors did oppose the Farleys' motion for an extension of time. The trial court ruled that the Farleys were not entitled to an extension of time in which to identify experts.[3] Therefore, because Dr. Weihl was the only expert identified by the Farleys and he was deemed incompetent to testify against the podiatric physicians, the circuit court granted summary judgment to Dr. Shook and Dr. Miller.
We have previously recognized that "[u]pon a trial court's determination that an expert witness is required to prove standard of care or proximate cause in an action brought under the West Virginia Medical Professional Liability Act, West Virginia Code §§ 55-7B-1 to -11 (1986) (Repl.Vol. 2000), a reasonable period of time must be provided for retention of an expert witness." Syl. pt. 4, Daniel, 209 W.Va. 203, 544 S.E.2d 905. In the instant case, because of the impediments to the Farleys' ability to identify a podiatric expert, the trial court abused *748 its discretion in denying their motion to enlarge the time within which to identify such an expert. The situation against Dr. Shook and Dr. Miller is very different than the case against Dr. Fornari and St. Mary's. As against Dr. Fornari and St. Mary's, the Farleys were able to identify an expert; however, while competent to testify, that expert was not able to tie any breaches of the standard of care by Dr. Fornari or St. Mary's to the Farleys' injuries. Nonetheless, as against Dr. Shook and Dr. Miller, the Farleys were not afforded adequate time to identify experts in light of the impediments with which they were faced. Therefore, it follows that the summary judgment awarded to Dr. Shook and Dr. Miller, on the basis that no expert existed to testify against them, must be reversed.
IV.
CONCLUSION
For the foregoing reasons, we affirm the March 30, 2004, order awarding summary judgment to Dr. Fornari and St. Mary's. Further, we reverse the September 27, 2004, order awarding summary judgment to Dr. Shook and Dr. Miller, and remand this matter for proceedings consistent with this opinion.
Affirmed, in part; Reversed, in part; and Remanded.
NOTES
[1] Huntington Podiatry Associates was also dismissed, without challenge, as reflected in the March 30, 2004, order. The defendants designated as DOES 1-10 represent possible defendants who were employed by the hospital. No further action was taken to identify such individuals.
[2] Both summary judgment orders are ripe for our consideration. Pursuant to Rule 54(b) of the West Virginia Rules of Civil Procedure,
when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.
We have explained that "[a]n otherwise interlocutory order that is not expressly certified as final by using the language required by Rule 54(b) of the West Virginia Rules of Civil Procedure remains interlocutory so long as the affected party does not seek an appeal." Syl. pt. 3, in part, Hubbard v. State Farm Indem. Co., 213 W.Va. 542, 584 S.E.2d 176 (2003). Moreover, "[a]s long as a circuit court has jurisdiction over the case, then it possesses the inherent procedural power to reconsider, rescind, or modify an interlocutory order for cause seen by it to be sufficient." Syl. pt. 4, id. Thus, both orders awarding summary judgment are proper for our consideration.
[3] We take this opportunity to point out that this case emphasizes the importance of complying with the West Virginia Rules of Civil Procedure when parties request alterations to scheduling orders, and further prescribes the necessity of reducing parties' agreements to writing. In this case, the defendant doctors and St. Mary's had requested extensions of their expert disclosure deadlines, which were memorialized in stipulations signed by all counsel. These written stipulations were filed with the circuit court on January 13, 2003, and again on March 14, 2003. When counsel for the Farleys realized the need for an extension, a similar practice should have been employed instead of relying on a professional courtesy that never materialized. The particular facts of this case, including the obstacles the defendant doctors and St. Mary's placed before the Farleys, and the inequity in not allowing the Farleys an opportunity to develop an expert witness against Dr. Shook and Dr. Miller, allow this Court to remedy the injustice on the Farleys. Finally, to the extent that parties do agree to alter a scheduling order, even if the agreement is in writing, the parties must also be aware that such agreement ultimately requires approval by the circuit court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1317142/ | 497 S.E.2d 580 (1998)
231 Ga. App. 33
REYNOLDS
v.
The STATE.
No. A97A2101.
Court of Appeals of Georgia.
February 11, 1998.
Reconsideration Denied March 10, 1998.
Certiorari Denied June 12, 1998.
*582 Lenzer & Lenzer, Robert W. Lenzer, Thomas P. Lenzer, Norcross, for appellant.
Daniel J. Porter, District Attorney, Brain K. Wilcox, Assistant District Attorney, for appellee.
RUFFIN, Judge.
A jury found Johnny Stephen Reynolds guilty of false imprisonment and simple battery. Reynolds appealed, claiming ineffective assistance of counsel, insufficiency of the evidence and errors committed by the trial court. We affirm for reasons which follow.
Viewed in a light most favorable to support the verdict, the evidence shows that at approximately 10:30 p.m. on May 31, 1993, the victim, Kimberly Ann Crossley, drove to a video store to rent a movie. Crossley noticed Reynolds walking his dog on a leash in the parking lot in front of the store. Upon exiting the video store and returning to her car, Reynolds initiated a conversation with Crossley. Reynolds then asked her if she would assist him in jump-starting his van that was located on the other side of the *583 large parking lot. Crossley agreed, and she, Reynolds and the dog got into her vehicle. Reynolds then said that he had lied and that he really needed a ride to Macon, Georgia. When she denied this request, Reynolds asked her if she could at least give him a ride to his house which was only a couple of blocks away. Crossley agreed, and Reynolds directed her to drive down a dead end street. However, Reynolds could not identify which house was his. When Crossley reached the end of the road, she turned around and Reynolds directed her to drive down a pathway that led into the woods. Crossley refused and advised Reynolds to get out of the car. Reynolds again told Crossley to drive down the path, and when Crossley resumed driving on the main road, Reynolds reached over, "slammed [the car] into park and said you don't want to do this." Reynolds then grabbed her, and she began fighting to escape. Crossley elbowed Reynolds during the struggle, broke loose, exited her car and ran towards another vehicle that was traveling down the street. Reynolds ran off with his dog. Crossley denied that she ever consented to Reynolds touching or grabbing her in any way. Reynolds admitted making a sexual advance towards Crossley, testifying at trial that he kissed her and "rubbed across the front of her shirt."
1. We conclude that there was sufficient evidence to authorize a rational trier of fact to find Reynolds guilty beyond a reasonable doubt of false imprisonment and simple battery. Jackson v. Virginia, 443 U.S. 307, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979). Reynolds held Crossley against her will while he made sexual advances toward her and physically caused her harm. OCGA §§ 16-5-23(a); 16-5-41(a).
2. Reynolds argues that the simple battery conviction should have merged with the false imprisonment conviction. We disagree. "Offenses may be said to merge when (1) one is a lesser offense included in another or (2) each of the two different charges arises out of the same conduct as the other, and all the evidence is used to establish one of the offenses charged." Johnson v. State, 195 Ga.App. 723(2), 394 S.E.2d 586 (1990).
Simple battery is committed when a person either "[i]ntentionally makes physical contact of an insulting or provoking nature with the person of another" or "[i]ntentionally causes physical harm to another." OCGA § 16-5-23(a). A person commits false imprisonment when he confines or detains another person without legal authority and in violation of the other person's personal liberty. OCGA § 16-5-41(a). In light of these definitions, we find that false imprisonment does not necessarily require an offensive touching as is required with simple battery. Accordingly, we conclude that simple battery is not, by definition, a lesser included offense of false imprisonment.
In the instant case, the jury could have found that Reynolds committed simple battery on Crossley by grabbing her, fighting with her as she tried to escape, or by making his sexual advance which included rubbing against the front of her shirt. The separate evidence of Reynolds slamming the car into park and holding Crossley against her will supported the false imprisonment conviction. Accordingly, the evidence to support the simple battery conviction was not necessarily "used up" to prove the elements of false imprisonment. Johnson, supra; Gilbert v. State, 176 Ga.App. 561(2), 336 S.E.2d 828 (1985).
3. Reynolds asserts that the trial court improperly commented on the verdict in the presence of the jury in violation of OCGA § 17-9-22. We disagree.
The record shows that after the jury had announced the guilty verdict, the trial court proceeded to sentence Reynolds. The court allowed the jurors to view the sentencing proceeding if they so desired. The trial judge stated during sentencing that he wanted to give Reynolds the maximum sentence, but was concerned that the state pardons and parole board would release Reynolds early. The judge commented that "[i]f I had more time to work with I wouldn't worry about putting him in prison for ten years.... But eleven is the maximum I've got. There is also some other arguments about merging of the two offenses. That is something the *584 court needs to consider. I'm sure the jury doesn't understand what I'm talking about but I do and I think the lawyers do."
OCGA § 17-9-22(a) provides that "[n]o judge of any court shall either directly or indirectly express in open court his approval or disapproval of the verdict of any jury in any case tried before him...." In the instant case, the judge was not expressing his disapproval of the jury's verdict, but was merely considering the sentencing options available in light of the convictions. Accordingly, there was no error.
4. Reynolds next asserts that the trial court erred in not allowing his counsel, Johnny Moore, to withdraw from representation and in failing to appoint new counsel.
The record reveals that Moore was Reynolds' third appointed trial counsel. Reynolds disliked and distrusted his first attorney because the attorney advised Reynolds of certain evidence the State was planning to use to incriminate him. Reynolds did not trust his second attorney because he was a court-appointed attorney and was afraid that the attorney and the State were trying to set him up. Reynolds also did not trust Moore and declined to cooperate in the preparation for his trial. At trial, Reynolds again expressed his distrust of Moore, and the trial court gave him the option of representing himself or proceeding with Moore as his attorney. Reynolds reluctantly agreed to be represented by Moore.
"[T]here was no error arising in [Reynolds] being confronted with choosing between representation by the appointed defense counsel and proceeding pro se. While an indigent defendant accused of a crime for which imprisonment is possible is entitled to have reasonably effective counsel provided to assist him, he is not entitled to counsel of his own choosing. [Cit.] A request by an indigent criminal defendant to discharge one court-appointed counsel and have another substituted in his place addressees itself to the sound discretion of the trial court. [Cit.]" Durham v. State, 185 Ga.App. 163, 164(1), 363 S.E.2d 607 (1987). See also Rivers v. State, 250 Ga. 303, 307(6), 298 S.E.2d 1 (1982). There was no abuse of discretion in this case. The trial court was very accommodating of Reynolds by dismissing his prior two court-appointed attorneys solely because Reynolds felt he could not trust them. As the trial judge appropriately stated, the court could not "keep going through lawyers perpetually because [Reynolds] tend[ed] not to like or trust [his] lawyer."
5. Next, Reynolds asserts that the trial court erred in failing to recharge the jury on false imprisonment. During its initial charge, the trial court instructed the jury that "intent is an essential element of any crime and must be proven by the state beyond a reasonable doubt." The trial court also charged the jury that "a person commits the offense of false imprisonment when in violation of the personal liberty of another he detains such person without legal authority." During deliberations, the jury sent out a note that stated "charge on false imprisonment." Underneath this was written, "any time frames?" and "intent involved?" The trial court held an unrecorded conference with Reynolds' attorney and the State to discuss the appropriate response to the jury's note. Following the unrecorded conversation, the trial judge stated on the record that "we have now agreed on the record that what the court should do is send back a note to the jury which says; the charge I've already given you on false imprisonment is as specific as I can be. You should consider the charge as a whole...." The trial court asked the State and defense counsel if the response was agreeable with them, and they both said that it was. Defense counsel declined to put anything on the record, such as an objection or an exception to the trial court's response, when the trial court offered him the opportunity to do so.
"When the jury requests a charge or recharge on a particular point, the trial court has discretion to also give or not give additional instructions. [Cit.]" Patterson v. State, 264 Ga. 593, 594(2), 449 S.E.2d 97 (1994). However, it is also well established that "[w]hen the jury requests the court to recharge them on any point, it is the court's duty to do so. [Cits.]" Edwards v. State, 233 Ga. 625, 626(2), 212 S.E.2d 802 (1975). See also Glisson v. Glisson, 268 Ga. 164, *585 165(1), 486 S.E.2d 167 (1997). "`Merely sending a message to the jury to consider the instructions previously given (may be) insufficient under the circumstances. (Cit.)'" Id. at 165, 486 S.E.2d 167.
Pretermitting whether the trial court's response to the jury's note may have been inadequate under the circumstances, we conclude that Reynolds waived his right to enumerate as error the failure to recharge by his own failure to object to the court's response. Fox v. State, 163 Ga.App. 601(1), 295 S.E.2d 563 (1982); White v. State, 243 Ga. 250, 253 S.E.2d 694 (1979). The proposed response was agreed to by the court, the State and defense counsel. Defense counsel was an active participant and was present when the note was sent back to the jury. At no point was there any objection or exception to the trial court's response. Accordingly, Reynolds' attorney induced any error in the response by his participation, and this coupled with the fact defense counsel failed to object when given the opportunity to do so precludes Reynolds from raising this issue on appeal. See Ingram v. State, 160 Ga.App. 300, 301(4), 287 S.E.2d 304 (1981) (induced error is impermissible); Moore v. Sinclair, 196 Ga.App. 667, 671(5), 396 S.E.2d 557 (1990); Edwards v. State, 235 Ga. 603, 604(2), 221 S.E.2d 28 (1975).
6. Reynolds asserts that Moore did not provide effective assistance of counsel. We first note that Reynolds could not refuse to cooperate with his court-appointed attorney and then claim later that he was not effectively represented. Jefferson v. State, 209 Ga.App. 859, 861(1), 434 S.E.2d 814 (1993). However, since it appears that Reynolds did cooperate to some extent with his attorney during the trial, we will further consider this enumeration.
"In order to prevail on a claim of ineffective assistance of counsel [Reynolds] must show that his counsel's performance was deficient and that the deficient performance was prejudicial to his defense. Smith v. Francis, 253 Ga. 782, 783, 325 S.E.2d 362 (1985) (citing Strickland v. Washington, 466 U.S. 668, 104 S. Ct. 2052, 80 L. Ed. 2d 674 (1984)). To meet the first prong of this test, [Reynolds] must overcome the strong presumption that counsel's performance fell within a wide range of reasonable professional conduct and that counsel's decisions were made in the exercise of reasonable professional judgment. The reasonableness of counsel's conduct is examined from counsel's perspective at the time of trial and under the circumstances of the case. The second prong requires [Reynolds] to show there is a reasonable probability that, absent counsel's unprofessional errors, the result of the trial would have been different." (Citations and punctuation omitted.) Brown v. State, 268 Ga. 354, 357(4), 490 S.E.2d 75 (1997).
(a) Reynolds argues that his attorney was not prepared to proceed to trial. However, this was due to Reynolds' own failure to cooperate with his attorney, and therefore he cannot complain on appeal in this regard. Jefferson, supra.
(b) Reynolds also asserts that his counsel failed to object when the trial judge improperly commented on the jury verdict. As we held in Division 3 that the trial judge did not violate OCGA § 17-9-22, trial counsel did not err in failing to object.
(c) Reynolds maintains that trial counsel was deficient in failing to request jury charges on lesser included offenses to the charge of false imprisonment and discussing these lesser included offenses with his client. Trial counsel testified in the motion for new trial that at the time he had to make the decision regarding what charges to request, Reynolds was upset and was unwilling to cooperate. Reynolds cannot complain that his attorney did not adequately represent him when Reynolds refused to cooperate during this portion of the trial. Jefferson, supra. Additionally, defense counsel's reasons for not requesting the lesser included offenses to the false imprisonment count were strategic and made in the exercise of his reasonable professional judgment. Brown, supra. Furthermore, Reynolds has failed to show how defense counsel's decision affected the results of the trial. Id. See also Van Alstine v. State, 263 Ga. 1, 426 S.E.2d 360 (1993).
*586 (d) Finally, Reynolds argues that his counsel was ineffective in failing to object to the trial court's response to the jury's question on false imprisonment. There is no indication in the record as to trial counsel's reasons for not objecting to the court's answer to the jury question or requesting a recharge. Regardless, however, Reynolds has failed to show that there is a reasonable probability that, absent the attorney's error, the results of the trial would have been different. Brown, supra.
Judgment affirmed.
BIRDSONG, P.J., and ELDRIDGE, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1503668/ | 148 F.2d 416 (1945)
UNITED STATES
v.
ALUMINUM CO. OF AMERICA et al.
No. 144.
Circuit Court of Appeals, Second Circuit.
March 12, 1945.
*417 *418 *419 *420 *421 Charles Fahy, Sol. Gen., of Washington, D. C., and Lawrence S. Apsey, of New York City (Norman A. Adler, of New York City, Edward S. Stimson, Robert L. Stern, and Aute L. Carr, all of Washington, D. C., Jesse R. O'Malley, of Cincinnati, Ohio, Marcus A. Hollabaugh, of Washington, D. C., Maurice Godin, of New York City, and Irving Lipkowitz, of Washington, D. C., on the brief), for appellant.
William Watson Smith, of Pittsburgh, Pa. (Frank B. Ingersoll and Leon E. Hickman, both of Pittsburgh, Pa., and Charles E. Hughes, Jr., and William T. Gossett, both of New York City, on the brief), for appellees Aluminum Co. of America and others.
Timothy N. Pfeiffer, of New York City (Morris Hadley, Rebecca M. Cutler, and Rudolph B. Schlesinger, all of New York City, on the brief), for appellees Aluminum Limited and others.
A. L. Nash, of Manitowoc, Wis., and Roger S. Baldwin and E. Raymond Shephard, both of New York City, for Aluminum Goods Mfg. Co.
Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
L. HAND, Circuit Judge.
This appeal comes to us by virtue of a certificate of the Supreme Court, under the amendment of 1944 to § 29 of 15 U.S. C.A. The action was brought under § 4 of that title, praying the district court to adjudge that the defendant, Aluminum Company of America, was monopolizing interstate and foreign commerce, particularly in the manufacture and sale of "virgin" aluminum ingot, and that it be dissolved; and further to adjudge that that company and the defendant, Aluminum Limited, had entered into a conspiracy in restraint of such commerce. It also asked incidental relief. The plaintiff filed its complaint on April 23, 1937, naming sixty-three defendants: ten of these were not served and did not appear; one died, and one corporate defendant was dissolved before the action was brought: the complaint was dismissed against another. At the date of judgment there were fifty-one defendants who had been served and against whom the action was pending. We may divide these, as the district judge did, into four classes: Aluminum Company of America, with its wholly owned subsidiaries, directors, officers and shareholders. (For convenience we shall speak of these defendants collectively as "Alcoa," that being the name by which the company has become almost universally known.) Next, Aluminum Limited, with its directors, officers and shareholders. (For the same reason we shall speak of this group as "Limited.") Third: the defendant, Aluminum Manufactures, Inc., which may be treated as a subsidiary of "Alcoa." Fourth: the defendant, Aluminum Goods Manufacturing Company, which is independent of "Alcoa," as will appear. The action came to trial on June 1, 1938, and proceeded without much interruption until August 14, 1940, when the case was closed after more than 40,000 pages of testimony had been taken. The judge took time to consider the evidence, and delivered an oral opinion which occupied him from September 30, to October 9, 1941. Again he took time to prepare findings of fact and conclusions of law which he filed on July 14, 1942; and he entered final judgment dismissing the complaint on July 23rd, of that year. The petition for an appeal, and assignments of error, were filed on September 14, 1942, and the petition was allowed on the next day. On June 12, 1944, the Supreme Court, declaring that a quorum of six justices qualified to hear the case was wanting, referred the appeal to this court under § 29 of Title 15, already mentioned. The district judge's opinion, reported in D.C., 44 F. Supp. 97, discussed the evidence with the utmost particularity; it took up every phase and every issue with the arguments of both parties, and provided a reasoned basis for the subsequent findings of fact and conclusions of law. For the purposes of this appeal we need not repeat the greater part of the facts; so far as it is necessary, we do so, leaving acquaintance with the remainder to the opinion itself. Although the plaintiff challenged nearly all of the 407 findings of fact, with negligible exceptions these challenges were directed, not to misstatements of the evidence, but to the judge's inferences alleged to be "clearly erroneous." For convenience *422 we have divided our discussion into four parts: (1) whether "Alcoa" monopolized the market in "virgin" aluminum ingot; (2) whether "Alcoa" was guilty of various unlawful practices, ancillary to the establishment of its monopoly; (3) whether "Limited" and "Alcoa" were in an unlawful conspiracy; and whether, if not, "Limited" was guilty of a conspiracy with foreign producers; (4) what remedies are appropriate in the case of each defendant who may be found to have violated the Act.
I.
"ALCOA'S MONOPOLY OF "VIRGIN" Ingot.
"Alcoa" is a corporation, organized under the laws of Pennsylvania on September 18, 1888; its original name, "Pittsburgh Reduction Company," was changed to its present one on January 1, 1907. It has always been engaged in the production and sale of "ingot" aluminum, and since 1895 also in the fabrication of the metal into many finished and semi-finished articles. It has proliferated into a great number of subsidiaries, created at various times between the years 1900 and 1929, as the business expanded. Aluminum is a chemical element; it is never found in a free state, being always in chemical combination with oxygen. One form of this combination is known as alumina; and for practical purposes the most available material from which alumina can be extracted is an ore, called, "bauxite." Aluminum was isolated as a metal more than a century ago, but not until about 1886 did it become commercially practicable to eliminate the oxygen, so that it could be exploited industrially. One, Hall, discovered a process by which this could be done in that year, and got a patent on April 2, 1889, which he assigned to "Alcoa," which thus secured a legal monopoly of the manufacture of the pure aluminum until on April 2, 1906, when this patent expired. Meanwhile Bradley had invented a process by which the smelting could be carried on without the use of external heat, as had theretofore been thought necessary; and for this improvement he too got a patent on February 2, 1892. Bradley's improvement resulted in great economy in manufacture, so that, although after April 2, 1906, anyone could manufacture aluminum by the Hall process, for practical purposes no one could compete with Bradley or with his licensees until February 2, 1909, when Bradley's patent also expired. On October 31, 1903, "Alcoa" and the assignee of the Bradley patent entered into a contract by which "Alcoa" was granted an exclusive license under that patent, in exchange for "Alcoa's" promise to sell to the assignee a stated amount of aluminum at a discount of ten per cent below "Alcoa's" published list price, and always to sell at a discount of five per cent greater than that which "Alcoa" gave to any other jobber. Thus until February 2, 1909, "Alcoa" had either a monopoly of the manufacture of "virgin" aluminum ingot, or the monopoly of a process which eliminated all competition.
The extraction of aluminum from alumina requires a very large amount of electrical energy, which is ordinarily, though not always, most cheaply obtained from water power. Beginning at least as early as 1895, "Alcoa" secured such power from several companies by contracts, containing in at least three instances, covenants binding the power companies not to sell or let power to anyone else for the manufacture of aluminum. "Alcoa" either itself or by a subsidiary also entered into four successive "cartels" with foreign manufacturers of aluminum by which, in exchange for certain limitations upon its import into foreign countries, it secured convenants from the foreign producers, either not to import into the United States at all, or to do so under restrictions, which in some cases involved the fixing of prices. These "cartels" and restrictive covenants and certain other practices were the subject of a suit filed by the United States against "Alcoa" on May 16, 1912, in which a decree was entered by consent on June 7, 1912, declaring several of these covenants unlawful and enjoining their performance; and also declaring invalid other restrictive covenants obtained before 1903 relating to the sale of alumina. ("Alcoa" failed at this time to inform the United States of several restrictive covenants in water-power contracts; its justification which the judge accepted being that they had been forgotten.) "Alcoa" did not begin to manufacture alumina on its own behalf until the expiration of a dominant patent in 1903. In that year it built a very large alumina plant at East St. Louis, where all of its alumina was made until 1939, when it opened another plant in Mobile, Alabama.
None of the foregoing facts are in dispute, and the most important question in the case is whether the monopoly in "Alcoa's" production of "virgin" ingot, secured *423 by the two patents until 1909, and in part perpetuated between 1909 and 1912 by the unlawful practices, forbidden by the decree of 1912, continued for the ensuing twenty-eight years; and whether, if it did, it was unlawful under § 2 of the Sherman Act, 15 U.S.C.A. § 2. It is undisputed that throughout this period "Alcoa" continued to be the single producer of "virgin" ingot in the United States; and the plaintiff argues that this without more was enough to make it an unlawful monopoly. It also takes an alternative position: that in any event during this period "Alcoa" consistently pursued unlawful exclusionary practices, which made its dominant position certainly unlawful, even though it would not have been, had it been retained only by "natural growth." Finally, it asserts that many of these practices were of themselves unlawful, as contracts in restraint of trade under § 1 of the Act, 15 U.S.C.A. § 1. "Alcoa's" position is that the fact that it alone continued to make "virgin" ingot in this country did not, and does not, give it a monopoly of the market; that it was always subject to the competition of imported "virgin" ingot, and of what is called "secondary" ingot; and that even if it had not been, its monopoly would not have been retained by unlawful means, but would have been the result of a growth which the Act does not forbid, even when it results in a monopoly. We shall first consider the amount and character of this competition; next, how far it established a monopoly; and finally, if it did, whether that monopoly was unlawful under § 2 of the Act.
From 1902 onward until 1928 "Alcoa" was making ingot in Canada through a wholly owned subsidiary; so much of this as it imported into the United States it is proper to include with what it produced here. In the year 1912 the sum of these two items represented nearly ninety-one per cent of the total amount of "virgin" ingot available for sale in this country. This percentage varied year by year up to and including 1938: in 1913 it was about seventy-two per cent; in 1921 about sixty-eight per cent; in 1922 about seventy-two; with these exceptions it was always over eighty per cent of the total and for the last five years 1934-1938 inclusive it averaged over ninety per cent. The effect of such a proportion of the production upon the market we reserve for the time being, for it will be necessary first to consider the nature and uses of "secondary" ingot, the name by which the industry knows ingot made from aluminum scrap. This is of two sorts, though for our purposes it is not important to distinguish between them. One of these is the clippings and trimmings of "sheet" aluminum, when patterns are cut out of it, as a suit is cut from a bolt of cloth. The chemical composition of these is obviously the same as that of the "sheet" from which they come; and, although they are likely to accumulate dust or other dirt in the factory, this may be removed by well known processes. If a record of the original composition of the "sheet" has been preserved, this scrap may be remelted into new ingot, and used again for the same purpose. It is true that some of the witnesses Arthur V. Davis, the chairman of the board of "Alcoa" among them testified that at each remelting aluminum takes up some new oxygen which progressively deteriorates its quality for those uses in which purity is important; but other witnesses thought that it had become commercially feasible to remove this impurity, and the judge made no finding on the subject. Since the plaintiff has the burden of proof, we shall assume that there is no such deterioration. Nevertheless, there is an appreciable "sales resistance" even to this kind of scrap, and for some uses (airplanes and cables among them), fabricators absolutely insist upon "virgin": just why is not altogether clear. The other source of scrap is aluminum which has once been fabricated and the article, after being used, is discarded and sent to the junk heap..as for example, cooking utensils, like kettles and pans, and the pistons or crank cases of motorcars. These are made with a substantial alloy and to restore the metal to its original purity costs more than it is worth. However, if the alloy is known both in quality and amount, scrap, when remelted, can be used again for the same purpose as before. In spite of this, as in the case of clippings and trimmings, the industry will ordinarily not accept ingot so salvaged upon the same terms as "virgin." There are some seventeen companies which scavenge scrap of all sorts, clean it, remelt it, test it for its composition, make it into ingots and sell it regularly to the trade. There is in all these salvage operations some inevitable waste of actual material; not only does a certain amount of aluminum escape altogether, but in the salvaging process itself some is skimmed off as scum *424 and thrown away. The judge found that the return of fabricated products to the market as "secondary" varied from five to twenty-five years, depending upon the article; but he did not, and no doubt could not, find how many times the cycle could be repeated before the metal was finally used up.
There are various ways of computing "Alcoa's" control of the aluminum market as distinct from its production depending upon what one regards as competing in that market. The judge figured its share during the years 1929-1938, inclusive as only about thirty-three percent; to do so he included "secondary," and excluded that part of "Alcoa's own production which it fabricated and did not therefore sell as ingot. If, on the other hand, "Alcoa's" total production, fabricated and sold, be included, and balanced against the sum of imported "virgin" and "secondary," its share of the market was in the neighborhood of sixty-four per cent for that period. The percentage we have already mentioned over ninety results only if we both include all "Alcoa's" production and exclude "secondary". That percentage is enough to constitute a monopoly; it is doubtful whether sixty or sixty-four percent would be enough; and certainly thirty-three per cent is not. Hence it is necessary to settle what he shall treat as competing in the ingot market. That part of its production which "Alcoa" itself fabricates, does not of course ever reach the market as ingot; and we recognize that it is only when a restriction of production either inevitably affects prices, or is intended to do so, that it violates § 1 of the Act. Apex Hosiery Co. v. Leader, 310 U.S. 469, 501, 60 S. Ct. 982, 84 L. Ed. 1311, 128 A.L.R. 1044. However, even though we were to assume that a monopoly is unlawful under § 2 only in case it controls prices, the ingot fabricated by "Alcoa," necessarily had a direct effect upon the ingot market. All ingot with trifling exceptions is used to fabricate intermediate, or end, products; and therefore all intermediate, or end, products which "Alcoa" fabricates and sells, pro tanto reduce the demand for ingot itself. The situation is the same, though reversed, as in Standard Oil Co. v. United States, 221 U.S. 1, 77, 31 S. Ct. 502, 523, 55 L. Ed. 619, 34 L.R.A.,N.S., 834, Ann.Cas.1912D, 734, where the court answered the defendants' argument that they had no control over the crude oil by saying that "as substantial power over the crude product was the inevitable result of the absolute control which existed over the refined product, the monopolization of the one carried with it the power to control the other." We cannot therefore agree that the computation of the percentage of "Alcoa's" control over the ingot market should not include the whole of its ingot production.
As to "secondary," as we have said, for certain purposes the industry will not accept it at all; but for those for which it will, the difference in price is ordinarily not very great; the judge found that it was between one and two cents a pound, hardly enough margin on which to base a monopoly. Indeed, there are times when all differential disappears, and "secondary" will actually sell at a higher price: i. e. when there is a supply available which contains just the alloy that a fabricator needs for the article which he proposes to make. Taking the industry as a whole, we can say nothing more definite than that, although "secondary" does not compete at all in some uses, (whether because of "sales resistance" only, or because of actual metallurgical inferiority), for most purposes it competes upon a substantial equality with "virgin." On these facts the judge found that "every pound of secondary or scrap aluminum which is sold in commerce displaces a pound of virgin aluminum which otherwise would, or might have been, sold." We agree: so far as "secondary" supplies the demand of such fabricators as will accept it, it increases the amount of "virgin" which must seek sale elsewhere; and it therefore results that the supply of that part of the demand which will accept only "virgin" becomes greater in proportion as "secondary" drives away "virgin" from the demand which will accept "secondary." (This is indeed the same argument which we used a moment ago to include in the supply that part of "virgin" which "Alcoa" fabricates; it is not apparent to us why the judge did not think it applicable to that item as well.) At any given moment therefore "secondary" competes with "virgin" in the ingot market; further, it can, and probably does, set a limit or "ceiling" beyond which the price of "virgin" cannot go, for the cost of its production will in the end depend only upon the expense of scavenging and reconditioning. It might seem for this reason that in estimating "Alcoa's" control over the ingot market, we ought to include the supply of "secondary," *425 as the judge did. Indeed, it may be thought a paradox to say that anyone has the monopoly of a market in which at all times he must meet a competition that limits his price. We shall show that it is not.
In the case of a monopoly of any commodity which does not disappear in use and which can be salvaged, the supply seeking sale at any moment will be made up of two components: (1) the part which the putative monopolist can immediately produce and sell; and (2) the part which has been, or can be, reclaimed out of what he has produced and sold in the past. By hypothesis he presently controls the first of these components; the second he has controlled in the past, although he no longer does. During the period when he did control the second, if he was aware of his interest, he was guided, not alone by its effect at that time upon the market, but by his knowledge that some part of it was likely to be reclaimed and seek the future market. That consideration will to some extent always affect his production until he decides to abandon the business, or for some other reason ceases to be concerned with the future market. Thus, in the case at bar "Alcoa" always knew that the future supply of ingot would be made up in part of what it produced at the time, and, if it was as far-sighted as it proclaims itself, that consideration must have had its share in determining how much to produce. How accurately it could forecast the effect of present production upon the future market is another matter. Experience, no doubt, would help; but it makes no difference that it had to guess; it is enough that it had an inducement to make the best guess it could, and that it would regulate that part of the future supply, so far as it should turn out to have guessed right. The competition of "secondary" must therefore be disregarded, as soon as we consider the position of "Alcoa" over a period of years; it was as much within "Alcoa's" control as was the production of the "virgin" from which it had been derived. This can be well illustrated by the case of a lawful monopoly: e. g. a patent or a copyright. The monopolist cannot prevent those to whom he sells from reselling at whatever prices they please. United States v. General Electric Co., 272 U.S. 476, 484, 47 S. Ct. 192, 71 L. Ed. 362. Nor can he prevent their reconditioning articles worn by use, unless they in fact make a new article. Wilson v. Simpson, 9 How. 109, 123, 13 L. Ed. 66. At any moment his control over the market will therefore be limited by that part of what he has formerly sold, which the price he now charges may bring upon the market, as second hand or reclaimed articles. Yet no one would think of saying that for this reason the patent or the copyright did not confer a monopoly. Again, consider the situation of the owner of the only supply of some raw material like iron ore. Scrap iron is a constant factor in the iron market; it is scavenged, remelted into pig, and sold in competition with newly smelted pig; an owner of the sole supply of ore must always face that competition and it will serve to put a "ceiling" upon his price, so far as there is enough of it. Nevertheless, no one would say that, even during the period while the pig which he has sold in the past can so return to the market, he does not have a natural monopoly. Finally, if "Alcoa" is right, precisely the same reasoning ought to lead us to include that part of clippings and trimmings which a fabricator himself saves and remelts "process scrap" for that too pro tanto reduces the market for "virgin." It can make no difference whether the original buyer reclaims, or a professional scavenger. Yet "Alcoa" itself does not assert that such "process scrap" competes; indeed it was at pains to prove that this scrap was not included in its computation of "secondary."
We conclude therefore that "Alcoa's" control over the ingot market must be reckoned at over ninety per cent; that being the proportion which its production bears to imported "virgin" ingot. If the fraction which it did not supply were the produce of domestic manufacture there could be no doubt that this percentage gave it a monopoly lawful or unlawful, as the case might be. The producer of so large a proportion of the supply has complete control within certain limits. It is true that, if by raising the price he reduces the amount which can be marketed as always, or almost always, happens he may invite the expansion of the small producers who will try to fill the place left open; nevertheless, not only is there an inevitable lag in this, but the large producer is in a strong position to check such competition; and, indeed, if he has retained his old plant and personnel, he can inevitably do so. There are indeed *426 limits to his power; substitutes are available for almost all commodities, and to raise the price enough is to evoke them. United States v. Corn Products Refining Co., D. C., 234 F. 964, 976; United States v. Associated Press., D. C., 52 F. Supp. 362, 371; Fashion Originators Guild v. Federal Trade Commission, 2 Cir., 114 F.2d 80, 85. Moreover, it is difficult and expensive to keep idle any part of a plant or of personnel; and any drastic contraction of the market will offer increasing temptation to the small producers to expand. But these limitations also exist when a single producer occupies the whole market: even then, his hold will depend upon his moderation in exerting his immediate power.
The case at bar is however different, because, for aught that appears there may well have been a practically unlimited supply of imports as the price of ingot rose. Assuming that there was no agreement between "Alcoa" and foreign producers not to import, they sold what could bear the handicap of the tariff and the cost of transportation. For the period of eighteen years 1920-1937 they sold at times a little above "Alcoa's" prices, at times a little under; but there was substantially no gross difference between what they received and what they would have received, had they sold uniformly at "Alcoa's" prices. While the record is silent, we may therefore assume the plaintiff having the burden that, had "Alcoa" raised its prices, more ingot would have been imported. Thus there is a distinction between domestic and foreign competition: the first is limited in quantity, and can increase only by an increase in plant and personnel; the second is of producers who, we must assume, produce much more than they import, and whom a rise in price will presumably induce immediately to divert to the American market what they have been selling elsewhere. It is entirely consistent with the evidence that it was the threat of greater foreign imports which kept "Alcoa's" prices where they were, and prevented it from exploiting its advantage as sole domestic producer; indeed, it is hard to resist the conclusion that potential imports did put a "ceiling" upon those prices. Nevertheless, within the limits afforded by the tariff and the cost of transportation, "Alcoa" was free to raise its prices as it chose, since it was free from domestic competition, save as it drew other metals into the market as substitutes. Was this a monopoly within the meaning of § 2? The judge found that, over the whole half century of its existence, "Alcoa's" profits upon capital invested, after payment of income taxes, had been only about ten per cent, and, although the plaintiff puts this figure a little higher, the difference is negligible. The plaintiff does indeed challenge the propriety of computing profits upon a capital base which included past earnings that have been allowed to remain in the business; but as to that it is plainly wrong. An argument is indeed often made in the case of a public utility, that the "rate-base" should not include earnings re-invested which were greater than a fair profit upon the actual investment outstanding at the time. That argument depends, however, upon the premise that at common law even in the absence of any commission or other authority enpowered to enforce a "reasonable" rate it is the duty of a public utility to charge no more than such a rate, and that any excess is unlawfully collected. Perhaps one might use the same argument in the case of a monopolist; but it would be a condition that one should show what part of the past earnings were extortionate, for not all that even a monopolist may earn is caput lupinum. The plaintiff made no such attempt, and its distinction between capital, "contributed by consumers" and capital, "contributed by shareholders," has no basis in law. "Alcoa's" earnings belonged to its shareholders, they were free to withdraw them and spend them, or to leave them in the business. If they chose to leave them, it was no different from contributing new capital out of their pockets. This assumed, it would be hard to say that "Alcoa" had made exorbitant profits on ingot, if it is proper to allocate the profit upon the whole business proportionately among all its products ingot, and fabrications from ingot. A profit of ten per cent in such an industry, dependent, in part at any rate, upon continued tariff protection, and subject to the vicissitudes of new demands, to the obsolescence of plant and process which can never be accurately gauged in advance to the chance that substitutes may at any moment be discovered which will reduce the demand, and to the other hazards which attend all industry; a profit of ten per cent, so conditioned, *427 could hardly be considered extortionate.
There are however, two answers to any such excuse; and the first is that the profit on ingot was not necessarily the same as the profit of the business as a whole, and that we have no means of allocating its proper share to ingot. It is true that the mill cost appears; but obviously it would be unfair to "Alcoa" to take, as the measure of its profit on ingot, the difference between selling price and mill cost; and yet we have nothing else. It may be retorted that it was for the plaintiff to prove what was the profit upon ingot in accordance with the general burden of proof. We think not. Having proved that "Alcoa" had a monopoly of the domestic ingot market, the plaintiff had gone far enough; if it was an excuse, that "Alcoa" had not abused its power, it lay upon "Alcoa" to prove that it had not. But the whole issue is irrelevant anyway, for it is no excuse for "monopolizing" a market that the monopoly has not been used to extract from the consumer more than a "fair" profit. The Act has wider purposes. Indeed, even though we disregarded all but economic considerations, it would by no means follow that such concentration of producing power is to be desired, when it has not been used extortionately. Many people believe that possession of unchallenged economic power deadens initiative, discourages thrift and depresses energy; that immunity from competition is a narcotic, and rivalry is a stimulant, to industrial progress; that the spur of constant stress is necessary to counteract an inevitable disposition to let well enough alone. Such people believe that competitors, versed in the craft as no consumer can be, will be quick to detect opportunities for saving and new shifts in production, and be eager to profit by them. In any event the mere fact that a producer, having command of the domestic market, has not been able to make more than a "fair" profit, is no evidence that a "fair" profit could not have been made at lower prices. United States v. Corn Products Refining Co., supra, 1014, 1015 (234 F. 964). True, it might have been thought adequate to condemn only those monopolies which could not show that they had exercised the highest possible ingenuity, had adopted every possible economy, had anticipated every conceivable improvement, stimulated every possible demand. No doubt, that would be one way of dealing with the matter, although it would imply constant scrutiny and constant supervision, such as courts are unable to provide. Be that as it may, that was not the way that Congress chose; it did not condone "good trusts" and condemn "bad" ones; it forbad all. Moreover, in so doing it was not necessarily actuated by economic motives alone. It is possible, because of its indirect social or moral effect, to prefer a system of small producers, each dependent for his success upon his own skill and character, to one in which the great mass of those engaged must accept the direction of a few. These considerations, which we have suggested only as possible purposes of the Act, we think the decisions prove to have been in fact its purposes.
It is settled, at least as to § 1, that there are some contracts restricting competition which are unlawful, no matter how beneficent they may be; no industrial exigency will justify them; they are absolutely forbidden. Chief Justice Taft said as much of contracts dividing a territory among producers, in the often quoted passage of his opinion in the Circuit Court of Appeals in United States v. Addystone Pipe & Steel Co., 6 Cir., 85 F. 271, 291, 46 L.R.A. 122. The Supreme Court unconditionally condemned all contracts fixing prices in United States v. Trenton Potteries Co., 273 U.S. 392, 397, 398, 47 S. Ct. 377, 71 L. Ed. 700, 50 A.L.R. 989: and whatever doubts may have arisen as to that decision from Appalachian Coals Inc. v. United States, 288 U.S. 344, 53 S. Ct. 471, 77 L. Ed. 825, they were laid by United States v. Socony-Vacuum Co., 310 U.S. 150, 220-224, 60 S. Ct. 811, 84 L. Ed. 1129. It will now scarcely be denied that the same notion originally extended to all contracts "reasonable," or "unreasonable" which restrict competition. United States v. Trans-Missouri Freight Association, 166 U.S. 290, 327, 328, 17 S. Ct. 540, 41 L. Ed. 1007; United States v. Joint Traffic Association, 171 U.S. 505, 575-577, 19 S. Ct. 25, 43 L. Ed. 259. The decisions in Standard Oil Co. v. United States, 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 34 L.R.A.,N.S., 834, Ann.Cas.1912D, 734, and American Tobacco Co. v. United States, 221 U.S. 106, 31 S. Ct. 632, 55 L. Ed. 663, certainly did change this, and since then it has been accepted law that not all contracts which in fact put an end to existing competition are unlawful. Starting, however, with the authoritative premise that all contracts fixing prices are unconditionally *428 prohibited, the only possible difference between them and a monopoly is that while a monopoly necessarily involves an equal, or even greater, power to fix prices, its mere existence might be thought not to constitute an exercise of that power. That distinction is nevertheless purely formal; it would be valid only so long as the monopoly remained wholly inert; it would disappear as soon as the monopoly began to operate; for, when it did that is, as soon as it began to sell at all it must sell at some price and the only price at which it could sell is a price which it itself fixed. Thereafter the power and its exercise must needs coalesce. Indeed it would be absurd to condemn such contracts unconditionally, and not to extend the condemnation to monopolies; for the contracts are only steps toward that entire control which monopoly confers: they are really partial monopolies.
But we are not left to deductive reasoning. Although in many settings it may be proper to weigh the extent and effect of restrictions in a contract against its industrial or commercial advantages, this is never to be done when the contract is made with intent to set up a monopoly. As much was plainly implied in Swift & Co. v. United States, 196 U.S. 375, 396, 25 S. Ct. 276, 49 L. Ed. 518, where the court spoke of monopoly as being the "result" which the law seeks to prevent; and, although the language on pages 60 and 61 of Standard Oil Co. v. United States, 221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 34 L.R.A.,N.S., 834, Ann.Cas.1912D, 734, is not altogether clear, it seems to presuppose as a premise that a monopoly is always an "unreasonable restraint of trade." Again, the opinion in Sugar Institute v. United States, 297 U.S. 553, 598, 56 S. Ct. 629, 642, 80 L. Ed. 859, borrowing from Appalachian Coals Inc. v. United States, supra, 288 U.S. 344, 374, 53 S. Ct. 471, 77 L. Ed. 825, said: "Accordingly we have held that a co-operative enterprise otherwise free from objection, which carries with it no monopolistic menace" need not always be condemned. These were indeed only thrown out as steps in the argument; but Fashion Originators Guild v. Federal Trade Commission, 312 U.S. 457, 61 S. Ct. 703, 85 L. Ed. 949, was a ruling. That concerned a combination of dressmakers who set up a boycott against all retailers who should deal in dresses copied "pirated" from the dressmakers' designs. Before the Commission the dressmakers had offered to prove that "the practices of FOGA were reasonable and necessary to protect the manufacturer, laborer, retailer and consumer against devastating evils growing from the pirating of original designs and had in fact benefitted all four." (312 U.S. at page 467, 61 S. Ct. 708). All such evidence the Commission refused to hear, raising as sharply as possible the issue whether the combination could excuse itself as "reasonable" because of the benefits it conferred upon the industry. The court sustained the Commission because "the purpose and object of this combination, its potential power, its tendency to monopoly, the coercion it could and did practice upon a rival method of competition, all brought it within the policy of the prohibition", 312 U.S. 457 at page 467, 61 S. Ct. 708. Moreover, the Clayton Act itself, §§ 14 and 18, 15 U.S.C.A., shows that practices harmless in themselves will not be tolerated when they "tend to create a monopoly." Perhaps, it has been idle to labor the point at length; there can be no doubt that the vice of restrictive contracts and of monopoly is really one, it is the denial to commerce of the supposed protection of competition. To repeat, if the earlier stages are proscribed, when they are parts of a plan, the mere projecting of which condemns them unconditionally, the realization of the plan itself must also be proscribed.
We have been speaking only of the economic reasons which forbid monopoly; but, as we have already implied, there are others, based upon the belief that great industrial consolidations are inherently undesirable, regardless of their economic results. In the debates in Congress Senator Sherman himself in the passage quoted in the margin showed that among the purposes of Congress in 1890 was a desire to put an end to great aggregations of capital because of the helplessness of the individual before them.[1] Another aspect of the *429 same notion may be found in the language of Mr. Justice Peckham in United States v. Trans-Missouri Freight Association, supra, at page 323 (166 U.S. 290, 17 S. Ct. 540, 41 L. Ed. 1007). That Congress is still of the same mind appears in the Surplus Property Act of 1944, 50 U.S.C.A.Appendix § 1611 et seq., and the Small Business Mobilization Act, 50 U.S.C.A.Appendix § 1101 et seq. Not only does § 2(d) of the first declare it to be one aim of that statute to "preserve the competitive position of small business concerns," but § 18 is given over to directions designed to "preserve and strengthen" their position. In United States v. Hutcheson, 312 U.S. 219, 61 S. Ct. 463, 85 L. Ed. 788, a later statute in pari materia was considered to throw a cross light upon the Anti-trust Acts, illuminating enough even to override an earlier ruling of the court. Throughout the history of these statutes it has been constantly assumed that one of their purposes was to perpetuate and preserve, for its own sake and in spite of possible cost, an organization of industry in small units which can effectively compete with each other. We hold that "Alcoa's" monopoly of ingot was of the kind covered by § 2.
It does not follow because "Alcoa" had such a monopoly, that it "monopolized" the ingot market: it may not have achieved monopoly; monopoly may have been thrust upon it. If it had been a combination of existing smelters which united the whole industry and controlled the production of all aluminum ingot, it would certainly have "monopolized" the market. In several decisions the Supreme Court has decreed the dissolution of such combinations, although they had engaged in no unlawful trade practices. Perhaps we should not count among these Northern Securities Co. v. United States, 193 U.S. 197, 327, 24 S. Ct. 436, 48 L. Ed. 679, because it was decided under the old dispensation which ended with Standard Oil Co. v. United States, supra, (221 U.S. 1, 31 S. Ct. 502, 55 L. Ed. 619, 34 L.R.A.,N.S., 834, Ann.Cas.1912D, 734); but the following cases were later. United States v. Union Pacific R. Co., 226 U.S. 61, 88, 33 S. Ct. 53, 57 L. Ed. 124; International Harvester v. Missouri, 234 U.S. 199, 209, 34 S. Ct. 859, 58 L. Ed. 1276, 52 L.R.A.,N.S., 525; United States v. Reading Co., 253 U.S. 26, 57-59, 40 S. Ct. 425, 64 L. Ed. 760; United States v. Southern Pacific Co., 259 U.S. 214, 230, 231, 42 S. Ct. 496, 66 L. Ed. 907. We may start therefore with the premise that to have combined ninety per cent of the producers of ingot would have been to "monopolize" the ingot market; and, so far as concerns the public interest, it can make no difference whether an existing competition is put an end to, or whether prospective competition is prevented. The Clayton Act itself speaks in that alternative: "to injure, destroy, or prevent competition." § 13(a) 15 U.S.C.A. Nevertheless, it is unquestionably true that from the very outset the courts have at least kept in reserve the possibility that the origin of a monopoly may be critical in determining its legality; and for this they had warrant in some of the congressional debates which accompanied the passage of the Act. In Re Greene, C.C.Ohio, 52 F. 104, 116, 117; United States v. Trans-Missouri Freight Association, 8 Cir., 58 F. 58, 82, 24 L.R.A. 73. This notion has usually been expressed by saying that size does not determine guilt; that there must be some "exclusion" of competitors; that the growth must be something else than "natural" or "normal"; that there must be a "wrongful intent," or some other specific intent; or that some "unduly" coercive means must be used. At times there has been emphasis upon the use of the active verb, "monopolize," as the judge noted in the case at bar. United States v. Standard Oil Co., C.C.Mo., 173 F. 177, 196; United States v. Whiting, D.C., 212 F. 466, 478; Patterson v. United States, 6 Cir., 222 F. 599, 619; National Biscuit Co. v. Federal Trade Commission, 2 Cir., 299 F. 733, 738. What engendered these compunctions is reasonably plain; persons may unwittingly find themselves in possession of a monopoly, automatically so to say: that is, without having intended either to put an end to existing competition, or to prevent *430 competition from arising when none had existed; they may become monopolists by force of accident. Since the Act makes "monopolizing" a crime, as well as a civil wrong, it would be not only unfair, but presumably contrary to the intent of Congress, to include such instances. A market may, for example, be so limited that it is impossible to produce at all and meet the cost of production except by a plant large enough to supply the whole demand. Or there may be changes in taste or in cost which drive out all but one purveyor. A single producer may be the survivor out of a group of active competitors, merely by virtue of his superior skill, foresight and industry. In such cases a strong argument can be made that, although, the result may expose the public to the evils of monopoly, the Act does not mean to condemn the resultant of those very forces which it is its prime object to foster: finis opus coronat. The successful competitor, having been urged to compete, must not be turned upon when he wins. The most extreme expression of this view is in United States v. United States Steel Corporation, 251 U.S. 417, 40 S. Ct. 293, 64 L. Ed. 343, 8 A.L.R. 1121, from which we quote in the margin;[2] and which Sanford, J., in part repeated in United States v. International Harvester Corporation, 274 U.S. 693, 708, 47 S. Ct. 748, 71 L. Ed. 1302. It so chances that in both instances the corporation had less than two-thirds of the production in its hands, and the language quoted was not necessary to the decision; so that even if it had not later been modified, it has not the authority of an actual decision. But, whatever authority it does have was modified by the gloss of Cardozo, J., in United States v. Swift & Co., 286 U.S. 106, p. 116, 52 S. Ct. 460, 463, 76 L. Ed. 999, when he said, "Mere size * * * is not an offense against the Sherman Act unless magnified to the point at which it amounts to a monopoly * * * but size carries with it an opportunity for abuse that is not to be ignored when the opportunity is proved to have been utilized in the past." "Alcoa's" size was "magnified" to make it a "monopoly"; indeed, it has never been anything else; and its size, not only offered it an "opportunity for abuse," but it "utilized" its size for "abuse," as can easily be shown.
It would completely misconstrue "Alcoa's" position in 1940 to hold that it was the passive beneficiary of a monopoly, following upon an involuntary elimination of competitors by automatically operative economic forces. Already in 1909, when its last lawful monopoly ended, it sought to strengthen its position by unlawful practices, and these concededly continued until 1912. In that year it had two plants in New York, at which it produced less than 42 million pounds of ingot; in 1934 it had five plants (the original two, enlarged; one in Tennessee; one in North Carolina; one in Washington), and its production had risen to about 327 million pounds, an increase of almost eight-fold. Meanwhile not a pound of ingot had been produced by anyone else in the United States. This increase and this continued and undisturbed control did not fall undesigned into "Alcoa's" lap; obviously it could not have done so. It could only have resulted, as it did result, from a persistent determination to maintain the control, with which it found itself vested in 1912. There were at least one or two abortive attempts to enter the industry, but "Alcoa" effectively anticipated and forestalled all competition, and succeeded in holding the field alone. True, it stimulated demand and opened new uses for the metal, but not without making sure that it could supply what it had evoked. There is no dispute as to this; "Alcoa" avows it as evidence of the skill, energy and initiative with which it has always conducted its business; as a reason why, having won *431 its way by fair means, it should be commended, and not dismembered. We need charge it with no moral derelictions after 1912; we may assume that all it claims for itself is true. The only question is whether it falls within the exception established in favor of those who do not seek, but cannot avoid, the control of a market. It seems to us that that question scarcely survives its statement. It was not inevitable that it should always anticipate increases in the demand for ingot and be prepared to supply them. Nothing compelled it to keep doubling and redoubling its capacity before others entered the field. It insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and the elite of personnel. Only in case we interpret "exclusion" as limited to manoeuvres not honestly industrial, but actuated solely by a desire to prevent competition, can such a course, indefatigably pursued, be deemed not "exclusionary." So to limit it would in our judgment emasculate the Act; would permit just such consolidations as it was designed to prevent.
"Alcoa" answers that it positively assisted competitors, instead of discouraging them. That may be true as to fabricators of ingot; but what of that? They were its market for ingot, and it is charged only with a monopoly of ingot. We can find no instance of its helping prospective ingot manufacturers. We do not forget the Southern Aluminum Company in whose origin it did have some part; though that was over before the end of 1914 and was in any event scarcely late enough to count. We are speaking, not of its purchase of the remains of the plant in 1915; we are not suggesting as the plaintiff argues that that was a move to keep the plant out of the ingot market; we are speaking of the original venture. In December, 1911, Arthur V. Davis was in Europe, engaged in forming the "cartel" of 1912, which we will assume not to have been meant to affect the production of ingot in the United States; for so the judge found. The first form of the project was a corporation in which all the members of that "cartel" were to share "Alcoa," through its Canadian subsidiary. That plan was abandoned; but the French interests, which had been parties to it, organized the Southern Aluminum Company in its place; and the correspondence between those interests and "Alcoa" in 1913 especially the French letter of April 16 and "Alcoa's" answer of May 10 even though it may not justify the conclusion that the two were acting in conjunction, leaves no doubt that they were not to be competitors at arms length.[3] Perhaps, as the plaintiff argues, "Alcoa" did think that the new project might be useful in persuading the plaintiff, whose attack had just ended in the decree of 1912, that the company was to be a real competitor. Be that as it may, the expected competition was not to be of the ordinary kind.
We disregard any question of "intent." Relatively early in the history of the Act 1905 Holmes, J., in Swift & Co. v. United States, supra, (196 U.S. 375, 396, 25 S. Ct. 276, 49 L. Ed. 518), explained this aspect of the Act in a passage often quoted. Although the primary evil was monopoly, the Act also covered preliminary steps, which, if continued, would lead to it. These may do no harm of themselves; but, if they are initial moves in a plan or scheme which, carried out, will result in monopoly, they are dangerous and the law will nip them in the bud. For this reason conduct falling short of monopoly, is not illegal unless it is *432 part of a plan to monopolize, or to gain such other control of a market as is equally forbidden. To make it so, the plaintiff must prove what in the criminal law is known as a "specific intent"; an intent which goes beyond the mere intent to do the act. By far the greatest part of the fabulous record piled up in the case at bar, was concerned with proving such an intent. The plaintiff was seeking to show that many transactions, neutral on their face, were not in fact necessary to the development of "Alcoa's" business, and had no motive except to exclude others and perpetuate its hold upon the ingot market. Upon that effort success depended in case the plaintiff failed to satisfy the court that it was unnecessary under § 2 to convict "Alcoa" of practices unlawful of themselves. The plaintiff has so satisfied us, and the issue of intent ceases to have any importance; no intent is relevant except that which is relevant to any liability, criminal or civil: i. e. an intent to bring about the forbidden act. Note 59 of United States v. Socony-Vacuum Oil Co., supra, 310 U.S. 150 on page 226, 60 S. Ct. 811, on page 845, 84 L. Ed. 1129, on which "Alcoa" appears so much to rely, is in no sense to the contrary. Douglas, J., was answering the defendants' argument that, assuming that a combination had attempted to fix prices, it had never had the power to do so, for there was too much competing oil. His answer was that the plan was unlawful, even if the parties did not have the power to fix prices, provided that they intended to do so; and it was to drive home this that he contrasted the case then before the court with monopoly, where power was a necessary element. In so doing he said: "An intent and a power * * * are then necessary," which he at once followed by quoting the passage we have just mentioned from Swift & Co. v. United States, supra, 196 U.S. 375, 25 S. Ct. 276, 49 L. Ed. 518. In order to fall within § 2, the monopolist must have both the power to monopolize, and the intent to monopolize. To read the passage as demanding any "specific," intent, makes nonsense of it, for no monopolist monopolizes unconscious of what he is doing. So here, "Alcoa" meant to keep, and did keep, that complete and exclusive hold upon the ingot market with which it started. That was to "monopolize" that market, however innocently it otherwise proceeded. So far as the judgment held that it was not within § 2, it must be reversed.
II.
"Alcoa's" Unlawful Practices.
As we have said, the plaintiff also sought to convict "Alcoa" of practices in which it engaged, not because they were necessary to the development of its business, but only in order to suppress competitors. Since we are holding that "Alcoa" "monopolized" the ingot market in 1940, regardless of such practices, these issues might be moot, if it inevitably followed from our holding that "Alcoa" must be dissolved. It could be argued that the new companies which would then emerge, should not be charged in retrospect with their predecessor's illegal conduct; but should be entitled to start without the handicap of injunctions, based upon its past. Possibly that would be true, except that conditions have so changed since the case was closed, that, as will appear, it by no means follows, because "Alcoa" had a monopoly in 1940, that it will have one when final judgment is entered after the war. That judgment may leave it intact as a competing unit among other competing units, and the plaintiff might argue, and undoubtedly will, that, if it was in the past guilty of practices, aimed at "monopolizing" the ingot market, it would be proper and necessary to enjoin their resumption, even though it no longer will have a monopoly. For this reason it appears to us that the issues are not altogether moot. In spite of the prolixity of the evidence, the challenged practices can be divided into three classes: (a) the "preemption" of bauxite deposits and water power; (b) the suppression of several efforts by competitors to invade either the ingot market, or some of the markets for fabricated goods; (c) the "domination" of the markets for such goods, and particularly of the markets for "sheet" and "cable."
(a) "Pre-emption" of Bauxite and Water-Power.
The plaintiff attempted to prove, and asserts that it did prove, that "Alcoa" bought up bauxite deposits, both in Arkansas the chief source of the mineral in the United States and in Dutch, and British, Guiana, in excess of its needs, and under circumstances which showed that the purchases were not for the purpose of securing an adequate future supply, but only in order to seize upon any available supply and so assure its monopoly. The very statement of this charge shows that it depends upon "Alcoa's" intent, for, if the purchases provided *433 for the future needs of the business, or for what "Alcoa" honestly believed were its future needs, they were innocent. In its effort to show such an intent, here and elsewhere, the plaintiff made the whole history of the industry from its beginning the subject of inquiry, with a persistence which left no corner unsearched. The judge heard the evidence with unmatched patience, and punctilious care and minuteness; and with equal industry and detail considered it for almost a year before he gave his opinion, in which he overruled all the plaintiff's contentions. The plaintiff's brief before us seems to intimate that in doing so he was actuated by a bias in "Alcoa's" favor; and, if by that is meant that "Alcoa" completely satisfied him of its innocence throughout, bias he certainly showed. That, however, is precisely the bias which all evidence is intended to create, and which it should create, if a court does its duty. If, on the other hand, it is suggested that into his conclusions there entered motives, not derived from the evidence, the record is utterly devoid of any support for it.
We assume that Federal Rules of Civil Procedure, Rule 52(a), 28 U.S.C. A. following section 723c, applies as well to appeals taken under Rule 72, as to those taken under Rule 75, although it makes very little difference whether or not it does, because Rule 52(a) in substance merely carried over the earlier practice in equity to all trials before a judge. State Farm Mutual Automobile Insurance Co. v. Bonacci, 8 Cir., 111 F.2d 412, 415; Petterson Lighterage & Towing Corporation v. New York Central R. Co., 2 Cir., 126 F.2d 992, 995; Katz Underwear Co. v. United States, 3 Cir., 127 F.2d 965, 966; 3 Moore's Federal Practice, § 52.01. It is idle to try to define the meaning of the phrase, "clearly erroneous"; all that can be profitably said is that an appellate court, though it will hesitate less to reverse the finding of a judge than that of an administrative tribunal or of a jury, will nevertheless reverse it most reluctantly and only when well persuaded. This is true to a considerable degree even when the judge has not seen the witnesses. His duty is to sift the evidence, to put it into logical sequence and to make the proper inferences from it; and in the case of a record of over 40,000 pages like that before us, it is physically impossible for an appellate court to function at all without ascribing some prima facie validity to his conclusions. Consumers Import Co. v. Kawasaki, 2 Cir., 133 F.2d 781, 787. What the plaintiff is really asking is that we shall in effect reconsider the whole evidence de novo, as though it had come before us in the first instance. The impossibility of that at once appears, if we consider what it would have involved, had the appeal taken its usual course and been heard by the nine justices of the Supreme Court. However, whatever may be said in favor of reversing a trial judge's findings when he has not seen the witnesses, when he has, and in so far as his findings depend upon whether they spoke the truth, the accepted rule is that they "must be treated as unassailable." Davis v. Schwartz, 155 U.S. 631, 636, 15 S. Ct. 237, 39 L. Ed. 289; Adamson v. Gilliland, 242 U.S. 350, 353, 37 S. Ct. 169, 61 L. Ed. 356; Alabama Power Co. v. Jckes, 302 U.S. 464, 477, 58 S. Ct. 300, 82 L. Ed. 374. The reason for this is obvious and has been repeated over and over again; in such cases the appeal must be decided upon an incomplete record, for the printed word is only a part, and often by no means the most important part, of the sense impressions which we use to make up our minds. Morris Plan Industrial Bank v. Henderson, 2 Cir., 131 F.2d 975, 977. Since an appellate court must have some affirmative reason to reverse anything done below, to reverse a finding it must appear from what the record does preserve that the witnesses could not have been speaking the truth, no matter how transparently reliable and honest they could have appeared. Even upon an issue on which there is conflicting direct testimony, appellate courts ought to be chary before going so far; and upon an issue like the witness's own intent, as to which he alone can testify, the finding is indeed "unassailable," except in the most exceptional cases.
In the case at bar, the first issue was whether, when "Alcoa" bought up the bauxite deposits, it really supposed that they would be useful in the future. It would be hard to imagine an issue in which the credibility of the witnesses should more depend upon the impressions derived from their presence. "Alcoa" relied principally upon the testimony of three of its officers, though there were some issues (the purchase of bauxite was among them), as to which not all three testified. These were the chairman of its board, Arthur V. Davis; its president, Roy A. Hunt; and Davis' *434 brother, Edward K. Davis, a former vice-president. Arthur V. Davis was on the stand for seven weeks; his testimony occupies 844 printed pages on the direct and 1445, on the cross; Edward K. Davis, called by the plaintiff, was on the stand six weeks; his direct occupies 1727 pages and his cross, 146; Hunt was on the stand two weeks; in his case the corresponding figures are 266 and 346. Thus the judge had an unrivaled opportunity to observe how they bore themselves under a most prolonged and searching test; and he went out of his way to commend their candor and credibility. Nor could the issue turn upon the dependability of their memory; they knew why they had bought the bauxite; they were either speaking the truth, or perjuring themselves, not only upon this issue but elsewhere throughout this amazing record. Evidence must be beyond measure convincing which leads to that conclusion in the face of the most positive assurance from the only impartial observer at the time, that they seemed to him men of honor and veracity. While it is of course true that they had an interest to excuse their past conduct and that the transactions admitted a sinister interpretation, neither of these facts was conclusive. Upon this, as upon all the issues, the plaintiff had the burden and must lose unless it succeeded in doing more than leaving the proof in balance. Taking all these considerations together, it seems plain to us that we should be unwarranted in declaring these findings "clearly erroneous."
Little need be added as to the similar charge that "Alcoa" bought up suitable water power which it did not need; and did so for the purpose of preventing competition. It did buy a number of such sites which it did not fully use; but, considering the extraordinary increase in ingot production which in fact took place even without the witnesses' explanations the inference which the plaintiff asks us to draw would be weak indeed; and certainly we should not be justified in holding that it overbore those explanations.
(b) Suppression of Competitors Seeking to Invade the Ingot Market.
The plaintiff relies upon two transactions as showing that "Alcoa" tried to suppress incipient competition by purchasing interests in two Norwegian aluminum companies; and a third, by purchasing interests in water-power at the head of the Saguenay River, Canada. The Ford Motor Company, in the winter of 1920-1921, wished to secure an independent source of aluminum; and one of its representatives met Haskell, the president of the Baush Company, and consulted him about getting one. Haskell in that winter saw Kloumann, the representative of a Norwegian company, which we may call "A. H. Norsk"; and Haskell got an option on the property. There was a sharp dispute as to whether Arthur V. Davis learned of these negotiations; but we shall assume that he did so shortly after May 18, 1921, in spite of the fact that the letter which conveyed that information was excluded. In the following July, "Alcoa" agreed with Kloumann to buy a half interest in "A. H. Norsk," and bought it in October, 1922, after Davis had got permission from the Attorney General in accordance with the requirements of the decree of 1912. In the letter in which he stated the case to the Attorney General, Davis declared that he wished to have the property in order to compete with German producers abroad; and that is the reason which he gave on the stand, and which the judge accepted. This evidence also admits the interpretation that Davis wished to head off Haskell, and perhaps in fact he did; but we cannot see that the issue differs from that which arose over the purchases of bauxite and water-power. It is impossible to say á priori what motive actuated Davis; even though he knew that his purchase would interrupt Haskell's negotiations on behalf of the Ford Company, it by no means follows that he did not wish the property for the reasons he gave to the Attorney General. Indeed, the plaintiff did not prove that there were no other sources of foreign aluminum open to the Ford Company; or even that there were no plants which it could have bought. The purchase of the other Norwegian plant had no accompaniment of cutting out American competition; as to it "Alcoa's" good faith must certainly be accepted.
The last transaction was "Alcoa's" intervention in a large power development at the source of the Saguenay River in Lake St. John, Canada. This lake is of large area and capacity; and at some time before 1922, James B. Duke, a very rich financier, had secured two water-powers close to the outlet, about eighteen miles apart, called the Upper, and Lower, Developments. The Upper Development was built by 1924, but the Lower Development *435 was not completed till 1931. In 1922 a representative of Duke proposed to Davis that he should take some of the power from the Upper Development but nothing was done; but in 1924 "Alcoa" was planning to build a plant at Arvida, near the Saguenay River; and at some time after October 15 of that year, Davis and Duke resumed negotiations, though this time for the purchase of the Lower Development. These resulted in its purchase in July, 1925, by means of a merger into "Alcoa" of one of Duke's corporations, which owned the property. When Duke died in October, 1925, his executors wished to dispose of the Upper Development also, and "Alcoa" obtained a fifty-three and one-half per cent interest in it during the spring of 1926. All the power used at Arvida has come from the Upper Development; and "Alcoa," after finishing the Lower Development, sold the power to others, until "'Limited" acquired the property in 1938.
In October, 1924, the brothers, Uihlein, who had formerly been brewers in St. Louis, and had already bought a bauxite deposit in British Guiana, conferred with Duke about using the power of the Upper Development to make ingot; but nothing came of these negotiations. Davis said that the Uihleins told him that, when he and Duke began to deal with each other in the autumn of 1924, they had entirely abandoned the idea of going into the aluminum business, and so the judge found. The Uihleins, having given up the bauxite business, sold out their deposits in British Guiana in December, 1924, to three equal interests, of which "Alcoa" was one. (This was one of the purchases considered in the preceding heading.) Haskell on his own account also negotiated with Duke for an interest in the Upper Development, but these negotiations had ended before Duke's death. The plaintiff argues that "Alcoa" was aware of the negotiations between Duke and the Uihleins, and between Duke and Haskell; and knew that, once it had secured the Lower Development, Duke was sure to lose interest in any independent aluminum plant. It adds that the fact that "Alcoa" has never used the Lower Development to manufacture ingot, shows that it must have been bought for another purpose. "Alcoa" answers that its original purpose was to develop the Lower Development after the Arvida plant had been built, meanwhile taking power from the Upper; that it was only after Duke's death that it bought a share in the Upper; and that the Uihlein and Haskell projects had nothing to do with its purchase of the Lower Development. This answer is not so patently implausible an explanation that the judge was bound to reject it, and to find that the plaintiff had carried the burden of proof upon the issue.
(c) "Alcoa's" Domination of the Fabricating Fields.
The last of "Alcoa's" supposedly unlawful practices was its infiltration into, and manipulation of, some of the markets for fabricated goods. These were three kinds: (1) buying an interest in the Aluminum Castings Company, and Aluminum Manufactures, Inc.; (2) the "Price Squeeze"; (3) the "Piston Patent Pool." (1) "Castings" were one of the earliest uses of aluminum; "Alcoa" began to make them about 1901, and by 1909 there were a number of companies engaged in the business. Five of these combined in that year to form the Aluminum Castings Company, of whose shares "Alcoa" received fifty per cent in exchange for advances made at the time. It does not appear what proportion of the total output these five companies had been manufacturing; certainly the plaintiff did not prove that they controlled the castings market. Later they acquired a sixth foundry; and in 1919 the combination was reorganized as Aluminum Manufactures, Inc. In 1922 it leased all its real estate and machinery to "Alcoa" for twenty-five years, and may be regarded as thereafter a subsidiary. We cannot see that in all this the plaintiff has proved anything relevant to the action. If it means that there was a monopoly of the castings market as such, there is no support whatever in the record for such an assertion. If it means that "Alcoa's" intervention in the castings business helps to support its claim that "Alcoa" monopolized the ingot market, the inference is extremely weak. Finally, there was nothing in the transactions themselves which indicated that they were independently unlawful, or that they served to make "Alcoa's" legal position as to the ingot industry less vulnerable than it would otherwise have been.
The Aluminum Goods Manufacturing Company makes cooking and other utensils out of aluminum. It was formed in 1909 by the consolidation of three small companies; all its plants are in Wisconsin, and its principal place of business is in that state. At the trial thirty-one per cent of *436 the shares were held by "Alcoa" and its officers, and this proportion had been thirty-six per cent in 1918. The proportion of the shares held by the three families, which had originally owned the combining companies, was almost thirty-six per cent, and if there were added the shares owned by employees and by residents of the town where the principal business is, the percentage was originally over fifty per cent and has so remained. Four of the six directors have always represented the original interests; the other two have represented "Alcoa's" interest. The four have frequently shown entire independence of "Alcoa," and on several occasions have overruled its two directors, although the two companies have, very naturally, usually acted in unison. Again, we are not clear whether the plaintiff means to argue that by its holdings in this company "Alcoa" "monopolizes," or has attempted to "monopolize," the utensil market; if so, there is no support for it. If on the other hand, the charge is that "Alcoa" invested in the company as part of its monopoly of the ingot market, that may be true. It may have hoped in this way to secure at least a friendly market for its ingot, if ingot competition should increase. As part of its general conduct after the Bradley patent expired, this purchase may thus be relevant, just as its investment in the castings business may be; but, like its investment in that business, there is nothing to support the conclusion that here was a practice or manoeuvre merely to suppress or exclude competitors; and there was no justification for joining the Aluminum Goods Manufacturing Company as a defendant.
(2) The "Price Squeeze."
The plaintiff describes as the "Price Squeeze" a practice by which, it says, "Alcoa" intended to put out of business the manufacturers of aluminum "sheet" who were its competitors; for "Alcoa" was itself a large in fact much the largest maker of that product, and had been the first to introduce it many years before the period in question. The challenged practice ended with the year 1932, shortly after the Department of Justice took up the complaints of several "sheet" makers, and began to investigate. The plaintiff says that the "squeeze" had been in operation for a long time before the year 1925, and that by means of it "Alcoa" had succeeded in eliminating four out of the eight companies which competed with it. However, it will not be necessary to go back of 1925, for the only question before us is whether an injunction shall go, and a test of that is whether the practice in the years 1925-1932, inclusive, was unlawful. If it was, the time when it began is irrelevant; if it was not, it was equally lawful in the earlier years. We shall not describe the manufacture of "sheet" "sheet rolling" beyond saying that "rolling ingot," not "notched bar ingot," must be used, and that it is forced between two rollers until it gets to the desired thickness: "gauge." It is made as "coiled sheet" or "flat sheet"; also the metal may be hardened by various alloys to bring up its tensile strength. The "squeeze" is asserted to have been exercised upon five "gauges" of "coiled sheet," four "gauges" of "flat sheet" and five "gauges" of alloyed metal called "Duralumin."
Between the years 1925 and 1937 inclusive "Alcoa's" books show the price of all these kinds of "sheet" for the "gauges" in question, together with the cost of making it from ingot. They also show the price of ingot, which was of course the same for all "gauges" and for all kinds of "sheet," as it was the same for all uses of aluminum other than "sheet." We are accepting as a basis the tables appearing as Section XVII of the Appendix to the plaintiff's brief which is more favorable to "Alcoa" than those which the judge used. Except for the years 1925-1928, inclusive, these tables do not include as an item of cost, "Unabsorbed Burden"; an accounting allowance, computed to cover the expense and loss properly to be attributed to that part of "Alcoa's" plant which was not being used during each year. We cannot see why it was not a proper item to include in the cost of production, for it was to be expected that other "sheet rollers" also would be unable to keep their plants fully occupied; and, if so, over a term of years they would have to "absorb" the ensuing loss in the price of the product. Moreover, as we have said, "Alcoa" itself so kept its books for the first four years of the period in question. Those were prosperous years during which the item was not likely to have been large, but even though we were to deduct in those years the average for the years in which "Alcoa" deducted it, the difference this would make in the average cost of "sheet" for the years before 1933 is trifling. At the expense of logical consistency and in order not to complicate the computations unduly, we have used the tables as they stand.
*437 The plaintiff's theory is that "Alcoa" consistently sold ingot at so high a price that the "sheet rollers," who were forced to buy from it, could not pay the expenses of "rolling" the "sheet" and make a living profit out of the price at which "Alcoa" itself sold "sheet." To establish this the plaintiff asks us to take "Alcoa's" costs of "rolling" as a fair measure of its competitors' costs, and to assume that they had to meet "Alcoa's" price for all grades of "sheet," and could not buy ingot elsewhere. It seems to us altogether reasonable, in the absence of proof to the contrary, to suppose that "Alcoa's" "rolling" costs were not higher than those of other "sheet rollers"; and, although it is true that theoretically, imported "virgin" was always available, for the reasons we have already given when we were discussing the monopoly in ingot, we think that it could at best be had at very little less than "Alcoa's" prices. As for "secondary," there were a number of uses for "sheet" for which the trade would not accept such of it as was available in the years in question. Besides, the "spread" between suitable grades of "secondary" and "virgin" was also very small.
Compressing into reasonable compass what the tables show, the result is as follows. For all the five "gauges" of "coiled sheet" for eight years, 1925-1932, the average profit open to competing "rollers" was .84 cents a pound, as against 4.7 cents for the five succeeding years, 1933-1937. The corresponding figures for "flat sheet" were .59 cents and 4 cents; and for "Duralumin," 4.9 cents and 11.8 cents. Moreover, in 31 instances out of 112 there was no "spread" at all; that is, the cost of ingot plus the cost of "rolling" was greater than the price at which "Alcoa" was selling "sheet." Obviously, there was in the eight years little or no inducement to continue in the "sheet" business, and Baush, the only "roller" of "Duralumin," gave up in 1931, although "Alcoa" insists, and the judge found, that this was because of its inefficiency. There can be little doubt that "Alcoa" changed the price of ingot in 1933 because it feared some action by the Department. True, it dropped the cost of ingot only about two and a half cents, and that advantage did not all inure to the profit of "sheet rollers," for the price of the majority of the "gauges" in all three kinds of "sheet" fell as well. However, the cost of making "sheet" also fell for every "gauge," and that in some part offset the fall in the price of "sheet." There resulted an average net gain in 1933 in all "gauges" of "coiled sheet" of 2.84 cents a pound; and the corresponding figure for "flat sheet" was 4.49 cents, and for "Duralumin," 3.14 cents. Moreover, although this advantage necessarily varied during the years 1934-1937, the cost of ingot the most important factor continued to be lower than in 1933 for all the following years except 1937, and then it was higher by only a quarter of a cent. The judge held and we agree that the "squeeze" was eliminated by lowering the price of ingot; and to do so "Alcoa" had to reduce the price, not only to "sheet rollers," but to all customers who bought ingot for any purpose. The drop of two and one half cents in 1933 went along with an actual though it is true a very small increase in mill cost, which left a margin of 4.62 cents for overhead expenses. Since 1925 that margin had never been less than ten cents except in 1932, when it was seven and a half cents. It is of course possible that the reduction in the price of ingot was accompanied by a corresponding drop in overhead; the record is silent; but it seems to us unreasonable to make that assumption: sudden changes of such magnitude are not to be expected. Rather we think that the plaintiff made out a prima facie case that "Alcoa" had been holding ingot at a price higher than a "fair price," and had reduced the price only because of pressure. If that was not so, it should have rebutted the inference.
In spite of this evidence the judge found that in these years "Alcoa" had not intended to monopolize the "sheet" market; or to exclude others; or to fix discriminatory prices, or prices of any kind; or to sell below the cost of production, measuring ingot price as part of the cost. The last of these findings presupposes that "Alcoa" could not have known the cost of "rolling sheet," for obviously it knew the prices at which "sheet" and ingot were selling. It says that it did not know, because the cost of "rolling sheet" varied from year to year, and could not be ascertained till the end of the year, so that it could never tell in advance what part of the gross "spread" between the "sheet" price and the ingot price would be left as profit. That is indeed hard to believe; but, assuming that it could not, since the judge so found, at least as early as 1930 the complaints charged it with notice of the effect *438 of what it was doing; and yet it kept on until the Department began to move, when it at once found means to cure the situation. Since we have not the question whether competitors were in fact damaged, but only whether there was enough evidence on which to base an injunction for the future, the only doubts are two: first, whether, when "Alcoa" came to know the effect of the "squeeze," as it did, the "squeeze" became unlawful; and second, whether the issue has become moot, which we will reserve until we come to discuss remedies. That it was unlawful to set the price of "sheet" so low and hold the price of ingot so high, seems to us unquestionable, provided, as we have held, that on this record the price of ingot must be regarded as higher than a "fair price." True, this was only a consequence of "Alcoa's" control over the price of ingot, and perhaps it ought not to be considered as a separate wrong; moreover, we do not use it as part of the reasoning by which we conclude that the monopoly was unlawful. But it was at least an unlawful exercise of "Alcoa's" power after it had been put on notice by the "sheet rollers'" complaints; and this is true, even though we assent to the judge's finding that it was not part of an attempt to monopolize the "sheet" market. We hold that at least in 1932 it had become a wrong.
The same considerations do not apply to "cable," of which "Alcoa" is the only fabricator. The plaintiff charges that "Alcoa" secured a monopoly of this by setting the price so low that there was no adequate "spread." That may be true, but aluminum "cable" must in any event compete with copper "cable," and the plaintiff failed to show that, even though the price of ingot were reduced so as to realize only a "fair" profit, it would have been possible to compete with copper "cable" and leave an adequate "spread" for "cable" fabricators. Complaints still continued after the "squeeze" in "sheet" had ended in 1933. The evidence permitted the conclusion that "Alcoa" may have had another intent in selling at a loss than to monopolize the market, or to suppress competition; and the finding was that it did. Such relief as the plaintiff can have, if any, upon this feature of the case, must therefore be limited to that against the monopoly in ingot.
(3) The Piston Patent Situation.
The plaintiff charges "Alcoa" with three kinds of misuses of patents: (1) an unlawful limitation of the production of licensees of its own patents; (2) accepting a license agreement from another patentee that unlawfully limited its own production; (3) using its own patents to force the purchase of ingot upon licensees. The situation was somewhat complicated. In 1922 a number of persons owned fifty-three design patents for automobile pistons; and "Alcoa" owned forty-five such patents; it also owned some process patents for making pistons. All the design patents were put into a pool, and "Alcoa" was made the exclusive licensee of all with power to sub-license. It then issued sublicenses to three companies of all the patents, limiting the number of pistons which each licensee could make. The plaintiff argues that, although this limitation was lawful as to the design patents, it was not lawful as to the process patents, because such a limitation is a way of extending the monopoly. We need not pass upon that proposition, although the Sixth Circuit upheld it in Barber-Colman Co. v. National Tool Co., 6 Cir., 136 F.2d 339, refusing to follow our decision in Straight Side Basket Corporation v. Webster Basket Co., 2 Cir., 82 F.2d 245, which was to the contrary. The decisions of the Supreme Court plainly show an increasing tendency not to allow a patentee to make use of the sanctions which follow upon an unrestricted prohibition of the right to make, vend and use. Although even at common law a patentee was not allowed to attach any condition upon the resale of a patented product, made and sold by himself, he was free to limit the price at which a licensee might himself sell what the licensee made, and it is not apparent to us what difference there is between that, and setting a price upon, or limiting the quantities of, a process. However, the whole subject is plainly in flux, and we do not wish to pass upon it unless we have to do so. In the case at bar we do not, because, granting all that the plaintiff says, it did not prove, in the case of any of the sublicensees, that the pistons were not covered by the design patents, as well as by the process patents; and if the limitation was valid upon the design patents, it made no difference whether or not it was invalid upon the process patents.
The next charge arises from a transaction between the Bohn Aluminum and Brass Corporation and "Alcoa" in 1927. The Bohn company had a product patent for a "strut type" piston, which "Alcoa" *439 wished to make; and the Bohn company agreed to give "Alcoa" a license under this patent in exchange for "Alcoa's" license under the design and process patents. "Alcoa's" liability for royalties were to be computed as follows: it was not to pay any royalties, unless it made more than 5,000,000 pistons of all sorts in any year; but, if it did, it was to pay a royalty upon the excess until it had paid upon all pistons made during that year under the Bohn patent. The plaintiff argues that it was unlawful for the Bohn company to license "Alcoa" under an agreement which exempted it from any royalties so long as it kept its total production of pistons below the stint, and that, if so, it was equally unlawful for "Alcoa" to submit to such a limitation upon its production. It is of course true that a patentee may not use his patent as a sanction for extending his monopoly beyond its terms; the cases cited by the plaintiff support that proposition. Standard Sanitary Manufacturing Co. v. United States, 226 U.S. 20, 33 S. Ct. 9, 57 L. Ed. 107; National Harrow Co. v. Hench, 3 Cir., 83 F. 36, 39 L.R.A. 299; Blount Manufacturing Co. v. Yale & Towne Manufacturing Co., C.C.Mass., 166 F. 555; United States v. New Departure Co., D.C., 204 F. 107. Moreover, the agreement offered an inducement to "Alcoa" to limit its general production of pistons, since it would in this way avoid any royalties to Bohn. We will not say that that was not an unlawful extension of the Bohn company's monopoly, and conceivably if that company were a party to this action, we might enjoin further performance of the contract; though we could not do so in the absence of the patentee. However, the agreement was made in 1927, and any patent which it covered has now expired, and with it, of necessity, the contract. It might still be argued that "Alcoa" ought to be enjoined from entering into any other such arrangement; but the point has become trivial to the last degree and appears to be raised for the first time in this appeal. We refuse to consider it. Helvering v. Wood, 309 U.S. 344, 60 S. Ct. 551, 84 L. Ed. 796.
Finally, the plaintiff charges that in 1929 "Alcoa" and Aluminum Industries one of the original three sublicensees of the pooled patents agreed, as one of the considerations for its license, that the sublicensee should buy its ingot from "Alcoa." The theory here is that this was part of "Alcoa's" effort to monopolize the ingot industry. This would be an unlawful practice, if proved; but the judge decided that no such agreement had been made, and the evidence certainly admitted that conclusion. We find nothing in "Alcoa's" dealing with the piston patents which demands any change in the judgment.
This concludes all that we think it necessary to say about "Alcoa's" supposed unlawful practices. We have omitted consideration of any supposed conspiracy with foreign producers to protect its domestic monopoly, because it will be more convenient to deal with this as part of the organization of "Limited," and of "Alcoa's" use made of "Limited" both before and after 1931 when the "Alliance" was founded, as will appear. The plaintiff's position in general is that "Alcoa" was independently a party to such combinations until the advent of the "Alliance": we do not understand, however, that it asserts that this continued thereafter, except in so far as "Limited" is to be understood as always acting as "Alcoa's" agent or affiliate.
III.
"Limited.
"Limited" was incorporated in Canada on May 31, 1928, to take over those properties of "Alcoa" which were outside the United States. Only two were excepted: a Dutch company which owned bauxite deposits in Dutch Guiana; and a Canadian power transmission company, which supplied "Alcoa's" Massena plant. "Alcoa" also retained until 1931 an Italian company which it was using for experiments, and apparently for a few months forgot a small Norwegian power plant, which was transferred in October, 1928. For special reasons the Alcoa Power Company, which owned the Lower Development on the Saguenay, was not conveyed until 1938, although both parties meant from the first to include it, and indeed it would have been useless to any plant in the United States. In exchange for all the properties conveyed, "Limited" issued all its common shares to "Alcoa's" common shareholders in the proportion of one for every three; and it thus resulted that the beneficial ownership remained what it had been, except for the interest of "Alcoa's" preferred shareholders, who were apparently considered amply protected by the properties in the United States. At first there remained some officers common to both companies; but by the middle of 1931, this had ceased, *440 and, formally at any rate, the separation between the two companies was complete. At the conclusion of the transfers a majority, though only a bare majority, of the common shares of "Alcoa" was in the hands of three persons: Andrew W. Mellon, Richard B. Mellon, his brother, and Arthur V. Davis. Richard Mellon died in 1933, and Andrew in 1937, and their shares passed to their families; but in January, 1939, the Davises, the officers and directors of "Alcoa" and the Mellon families eleven individuals in all collectively still held 48.9 per cent of "Alcoa's" shares, and 48.5 per cent of "Limited's"; and Arthur V. Davis was then the largest shareholder in both companies.
The companies had a number of transactions with each other, upon which the plaintiff relies to prove that they did not deal at arms length, but that "Limited" was organized only as a creature of "Alcoa." As one instance, "Limited" apparently would have been able at times to sell aluminum in the United States at a profit but did not do so, because the plaintiff argues they had agreed not to compete. The inference is not strong: to break into a new market protected by a tariff subject to change, particularly a market for long in the possession of a single powerful producer, is a step which an outsider might well hesitate to take. Another supposed instance of cooperation is the manufacture of some of "Limited's" ore into alumina at the East St. Louis plant of "Alcoa" during the years 1928-1936. "Limited" had no alumina plant of its own except one of an experimental nature until the end of 1936; yet, although "Alcoa" did make all "Limited's" alumina until 1932, thereafter "Limited" bought a great deal from foreign manufacturers. Although "Alcoa" sold this alumina to "Limited" at a lower price than it billed alumina to its own aluminum plants, "Alcoa's" intramural accounts are without significance. "Alcoa" also did some fabrication for "Limited" from "Limited's" own aluminum, and did it at only mill cost without overhead. That substantially ended by 1931; but, while it lasted, it was confessedly a favor, and indeed for a short season "Alcoa" undoubtedly did cast a kindly eye upon its "fledgling", as Arthur V. Davis called it. "Alcoa" also bought three parcels of "Limited's" aluminum: the first two in 1929, and the last in February, 1938. The first were perhaps at a lower price than "Limited" would otherwise have obtained, (the judge however found the prices were "fairly representative"); but they are not important, for they were both at the beginning of "Limited's" business, while there had as yet probably been little, if any, separation of interest between the two groups of shareholders. The third purchase was of quite a different character; it was part of the consideration for the conveyance to "Limited" of the Alcoa Power Company. In 1928 "Limited" was not able to pay for this property, although, as we have said, it always expected eventually to receive it. The price, as finally fixed in 1938, was $35,000,000, of which "Limited" was to pay $20,000,000 in mortgage bonds issued by the company itself, and the remainder in payments of two kinds: "Limited" was to pay "Alcoa" for power at a fixed rate, which should amount to at least $330,000 a year; and "Alcoa" was to have an option upon 75,000,000 pounds of aluminum, at thirteen cents, which was less than the market rate.
There was also some evidence that "Alcoa" took part in the formation of the "Alliance," a foreign "cartel" which we shall describe later. This consists very largely of declarations of Arthur V. Davis, put in his mouth by other witnesses; of a cable of Edward K. Davis to one of "Limited's" other officers; and of the improbability that the "Alliance" should have been set up without the active cooperation of Arthur V. Davis, especially as he was concededly in Europe and in communication with some foreign producers at about the time that the "Alliance" was first bruited. Edward K. Davis was the originator of the "Alliance"; he gave as his reason for it that he feared that the other foreign producers who had already joined in a "cartel," would shut him out. When these producers came to Canada in 1931 to arrange for the "Alliance," they visited Arthur V. Davis and made an extended visit to "Alcoa's" plants in the East. As anticipatory confirmation that the "Alcoa" had had a share in forming the "Alliance," the plaintiff also introduced evidence to show that before 1928 "Alcoa" had already had an understanding with foreigners as to prices. This consisted largely of the statements of what others had said about an agreement to keep their prices the same as "Alcoa's." The plaintiff rested particularly upon the testimony of Haskell, (who testified, not only upon this point, but more generally), *441 because, when Haskell testified, although he had been one of the important figures in the Baush company, he had made his peace with "Alcoa" which had employed him in some advisory capacity. It must be remembered, however, that he had already testified in the action of the Baush company against "Alcoa," and that he could scarcely have repudiated what he then said.
The Davises in answer to all this evidence swore that "Limited" had been organized for three reasons, quite different from controlling prices in the United States. First, there was at that time a growing nationalism in the British Empire where "Alcoa" sold most of its foreign aluminum which manifested itself in the slogan: "Buy British," and which would be better satisfied, if the properties were owned by a Canadian corporation, even though its shareholders were American. Next, "Alcoa" had neglected its foreign properties relatively and they would better prosper under a management, singly devoted to them. Finally, the time was coming when Arthur V. Davis wished to take a less active part in affairs; and there would be embarrassment in choosing between Hunt and Edward K. Davis, as his successor. Both said that the separation between the companies had been actually as complete as it was in form. Arthur said that, although while in Europe shortly before the "Alliance" was formed, foreign producers had spoken to him, he had then and always referred all their inquiries to his brother. He had discussed little with Edward any questions of policy about "Limited"; they had talked for the most part only about the history, development and future of the properties. He had indeed seen a preliminary draft of the agreement, forming the "Alliance," but not its final form until the time of the trial; and he had had nothing whatever to do with its formation. As for the trip of the foreign producers in the United States, it was purely social; a "good-will" excursion, so to say, in which the relations of "Alcoa" and foreign production was not discussed.
Upon the whole evidence the judge found that by 1935 "Limited" had become altogether free from any connection with "Alcoa," and that "Alcoa" had had no part in forming the "Alliance," or in any effort at any time to limit imports, to fix their price, or to intervene in price fixing "cartels" in Europe except the early ones. In short, he again felt persuaded by the testimony against any inferences to be drawn from the conceded facts, and from the declarations put in the mouths of the Davises. As before, to do otherwise he would have had to find that both these men had deliberately perjured themselves; and we cannot see that these findings present us with anything different in substance from those on which we have already passed. Considering the interests in "Limited" which Arthur V. Davis and both the Mellons had, it would perhaps have taxed our credulity to the breaking point to believe that they knew nothing about the formation of the "Alliance." Arthur V. Davis did not go as far as that; and that he and the Mellons should have put into the hands of Edward K. Davis the whole management of "Limited," does not appear to us to pass the bounds of reasonable entertainment. "Alcoa" had had collisions in plenty with the plaintiff and others before 1931; the first Baush action, which challenged the "price squeeze," had been filed in April, 1928, and the second in July, 1931. It was not unreasonable to believe that Arthur V. Davis and the Mellons, seeing that some kind of "cartel" might be an inescapable incident to continuing business abroad, wished in 1931 to keep "Alcoa" as far removed from it as possible.
Even so, the question remains whether "Alcoa" should be charged with the "Alliance" because a majority of its shareholders were also a majority of "Limited's" shareholders; or whether that would be true, even though there were a group, common to both, less than a majority, but large enough for practical purposes to control each. It is quite true that in proportion as courts disregard the fictitious persona of a corporation as perhaps they are increasingly disposed to do they must substitute the concept of a group of persons acting in concert. Nevertheless, the group must not be committed legally except in so far as they have assented as a body, and that assent should be imputed to them only in harmony with the ordinary notions of delegated power. The plaintiff did not prove that in 1931, to say nothing of 1936, there was not a substantial minority in each company made up of those who held no shares in the other; and the existence of the same majority in the two corporations was not enough by itself to identify the two. "Alcoa" would not be bound, unless those who held the majority of its *442 shares had been authorized by the group as a whole to enter into the "Alliance"; and considering the fact that, as we shall show, it was an illegal arrangement, such an authority ought convincingly to appear. It does not appear at all. For support of this proposition we need look no further than to the decisions of the Supreme Court under the "Commodity Clause." United States v. Delaware & Hudson Co., 213 U.S. 366, 29 S. Ct. 527, 53 L. Ed. 836; United States v. Lehigh Valley R. Co., 220 U.S. 257, 31 S. Ct. 387, 55 L. Ed. 458; United States v. Delaware, Lackawanna & Western R., 238 U.S. 516, 35 S. Ct. 873, 59 L. Ed. 1438; United States v. Reading Co., 253 U.S. 26, 40 S. Ct. 425, 64 L. Ed. 760; United States v. Lehigh Valley R. Co., 254 U.S. 255, 41 S. Ct. 104, 65 L. Ed. 253; United States v. Elgin, Joliet & Eastern R. Co., 298 U.S. 492, 56 S. Ct. 841, 80 L. Ed. 1300. There was in all these cases strong reason to hold that the railroads had an "indirect" interest in the coal moved, yet the decisions uniformly assumed that the ownership, not of a majority of the shares, but even of all the shares, did not make the corporations coalesce. Except when there was evidence that those in nominal control of one of the two corporations, exercised no independent decision, but followed the directions of the other, they were treated as juridically separate. Indeed, were it not so, a minority of shareholders would always be compelled to see to it that a majority perhaps even a controlling fraction of the shares did not pass to a confederated group who had a similar control over another corporation. For these reasons we conclude that "Alcoa" was not a party to the "Alliance," and did not join in any violation of § 1 of the Act, so far as concerned foreign commerce.
Whether "Limited" itself violated that section depends upon the character of the "Alliance." It was a Swiss corporation, created in pursuance of an agreement entered into on July 3, 1931, the signatories to which were a French corporation, two German, one Swiss, a British, and "Limited." The original agreement, or "cartel," provided for the formation of a corporation in Switzerland which should issue shares, to be taken up by the signatories. This corporation was from time to time to fix a quota of production for each share, and each shareholder was to be limited to the quantity measured by the number of shares it held, but was free to sell at any price it chose. The corporation fixed a price every year at which it would take off any shareholder's hands any part of its quota which it did not sell. No shareholder was to "buy, borrow, fabricate or sell" aluminum produced by anyone not a shareholder except with the consent of the board of governors, but that must not be "unreasonably withheld." Nothing was said as to whether the arrangement extended to sales in the United States; but Article X, known as the "Conversion Clause," provided that any shareholder might exceed his quota to the extent that he converted into aluminum in the United States or Canada any ores delivered to him in either of those countries by persons situated in the United States. This was confessedly put in to allow "Limited" to receive bauxite or alumina from "Alcoa," to smelt it into aluminum and to deliver the aluminum to "Alcoa." Edward K. Davis gave as an explanation of this that "Limited" needed some protection against "Alcoa's" possible refusal to convey Alcoa Power Company, which "Alcoa" had never actually bound itself to transfer. Although in 1931 "Alcoa" had all the producing capacity which it seemed likely to need (and so the event proved, for the clause was never invoked), Davis said that he did not know whether in the future the demand might not outrun that capacity, and whether "Alcoa" might not therefore be tempted to hold onto the Lower Development, unless "Limited" would smelt its alumina. That does indeed seem a somewhat farfetched reason; but on the other hand it is hard to suppose that "Alcoa" really feared that it could not meet its future needs and meant to lean upon "Limited." The incident may be thought to have a bearing on "Alcoa's" implication in the "Alliance"; but its only substantial importance, so far as we can see, is as showing whether the 1931 agreement was intended to cover the United States. That question arose very shortly after the agreement was made, and Edward K. Davis took the position that the United States was included, relying upon absence of any exception in the general language. His interpretation would seem to have been plainly right, not only for the reason he gave, but because otherwise there would have been no occasion for the "Conversion Clause." However, the other shareholders overruled him, and until 1936, when the new arrangement was made, imports into the United States *443 were not included in the quotas. The issue turned out to be unimportant anyway, for the annual average of imports during the five years was in the neighborhood of only fifteen million pounds.
The agreement of 1936 abandoned the system of unconditional quotas, and substituted a system of royalties. Each shareholder was to have a fixed free quota for every share it held, but as its production exceeded the sum of its quotas, it was to pay a royalty, graduated progressively in proportion to the excess; and these royalties the "Alliance" divided among the shareholders in proportion to their shares. This agreement unlike the first did not contain an express promise that the "Alliance" would buy any undisposed of stocks at a fixed price, although perhaps § 3 of Subdivision A, of Part X may have impliedly recognized such an obligation. Probably, during the two years in which the shareholders operated under this agreement, that question did not arise for the demand for aluminum was very active. Nevertheless, we understand from "Limited's" answer to an interrogatory that the last price fixed under the agreement of 1931 was understood to remain in force. Although this agreement, like its predecessor, was silent as to imports into the United States, when that question arose during its preparation, as it did, all the shareholders agreed that such imports should be included in the quotas. The German companies were exempted from royalties for obvious reasons and that, it would seem, for practical purposes put them out of the "cartel" for the future, for it was scarcely possible that a German producer would be unable to dispose of all its production, at least within any future period that would be provided for. The shareholders continued this agreement unchanged until the end of March, 1938, by which time it had become plain that, at least for the time being, it was no longer of service to anyone. Nothing was, however, done to end it, although the German shareholders of course became enemies of the French, British and Canadian shareholders in 1939. The "Alliance" itself has apparently never been dissolved; and indeed it appeared on the "Proclaimed List of Blocked Nationals" of September 13, 1944.
Did either the agreement of 1931 or that of 1936 violate § 1 of the Act? The answer does not depend upon whether we shall recognize as a source of liability a liability imposed by another state. On the contrary we are concerned only with whether Congress chose to attach liability to the conduct outside the United States of persons not in allegiance to it. That being so, the only question open is whether Congress intended to impose the liability, and whether our own Constitution permitted it to do so: as a court of the United States, we cannot look beyond our own law. Nevertheless, it is quite true that we are not to read general words, such as those in this Act, without regard to the limitations customarily observed by nations upon the exercise of their powers; limitations which generally correspond to those fixed by the "Conflict of Laws." We should not impute to Congress an intent to punish all whom its courts can catch, for conduct which has no consequences within the United States. American Banana Co. v. United Fruit Co., 213 U.S. 347, 357, 29 S. Ct. 511, 53 L. Ed. 826, 16 Ann.Cas. 1047; United States v. Bowman, 260 U.S. 94, 98, 43 S. Ct. 39, 67 L. Ed. 149; Blackmer v. United States, 284 U.S. 421, 437, 52 S. Ct. 252, 76 L. Ed. 375. On the other hand, it is settled law as "Limited" itself agrees that any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state reprehends; and these liabilities other states will ordinarily recognize. Strassheim v. Daily, 221 U.S. 280, 284, 285, 31 S. Ct. 558, 55 L. Ed. 735; Lamar v. United States, 240 U.S. 60, 65, 66, 36 S. Ct. 255, 60 L. Ed. 526; Ford v. United States, 273 U.S. 593, 620, 621, 47 S. Ct. 531, 71 L. Ed. 793; Restatement of Conflict of Laws § 65. It may be argued that this Act extends further. Two situations are possible. There may be agreements made beyond our borders not intended to affect imports, which do affect them, or which affect exports. Almost any limitation of the supply of goods in Europe, for example, or in South America, may have repercussions in the United States if there is trade between the two. Yet when one considers the international complications likely to arise from an effort in this country to treat such agreements as unlawful, it is safe to assume that Congress certainly did not intend the Act to cover them. Such agreements may on the other hand intend to include imports into the United States, and yet it may appear that they have had no effect upon them. That situation might be thought to *444 fall within the doctrine that intent may be a substitute for performance in the case of a contract made within the United States; or it might be thought to fall within the doctrine that a statute should not be interpreted to cover acts abroad which have no consequence here. We shall not choose between these alternatives; but for argument we shall assume that the Act does not cover agreements, even though intended to affect imports or exports, unless its performance is shown actually to have had some effect upon them. Where both conditions are satisfied, the situation certainly falls within such decisions as United States v. Pacific & Artic R. & Navigation Co., 228 U.S. 87, 33 S. Ct. 443, 57 L. Ed. 742; Thomsen v. Cayser, 243 U.S. 66, 37 S. Ct. 353, 61 L. Ed. 597, Ann.Cas.1917D, 322 and United States v. Sisal Sales Corporation, 274 U.S. 268, 47 S. Ct. 592, 71 L. Ed. 1042. (United States v. Nord Deutcher Lloyd, 223 U.S. 512, 32 S. Ct. 244, 56 L. Ed. 531, illustrates the same conception in another field.) It is true that in those cases the persons held liable had sent agents into the United States to perform part of the agreement; but an agent is merely an animate means of executing his principal's purposes, and, for the purposes of this case, he does not differ from an inanimate means; besides, only human agents can import and sell ingot.
Both agreements would clearly have been unlawful, had they been made within the United States; and it follows from what we have just said that both were unlawful, though made abroad, if they were intended to affect imports and did affect them. Since the shareholders almost at once agreed that the agreement of 1931 should not cover imports, we may ignore it and confine our discussion to that of 1936: indeed that we should have to do anyway, since it superseded the earlier agreement. The judge found that it was not the purpose of the agreement to "suppress or restrain the exportation of aluminum to the United States for sale in competition with "Alcoa." By that we understand that he meant that the agreement was not specifically directed to "Alcoa," because it only applied generally to the production of the shareholders. If he meant that it was not expected that the general restriction upon production would have an effect upon imports, we cannot agree, for the change made in 1936 was deliberate and was expressly made to accomplish just that. It would have been an idle gesture, unless the shareholders had supposed that it would, or at least might, have that effect. The first of the conditions which we mentioned was therefore satisfied; the intent was to set up a quota system for imports.
The judge also found that the 1936 agreement did not "materially affect the * * * foreign trade or commerce of the United States"; apparently because the imported ingot was greater in 1936 and 1937 than in earlier years. We cannot accept this finding, based as it was upon the fact that, in 1936, 1937 and the first quarter of 1938, the gross imports of ingot increased. It by no means follows from such an increase that the agreement did not restrict imports; and incidentally it so happens that in those years such inference as is possible at all, leads to the opposite conclusion. It is true that the average imports including "Alcoa's" for the years 1932-1935 inclusive were about 15 million pounds, and that for 1936, 1937 and one-fourth of 1938 they were about 33 million pounds; but the average domestic ingot manufacture in the first period was about 96 million and in the second about 262 million; so that the proportion of imports to domestic ingot was about 15.6 per cent for the first period and about 12.6 per cent for the second. We do not mean to infer from this that the quota system of 1936 did in fact restrain imports, as these figures might suggest; but we do mean that nothing is to be inferred from the gross increase of imports. We shall dispose of the matter therefore upon the assumption that, although the shareholders intended to restrict imports, it does not appear whether in fact they did so. Upon our hypothesis the plaintiff would therefore fail, if it carried the burden of proof upon this issue as upon others. We think, however, that, after the intent to affect imports was proved, the burden of proof shifted to "Limited." In the first place a depressant upon production which applies generally may be assumed, ceteris paribus, to distribute its effect evenly upon all markets. Again, when the parties took the trouble specifically to make the depressant apply to a given market, there is reason to suppose that they expected that it would have some effect, which it could have only by lessening what would otherwise have been imported. If the motive they introduced was over-balanced in all instances by motives *445 which induced the shareholders to import, if the United States market became so attractive that the royalties did not count at all and their expectations were in fact defeated, they to whom the facts were more accessible than to the plaintiff ought to prove it, for a prima facie case had been made. Moreover, there is an especial propriety in demanding this of "Limited," because it was "Limited" which procured the inclusion in the agreement of 1936 of imports in the quotas.
There remains only the question whether this assumed restriction had any influence upon prices, Apex Hosiery Co. v. Leader, supra, 310 U.S. 469, 60 S. Ct. 982, 84 L. Ed. 1311, 128 A.L.R. 1044. To that Socony-Vacuum Oil Co. v. United States, supra, 310 U.S. 150, 60 S. Ct. 811, 84 L. Ed. 1129, is an entire answer. It will be remembered that, when the defendants in that case protested that the prosecution had not proved that the "distress" gasoline had affected prices, the court answered that that was not necessary, because an agreement to withdraw any substantial part of the supply from a market would, if carried out, have some effect upon prices, and was as unlawful as an agreement expressly to fix prices. The underlying doctrine was that all factors which contribute to determine prices, must be kept free to operate unhampered by agreements. For these reasons we think that the agreement of 1936 violated § 1 of the Act.
IV.
The Remedies.
Nearly five years have passed since the evidence was closed; during that time the aluminum industry, like most other industries, has been revolutionized by the nation's efforts in a great crisis. That alone would make it impossible to dispose of the action upon the basis of the record as we have it; and so both sides agree; both appeal to us to take "judicial notice" of what has taken place meanwhile, though they differ as to what should be the result. The plaintiff wishes us to enter a judgment that "Alcoa" shall be dissolved, and that we shall direct it presently to submit a plan, whose execution, however, is to be deferred until after the war. It also asks a termination of all shareholding in common between "Alcoa" and "Limited"; and that injunctions shall go against any resumption of the putative unlawful practices. On the other hand, "Alcoa" argues that, when we look at the changes that have taken place particularly the enormous capacity of plaintiff's aluminum plants it appears that, even though we should conclude that it had "monopolized" the ingot industry up to 1941, the plaintiff now has in its hands the means to prevent any possible "monopolization" of the industry after the war, which it may use as it wills; and that the occasion has therefore passed forever which might call for, or justify, a dissolution: the litigation has become moot. "Limited" on its part argues that, so far as concerns the "Alliance" the only practice which we are holding unlawful the war has killed it forever; and, more particularly, that the decision in United States v. Hamburg-Amerikanische Packet-Fahrt, 239 U.S. 466, 36 S. Ct. 212, 60 L. Ed. 387, is on all fours. We do not agree with either side; but, before giving our reasons, we must determine for what purposes we may look outside the record.
Both sides agree that the judgment in this action should speak from the time of its entry, like a decree upon an old bill in equity (indeed, until the advent of the New Rules, the action would have been a "suit in equity," though the "bill" was until then more properly described as a "petition" and the plaintiff as a "petitioner"). There is no reason why an appellate court upon deciding an appeal from such a judgment should not direct the district court what judgment to enter; and so it often does. Nor is there any reason why in deciding what judgment to direct, it should not advise itself from outside the record of such facts as appear to admit of no genuine dispute: i.e. should take "notice" of whatever the district court itself might take "notice." Indeed, it would otherwise be impossible for an appellate court ever to dismiss an action upon the ground that it had become moot. We may, and we do, accept the figures of aluminum production in the report of the so-called "Truman Committee" as of March, 1944, which showed that the annual production of "Alcoa's" plants was about 828 million pounds; that the production of plants owned by the plaintiff which it had leased to "Alcoa," was about 1293 million pounds; and that the production of the Reynolds and Olin plants was together, 202 million pounds: a total of about 2300 million pounds. The case is otherwise as to any facts already existing in August, 1940, such as the *446 amount of bauxite in Arkansas, as to which the "Truman Report" also contains figures. Even though we took "notice" of these, the report would not be conclusive, or more than evidence. We could not constitutionally substitute it for the findings of a court after a trial: facts which a court may judicially "notice" do not for that reason become indisputable. Wigmore, § 2567a. At most we could do no more than treat the report as newly discovered evidence, and send the issue back for another trial, which in the present case we should under no circumstances be willing to do. For these reasons we refuse to take "notice" of facts relevant to the correctness of the findings; but we do take "notice" of those relevant to remedies.
After doing so, it is impossible to say what will be "Alcoa's" position in the industry after the war. The plaintiff has leased to it all its new plants and the leases do not expire until 1947 and 1948, though they may be surrendered earlier. No one can now forecast in the remotest way what will be the form of the industry after the plaintiff has disposed of these plants, upon their surrender. It may be able to transfer all of them to persons who can effectively compete with "Alcoa"; it may be able to transfer some; conceivably, it may be unable to dispose of any. The measure of its success will be at least one condition upon the propriety of dissolution, and upon the form which it should take, if there is to be any. It is as idle for the plaintiff to assume that dissolution will be proper, as it is for "Alcoa" to assume that it will not be; and it would be particularly fatuous to prepare a plan now, even if we could be sure that eventually some form of dissolution will be proper. Dissolution is not a penalty but a remedy; if the industry will not need it for its protection, it will be a disservice to break up an aggregation which has for so long demonstrated its efficiency. The need for such a remedy will be for the district court in the first instance, and there is a peculiar propriety in our saying nothing to control its decision, because the appeal from any judgment which it may enter, will perhaps be justiciable only by the Supreme Court, if there are then six justices qualified to sit.
But there is another, and even more persuasive, reason why we should not now adjudge a dissolution of any kind. The Surplus Property Act of 1944 provides the method by which the plaintiff's "surplus" properties shall be disposed of: "aluminum" plants and facilities" among the rest, § 19(a) (1). The "Surplus Property Board," § 5(a), is to "designate one or more Government agencies to act as disposal agencies," § 10(a), and they are to "have responsibility and authority for the disposition of such property and for the care and handling of such property, pending its disposition," § 11(d), subject to the Board's regulations. These "agencies" may dispose of the properties "by sale, exchange, lease, or transfer, for cash, credit, or other property, with or without warranty, and upon such other terms and conditions, as the agency deems proper" § 15(a). The following, among other "objectives," are to "regulate the orderly disposal of surplus property": "(b) to give maximum aid in the reestablishment of a peacetime economy of free independent private enterprise"; "(d) to discourage monopolistic practices and to strengthen and preserve the competitive position of small business concerns in an economy of free enterprise"; "(p) to foster the development of new independent enterprise"; "(r) to dispose of surplus property as promptly as feasible without fostering monopoly or restraint of trade * * *." So far as consistent "with the usual and customary commercial practice" preference is to be given to smaller purchasers, § 18(b); to whom, when proper, money may be lent § 18(f). Finally, no "disposal agency" shall even "begin negotiations" to sell a plant which has cost over a million dollars without advising the Attorney General of "the probable terms or conditions" of the sale; and he in turn must tell the "agency" whether "the proposed disposition will violate the antitrust laws." The act must not be read to "impair, amend, or modify" those laws, or to "prevent their application" to purchasers of surplus property. In view of these declarations of the purpose of Congress, the "agency" which the Board "designates" to dispose of the plaintiff's "aluminum plants and facilities" may well believe that it cannot do so without some plan or design for the industry as a whole, some comprehensive model which shall, so far as practicable, re-establish "free independent private enterprise," "discourage" monopoly, "strengthen" small competitors, "foster" independents and not foster "monopoly or restraint of trade." If it should find this method desirable, it would have to *447 learn what purchasers were in the market, how strong they were, what units they could finance and operate, and in what position they would be to compete. In such a model or design the "agency" would have to assign a place to "Alcoa," and that place no one of course can now anticipate. Conceivably "Alcoa" might be left as it was; perhaps it might have to be dissolved; if dissolved, the dissolution would depend upon how the other plants were distributed. If the "agency" should find it wise to proceed in this way, it may succeed in inducing "Alcoa" to accept the place assigned to it, particularly if the plan has not been prepared ex parte. If it does not succeed, then, but then only, will it be appropriate for the district court to act. We do not of course mean that in deciding whether to dissolve "Alcoa," or how to do it, that court must be governed by any plan which the "agency" may have devised, if it does devise one. But, plan or no plan, it must wait until it learns what the "agency" has in fact done. Moreover, if the "agency" does form a plan, it will have been an attempt to realize the same "objectives" for which the court itself must strive; and the court may well feel that it should accord to the "agency's" plan that presumptive validity which courts are properly coming more and more to recognize in the decisions of specialized tribunals. Nothing which we now say ought in any measure to limit the discretion of the "agency" to proceed in this way. Therefore we shall merely reverse the judgment, so far as it held that "Alcoa" was not "monopolizing" the ingot market, and remand the case to the district court.
From what we have already said, we must deny the plaintiff's prayer that those shareholders who own shares in both "Alcoa" and "Limited," shall dispose of one or the other. Since we have affirmed all the findings as to unlawful practices except the "price squeeze," again it follows that no injunction will go as to these. As to the "price squeeze" itself, "Alcoa" insists that, even if it was unlawful, it has been discontinued now for twelve years, and that there is no likelihood that it will ever be resumed. "Alcoa" might add that, since there can be no "squeeze" if "sheet rollers" can buy ingot at competitive prices, there can be no need of an injunction, if that privilege is assured to them; and that, since it will be assured to them when the final judgment is entered, an injunction would only bring coals to Newcastle. We defer for the moment any general discussion as to when abandonment of a practice ought to bar an injunction, for we shall have to consider it more specifically in the case of "Limited." It is enough here to say that, since "Alcoa" abandoned the "squeeze" only after it became aware that it was under investigation, it is in no position now to complain of whatever stigma there may be in an injunction; in such a setting there is no place for sensibilities; nor should lapse of time secure immunity. More can be said for the argument that "Alcoa" will be unable to "squeeze" at all, if it loses its monopoly; but no one can be sure how the industry may change, and it is impossible to say that the same practice may not in the future commend itself to those who may come into control; and at any rate there can be no injustice in making assurance doubly sure. An injunction will go against any resumption of the "price squeeze"; the terms to be decided by the district court.
Unless the issue has become moot, "Limited" also must be enjoined from entering into any "cartel," or agreement like that of 1936, covering imports into the United States; and even though it had become moot we should have to reverse the judgment, though we should then dismiss the complaint without prejudice, as in United States v. Hamburg-Amerikanische Packet-Fahrt, supra, 239 U.S. 466, 36 S. Ct. 212, 60 L. Ed. 387. We think, however, that the issue has not become moot, and that there are vital distinctions between the situation before us and that then before the Supreme Court. A number of steamship lines had there agreed to apportion between them the carriage of steerage passengers upon a non-competitive basis. Two or three of the lines were German, and the agreement was to end in any event on December 3, 1915. Moreover, it provided that "the withdrawal of any one of the lines from the contract should release all others from all future obligation unless the others agreed among themselves to continue," 239 U.S. at page 472, 36 S. Ct. 215. The decision was rendered on January 10, 1916, after the contract had come to an end, and after war had been waged for over a year between Germany and the Allies. The court treated the last circumstance as putting an end to the contract which certainly it did, so far as concerned *448 the German lines. As between the other parties the contract was also terminated, if the exclusion of the Germans because of the war was a "withdrawal from the contract," as it should have been regarded. Besides, the contract was of such a kind that the exclusion of the German lines probably made impossible the realization of its purposes in any part; for the traffic divided was only between European ports and the United States and Canada, and it would scarcely have value to any of the parties unless all the large lines joined.
The agreement of 1936 on the other hand, was to last for 99 years, though it could be terminated on six months' notice by any shareholder who held 200 shares, and all held as many as 200. As we have seen, the two German smelters had been exempted from royalties; and it is not altogether clear what future part remained for them in the enterprise, although some past obligations were compromised. It is true that some eighteen months before war was declared the other shareholders ceased to perform the agreement, but no one ever gave the prescribed notice of dissolution and, formally at least, the agreement continued and still continues. Indeed, it is possible that all but the German shareholders can start up the system again without renewal, if they please. The only doubt is whether the termination of the Germans' connection by the war automatically put an end to the agreement as between the others; and at least a strong argument can be made, in view of the provision for dissolution by notice, that it was not to be dissolved by the mere withdrawal of shareholders, certainly of shareholders who were not within the quota and did not share the royalties. Finally, the two situations differ in the fact that the "Alliance" itself, as a corporation, still persists, and all the original shareholders presumably remain such. The mere cessation of an unlawful activity before suit does not deprive the court of jurisdiction to provide against its resumption; a "case or controversy" may remain to be disposed of. There are plentiful authorities so holding. Southern Pacific T. Co. v. Interstate Commerce Commission, 219 U.S. 498, 514-516, 31 S. Ct. 279, 55 L. Ed. 310; Goshen Manufacturing Co. v. Myers Manufacturing Co., 242 U.S. 202, 37 S. Ct. 105, 61 L. Ed. 248; National Labor Relations Board v. Pennsylvania Greyhound Lines, 303 U.S. 261, 271, 58 S. Ct. 571, 82 L. Ed. 831, 115 A.L.R. 307; Federal Trade Commission v. Goodyear Co., 304 U.S. 257, 260, 58 S. Ct. 863, 82 L. Ed. 1326; Walling v. Haile Gold Mines, 4 Cir., 136 F.2d 102, 105. To disarm the court it must appear that there is no reasonable expectation that the wrong will be repeated. That is not true in the case at bar. Unless we are to grant an injunction, we ought not pass upon the issue; if we do not pass upon the issue, we are by no means persuaded that "Limited," when peace comes, will not enter into another "cartel" which again attempts to restrict imports. It has insistently argued that the Act does not cover such an agreement; and it alleges that it was forced into the "cartel," if it was to do a European business at all. It may be forced to do so again, unless a judgment forbids.
The judgment dismissing the complaint against the Goods Company will stand. The injunctions granted will embrace the officers of those corporate defendants against which they run.
Judgment reversed, and cause remanded for further proceedings not inconsistent with the foregoing.
NOTES
[1] "If the concerted powers of this combination are intrusted to a single man, it is a kingly prerogative, inconsistent with our form of government, and should be subject to the strong resistance of the State and national authorities * * *." 21 Cong. Record, 2457.
"The popular mind is agitated with problems that may disturb social order, and among them all none is more threatening than the inequality of condition, of wealth, and opportunity that has grown within a single generation out of the concentration of capital into vast combinations to control production and trade and to break down competition. These combinations already defy or control powerful transportation corporations and reach State authorities. They reach out their Briarean arms to every part of our country. They are imported from abroad. Congress alone can deal with them, and if we are unwilling or unable there will soon be a trust for every production and a master to fix the price for every necessity of life. * * *" 21 Cong. Record, 2460. See also 21 Cong. Record 2598.
[2] Justice McKenna for the majority said, 251 U.S. 417 at page 451, 40 S. Ct. 299: "The corporation is undoubtedly of impressive size, and it takes an effort of resolution not to be affected by it or to exaggerate its influence. But we must adhere to the law, and the law does not make mere size an offense, or the existence of unexerted power an offense. It, we repeat, requires overt acts and trusts to its prohibition of them and its power to repress or punish them. It does not compel competition, nor require all that is possible." The minority through Day, J. agreed, 251 U.S. 417 at page 460, 40 S. Ct. 302: "the act offers no objection to the mere size of a corporation, nor to the continued exertion of its lawful power, when that size and power have been obtained by lawful means and developed by natural growth, although its resources, capital and strength may give to such corporation a dominating place in the business and industry with which it is concerned. It is entitled to maintain its size and the power that legitimately goes with it, provided no law has been transgressed in obtaining it."
[3] For example, the first letter contained the following: "I do not believe that the political conditions existing in the United States make it advisable to associate our aluminium companies, even for the fabrication of alumina. Mr. Sternfeld, whom I talked with in Paris a few days ago, told me that in his conversations with you on the subject he was under the impression that you are of the same opinion as I, and that it would be preferable for your company, the Southern and the Northern each to work alone in all branches of fabrication and commerce." And again: "It would evidently be better for the equilibrium of the market if we would take a large portion of our supply of power with the view of producing nitrures" (nitrates?) "rather than to employ the whole to increase our production of metal." The answer in part read: "As to whether it is wiser to build at first one plant in the United States conjointly between the Southern Aluminum Company and the Aluminum Company of America is to my mind rather a detail, and, if you prefer to have the Southern Company build its own plant at Whitney, while the Aluminum Company builds another for itself, I see no objection to that procedure." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1342762/ | 120 Ga. App. 883 (1969)
172 S.E.2d 649
SIMEONIDES et al.
v.
ZERVIS.
44813.
Court of Appeals of Georgia.
Argued October 6, 1969.
Decided December 5, 1969.
Rehearing Denied December 19, 1969.
*884 Adams, Adams, Brennan & Gardner, Edward T. Brennan, for appellants.
Freedman, Haslam & Weiner, Aron G. Weiner, for appellee.
BELL, Chief Judge.
1. The appellee was born while his mother was lawfully married to George Zervis. This raises a strong presumption that appellee is the legitimate son of Zervis; but this presumption is rebuttable. Code § 74-101; Wright v. Hicks, 15 Ga. 160; Ellis v. Woods, 214 Ga. 105, 108 (103 SE2d 297). "When sexual intercourse is once proved, nothing short of impossibility in such case, should impugn the legitimacy of the offspring. But where sexual intercourse is presumed, merely from the propinquity of the parties, slighter proof is required to repel the presumption of paternity." Wright v. Hicks, (9) supra. The appellants, who have the burden of proof on summary judgment, have submitted no evidence that at or near the time of appellee's conception, his mother and his presumptive father in fact engaged in sexual intercourse so as to require application of the harsher rule of impossibility to rebut the presumption of legitimacy. The fact that four other children previously were born of this marriage shows no more than a presumption of sexual intercourse between the parties and a lesser degree of proof is required to rebut paternity. The declarations of the deceased made prior to this controversy are admissible on this issue. Estill v. Estill, 149 Ga. 384 (2) (100 S.E. 365). Consequently, a genuine issue of material fact is present for resolution by a jury, and appellants are not entitled to summary judgment. This holding is not in conflict with Sullivan v. Hugly, 32 Ga. 316. In that case a jury found in favor of the presumption of legitimacy where the evidence was conflicting. The court in passing on the sufficiency of the evidence stated it would not disturb the verdict since a case of plain impossibility was not demanded by the evidence.
*885 2. There remains an additional issue for resolution. The appellants are admitted nonresident aliens. They are not qualified to be administrators by Code § 113-1203. It is urged that their disqualification to administer by reason of their alienage also deprives them of power as the ostensible heirs at law of the deceased to nominate a qualified resident administrator. Reliance is placed upon subsection 3 of Code § 113-1202 which provides: "If there shall be several of the next of kin equally near in degree, the person selected in writing by a majority of those interested as distributees of the estate, and who are capable of expressing a choice, shall be appointed." This provision has been construed to apply where there is disagreement, which is not present in this case, as to the selection of an administrator among the heirs. Walker v. Rowe, 41 Ga. App. 769 (3b) (154 S.E. 722). The term "capable" to express a choice used in this context applies, we believe, to disability caused by infancy or mental deficiency. See Mattox v. Embry, 131 Ga. 283 (62 S.E. 202); 33 CJS 943, Executors and Administrators, § 44b. There is no express statutory provision which disqualifies an alien heir of the power to nominate an administrator. The Supreme Court in Headman v. Rose, 63 Ga. 458, held that if an heir is disqualified to act as administrator, he is entitled nonetheless to select some qualified person to be appointed. In this connection it is well to consider subsection 6 of Code § 113-1202 which provides that persons entitled to an estate may select a qualified administrator. As the appellants may be entitled to this estate, they are authorized to select an administrator notwithstanding that they are expressly disqualified to take the administration themselves because of their status as nonresident aliens.
Judgment affirmed. Eberhardt and Deen, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1655031/ | 711 F. Supp. 1301 (1989)
UNITED STATES of America, Plaintiff,
v.
MALIBU BEACH, INC., et al., Defendants.
Civ. A. No. 88-4742.
United States District Court, D. New Jersey.
April 27, 1989.
As Amended June 2, and June 19, 1989.
*1302 Samuel A. Alito, Jr., U.S. Atty. by James C. Woods, Asst. U.S. Atty., Newark, N.J., Letitia J. Grishaw and Margaret Kane Harrington, Environmental Defense Section, Land & Natural Resources Div., U.S. Dept. of Justice, Washington, D.C., and John B. *1303 Rutherford, U.S.E.P.A., New York City, for plaintiff.
Richard M. Hluchan, Drinker Biddle & Reath, Voorhees, N.J., for defendants.
OPINION
JOSEPH H. RODRIGUEZ, District Judge.
This matter is before the court on an application by the United States for a preliminary injunction. The Government seeks to enjoin defendants from further engaging in fill activities at the Malibu Beach site, located in Atlantic Beach, New Jersey, and to obtain a mandatory injunction requiring defendant to remove fill material that presently exists at the site.
The Government claims jurisdiction over the property under the Federal Water Pollution Control Act (hereinafter the "Clean Water Act" or "CWA"), 33 U.S.C. § 1251-1376. For jurisdiction to attach, the Government must prove that the fill activities impair the flow of "waters of the United States," as defined by 33 C.F.R. 328.3(a), or that defendants have filled an area designated as "adjacent wetlands," i.e. wetlands adjacent to waters of the United States, as defined by 33 C.F.R. 328.3(b).
A hearing was held on December 9, December 14, and December 22, 1988, and the parties have submitted both pre-trial and post-trial briefs in support of their positions.
I. THE CLEAN WATER ACT
The Clean Water Act (hereinafter "CWA") prohibits the discharge of pollutants into waters of the United States except when permitted in accordance with restrictions established under other sections of the Act. See 33 U.S.C. § 1311(a). Section 404 of the CWA regulates the discharge of fill material into "navigable waters" by requiring a discharger to obtain an appropriate permit from the Army Corps of Engineers before depositing dredged or fill material. 33 U.S.C. § 1344; United States v. Ciampitti, 583 F. Supp. 483, 491 (D.N.J.1984).
The CWA broadly defines "navigable waters" to include "all waters of the United States, including territorial seas." 33 U.S. C. § 1362(7). The regulations published by the Environmental Protection Agency (hereinafter "EPA") and the Army Corps or Engineers (hereinafter "the Corps") for implementing the CWA define "waters of the United States" to include:
All waters which are currently used, or were used in the past, or may be susceptible to use in interstate or foreign commerce, including all waters which are subject to the ebb and flow of the tide;
* * * * * *
[and] wetlands adjacent to waters (other than waters that are themselves wetlands) identified in paragraphs (a)(1)-(6) of this section....
33 C.F.R. § 328.3(a)(1), (7) (1987) (emphasis added); see also 40 C.F.R. § 230.3(s)(1), (7) (1987).
Regulation 328.4(b) states, in part, that the landward limits to CWA jurisdiction for tidal waters of the United States extend to the high tide line. 33 C.F.R. § 328.4(b)(1). The regulations define the high tide line as "the line of intersection of the land with the water's surface at the maximum height reached by a rising tide." 33 C.F.R. § 328.3(d). Section 328.3(d) further explains that in the absence of actual data, the high tide line may be established
by a line of oil or scum along shore objects, a more or less continuous deposit of fine shell or debris on the foreshore or berm, other physical markings or characteristics, vegetation lines, tidal gages, or other suitable means that delineate the general height reached by a rising tide. The line encompasses spring high tides and other high tides that occur with periodic frequency but does not include storm surges in which there is a departure from the normal or predicted reach of the tide due to the piling up of water against a coast by strong winds such as those accompanying a hurricane or other intense storm.
33 C.F.R. § 328.3(d) (emphasis added).
In addition, the regulations define "wetlands" as
*1304 those areas that are inundated or saturated by surface or ground water at a frequency and duration sufficient to support, and that under normal circumstances do support, a prevalence of vegetation typically adapted for life in saturated soil conditions. Wetlands generally include swamps, marshes, bogs, and similar areas.
33 C.F.R. § 328.3(c).
II. FINDINGS OF FACT
A. Waters Subject to the Ebb and Flow of the Tide
The Malibu Beach property is located along Longport Boulevard, between Longport and Ocean City, New Jersey. It is bound to the east by the Great Egg Harbor Inlet, and to the west by Longport Boulevard. Malibu Beach consists of a beach area abutting the inlet, a central dune area, and a pool of water (hereinafter "the pool"), which is situated between the dunes and Longport Boulevard. The Government contends that the pool falls under the definition of "waters of the United States" as articulated in the Clean Water Act and its regulations, because before defendants conducted the alleged fill activities, the pool was subject to the influence of the tides from Great Egg Harbor Inlet. In the alternative, the Government argues that the fill areas contain wetlands adjacent to the inlet, as defined in the regulations, and are therefore within the jurisdiction of the CWA.
At the hearing before this court, the Government presented evidence to establish that defendants deposited fill material in low areas of the dunes in order to stop the tidal flow between Great Egg Harbor Inlet and the pool. Those areas were designated as the "western breach area" and the "central breach area." The Government also presented evidence to establish that these areas, as well as three other areas of Malibu Beach, designated the "half moon," "road fill," and "eastern fill" areas, were wetlands within the meaning of the CWA.
Allen Jackson, a biologist employed by the United States Fish & Wildlife Service, testified at the hearing that he had visited the Malibu Beach site on March 10, 1983. He testified that on that date he observed a wrack lines[1] on both the pool side and the inlet side of the western breach area. See Government exhibits 13-14. Jackson stated that the wrack line on the pool side of the dunes indicated that the pool was subject to tidal flow when the tide was at its highest point.
Jackson testified that on October 2, 1984, he observed that tires, which have the effect of trapping sand, had been placed in the western breach area. Declaration of Jackson at 5, 9. He stated that on June 13, 1986, he again visited the property and noticed that, in addition to the tires, a considerable amount of soil and concrete rubble had been deposited in this area, creating a berm approximately 30 feet long and 10 feet wide, substantial enough to block the tidal flow from entering into the pool.
Jackson returned to the site on August 6, 1986, and photographed the western breach area. Government exhibit 16. He testified that on that day he observed a wrack line at the base of the berm on the inlet side, indicating that the berm had effectively blocked water from passing into the pool.
Jackson also testified that he went to the site on two occasions in 1987 and observed the condition of the berm. On June 5, 1987, he noticed that the berm had deteriorated since his June 13, 1986 inspection. On August 25, 1987, he noticed that the deposited tires were scattered throughout the pool, reflecting tidal influence on the pool itself. See Government exhibit 22.
The Government presented the testimony of Michael Claffey, an Army Corps of Engineers biologist who corroborated Jackson's testimony that a tidal connection had existed between the inlet and the pool through the central breach area before defendants deposited fill on the site. Claffey stated *1305 that he had gone to the site on November 3 and 4, 1986 and took aerial photographs of the area which indicate a path of water through the central breach area connecting the inlet to the pool. See Government exhibits 2-4. The Government presented evidence that the monthly lunar spring high tides had been predicted to occur on November 3 and 4, and that there was no indication of storm activity in the area on either of those dates. See Declaration of Steven Sambol. The photographs presented by the Government clearly show a connection between the two bodies of water. Goverment exhibits 2-4.
Claffey testified that he obtained an aerial photograph of the site taken on March 8, 1987 and conducted a stereoscopic analysis of that photograph. See Government exhibit 32. According to Claffey, the photographs indicate that the central breach areas did not contain fill material at that time, and that the sand in the central breach area was moist. Claffey indicated that the photographs were taken when the tide was 1.84 feet below mean high water. See Government exhibit 35. Although the photographs do not show a direct connection between the inlet and the pool, Claffey opined that the existence of moist sand in this low-lying area indicates that the central breaches were subject to tidal inundation, and that the waters of the inlet would eventually reach the breach area at high tide.
Jackson also observed the central breach area on June 5, 1987, and testified that the area remained unfilled and contained some standing water. He concluded that the standing water was the result of the receding high tide. On August 20, 1987, Jackson observed that this area had since been filled. He also noticed a prominent wrack line located on the landward side of the fill material, indicating to him that the breach area where the fill had been placed was subject to the normal flow of the tide. See Government exhibit 28; see also Government exhibits 29-30. The Government supported Jackson's conclusion with evidence that no intense storm activity of sufficient intensity to cause the same effects had taken place on the New Jersey coast between June 1, 1987 and August 31, 1987. Declaration by Michael Caropolo at 3.
Defendants proffered evidence to show that changes have occurred at the site since 1962. Dr. Norbert Psuty, a recognized geomorphologist, testified that the dunes were subject to migration into the pool, and explained how breaches may occur in the dunes. He indicated that storm waves, surges, and currents can break through the dune ridge, transporting sand from the inlet side of the dunes to the pool side. An accumulation of sand in the shape of a fan then results on the inland side of the dunes. See Government exhibits 3, 3A. This movement of sand yields what is referred to as a "washover fan," which, according to Psuty, is the eventual location of the migrating dune ridge.
Psuty further stated that the migration of the dunes inland serves to enhance the strength of the dune structure. According to Psuty, the breaches that may occur due to storm activity, winds, or surges, resulting in the washover fans, will eventually heal as a result of natural processes. Psuty indicated that during this healing process the breaches close, and dune vegetation takes root, thus stabilizing the dunes. In Dr. Psuty's opinion, the central breaches depicted in Government exhibits 2-4 may have healed by natural processes after Claffey's observations in November, 1986.
Psuty indicated that the mean high tide range at Malibu Beach is approximately 2.38 feet above mean sea level. He stated that spring high tides, the highest predictable tides, are 1.6 feet higher than the mean high tide range. He concluded that the highest predictable and measurable tides at Malibu Beach, therefore, would reach 3.98 feet above mean sea level.
Psuty opined that the pool could not be subject to the predictable flow of the tides. He noted that the dune ridge at the site extends approximately six feet above mean sea level. Because the predictable level of the spring high tides (3.98 feet above mean sea level) does not rise above the six feet dune ridge, Psuty concluded that a measurable *1306 periodic tidal connection between the inlet and the pool could not exist.
Defendants also rely on a letter dated January 21, 1985, from the Army Corps of Engineers to defendant Albert A. Ciardi. Defendants exhibit D-1. The letter indicates that it was the Corps' position in 1985 that "the high tide line was established as corresponding to the three-foot contour line that runs along the Oceanfront portion of the property...." According to defendants, the letter indicates that as late as 1985 the Corps recognized that CWA jurisdiction extended no farther than the threefeet contour line, and therefore did not extend above the six-feet high dunes or into the pool beyond the dunes.
Finally, defendants proffered evidence to suggest that third parties enhanced or created the breaches in the dune area with the use of four-wheel drive and other off-road vehicles. Defendants assert that by effectively barring the use of such vehicles on the property, they have reduced the probability that any breaches will occur in the future as a result of spring high tides that are unaffected by a storm, unusual wave action, or high winds.
This court finds that the Government has established that the pool was subject to the ebb and flow of the tide in the central breach areas. Claffey testified that he saw a tidal connection on November 3 and 4, 1986, and took photographs of the area on that day. See Government exhibits 2-4, 7, 17. The pictures clearly depict a tidal connection between the inlet and the pool. Id. The Government submitted weather data for November 2-4, 1986, which indicated that the winds in that area did not exceed 13 miles per hour, and only light showers occurred on the second and on the fourth. Declaration by Steven Sambol. Also, the Government proffered evidence that a spring high tide, which may be considered for the purpose of determining the high tide line under section 328.3(d), was predicted for that date. In the absence of any direct evidence to the contrary, this court finds that the Government has satisfied its burden of proving that the pool on the Malibu Beach property was subject to the ebb and flow of the tide on November 3 and 4, 1986.
This determination, however, does not resolve the issue of whether a tidal connection existed between the pool and the inlet at the time the fill material was placed in the central breaches. Defendants assert, relying on the testimony of Dr. Psuty, that the breaches closed naturally due to the washover fan effect, and that any fill activity merely reinforced the area that had already sealed by itself.
Courts have interpreted the regulations implementing the CWA liberally, because "Congress intended the Clean Water Act to assert `federal jurisdiction over the Nation's waters to the maximum extent permissible under the Commerce Clause of the Constitution.'" Ciampitti, 583 F.Supp. at 491 (quoting National Resource Defense Council v. Callaway, 392 F. Supp. 685, 686 (D.D.C.1975)). As previously indicated, the Government established that the pool was subject to the ebb and flow of the tide as late as November 4, 1986. At that time, the Army Corps of Engineers had jurisdiction over the property under the CWA because the pool was part of the "waters of the United States." See infra p. 1311. As such, any fill activities would require a permit from the Corps. See id. at 1311. To defeat CWA jurisdiction, defendants must prove that before their dumping activities commenced between June and August, 1987, the dynamic nature of the property had caused these breaches to fill by themselves.
Defendants presented historical and topographical data to establish that such breaches heal naturally. They relied on the testimony of Dr. Psuty and on numerous exhibits that detailed the changes in Malibu Beach from 1962 to the present. Although defendants have established that the site has been subject to many changes caused by storm activity and erosion, they failed to present any direct evidence or testimony to show that after November 3 and 4, 1986, the central breach areas closed naturally, blocking the flow of the tide into the pool. Psuty only speculated that the central breaches could have healed by *1307 themselves, and that if they did, the flow of the tide would have been blocked before the filling occurred.
The Government, on the other hand, strengthened its position that the breaches had been open before the area was filled. Michael Claffey testified that he conducted a stereoscopic analysis of the photograph taken on March 8, 1987, which depicted the central breaches when the water level was 1.84 feet below mean high tide. Claffey noted that the photograph reflected that the sand in the low area of the breaches was moist. Allen Jackson stated that on June 5, 1987, he saw some standing water there, indicating that the water had reached the central breaches at high tide.
The Government further demonstrated the tide's influence on the pool through its observation of the western breach area. Jackson testified that in 1983 he had inspected this area and observed wrack lines present on both the inlet side and the pool side of the dunes. Jackson again visited the western breach area on August 6, 1986, after the berm was created. He indicated that at that time a wrack line existed at the base of the berm on the inlet side. In August of 1987, Jackson again went to the western breach to inspect the condition of the berm, and saw that the tires that had been placed in the pool along the berm were scattered throughout the pool area. Government exhibit 22. Further, Claffey stated that on March 8, 1987, he noticed a wrack line near the berm on the inlet side. The testimony detailed above indicates that the water level on both sides of the berm fluctatued at periodic intervals in a manner that reflects tidal influence on the pool itself during the period of time in question.
Because a direct tidal connection existed at the central breach on November 3 and 4, 1986 and because the evidence suggests that the pool continued thereafter to be subject to the influence of the tide, and because there is no direct proof that the breach areas closed by natural causes, this court finds that the pool on the Malibu Beach property was subject to the ebb and flow of the tides of the Great Egg Harbor Inlet until fill material was placed on the property.
B. Wetlands at Malibu Beach
The Government submitted the declaration of Ann Ciccotti, a Life Scientist employed by the United States Environmental Protection Agency Regent II Marine and Wetlands Protection Branch. Ciccotti reported that she conducted an inspection of Malibu Beach on July 27, 1988, to determine the impact of filling activities on the pool and to determine whether wetlands exist at Malibu Beach. She collected soil and vegetation data from four locations on the property. See Declaration by Ciccotti at exhibit A. Ciccotti stated that she used the three-parameter approach to wetlands delineation, as set forth in the EPA's Wetland Delineation Manual, to determine if the site contains wetlands.[2]Id. at 3. Several courts have recognized the three-parameter approach as an appropriate method to determine whether an area is a wetland. See, e.g., Ciampitti, 583 F.Supp. at 491 n. 4; Avoyelles Sportsmen's League, Inc. v. Marsh, 715 F.2d 897, 917-18 (5th Cir.1983); United States v. Larkins, 657 F. Supp. 76, 80-84 (W.D.Ky.1987), aff'd, 852 F.2d 189 (6th Cir.1988), cert. denied, ___ U.S. ___, 109 S. Ct. 1131, 103 L. Ed. 2d 193 (1989).
Ciccotti indicated that there are five classifications of plant life species that may be associated with wetlands, according to the Plant List issued by the United States Fish and Wildlife Service: obligate wetland plants, facultative wetland plants, facultative plants, facultative upland plants, and upland plants. The categories reflect the probability that the environment in which a species of plant occurs is wetlands. Obligate wetland plants very rarely exist outside wetland areas. Therefore, there is a 99% probability that the area in which one of those species is found is wetlands. Facultative wetland plants exist in wetland areas with 67-99% frequency. Plants designated as facultative are found in wetland areas 34-66% of the time. Facultative upland plants are less frequently found in *1308 wetland areas, at a probability of only 1-33%. Finally, upland plants are present in wetland areas less than 1% of the time. Declaration by Ciccotti at 4.
Ciccotti took samples of the plant life from each of the four areas she studied at Malibu Beach. Site 1 was located on the northwestern part of the property, between the pool and Longport Boulevard. Id. at exhibit A. She observed that all vegetation there was either facultative wetland or obligate wetland species. Id. at 5. The species present were Saltmeadow Cordgrass, Saltmarsh Cordgrass, Glasswort, Common Reed, and Hightide Bush. Ciccotti observed that the top six inches of soil at Site 1 is composed of course sand with heavy organic streaking. From six to twelve inches below the surface she noticed fine sand with an accumulation of organic matter. Ciccotti stated that the hole used for the sample filled with water at a depth of eight inches. Id. Based upon her observations, Ciccotti concluded, using the three-parameter approach, that Site 1 is a wetland area. Id.
Ciccotti next observed an area at the central-western part of the property, located between the pool and the dunes, referred to as Site 2. See id. at exhibit A. There she observed five types of vegetation: Spartina patens, Spartina alternaflora, Salicornia, Phragmites australias, and Myrica, the majority of which are species designated as obligate wetlands and facultative wetland plants. Ciccotti noted that the soil and hydrology observations at Site 2 were the same as those at Site 1. Thus, she concluded that Site 2 is also a wetland. Id. at 5.
Site 3 is located a short distance west of the central breaches, between the pool and the dunes, at the approximate center of the Malibu Beach property. Id. at exhibit A. At this site, Ciccotti observed Spartina patens, designated by the Plant list as a facultative wetland species, and Spartina alternaflora, an obligate wetland plant. Id. at 5-6. The soil conditions at Site 3 were found to be similar to those of Sites 1 and 2. Id. at 6. In addition, Ciccotti observed dried algae on the ground, indicating that standing water had been present in that area for an extended period of time. As a result, Ciccotti concluded that Site 3 is a wetland. Id.
The fourth site was located at the eastern part of Malibu Beach, near the eastern fill. Id. at exhibit A. At Site 4 Ciccotti observed four species of vegetation, each of which was either an obligate wetland or facultative wetland species. Id. at 6. She indicated that the soil conditions at Site 4 were similar to those of the other three sites, and that water appeared in the sampling hole at nine inches below the surface. Thus, Ciccotti concluded that Site 4 is a wetland. Id.
Joseph Lomax, an environmental consultant, testified for defendants regarding the presence of wetlands at Malibu Beach. He agreed with Ciccotti that wetlands exist on the property. However, Lomax stated that for the sake of accuracy, he would have staked the property to delineate wetland areas, rather than merely drawing a sketch and plotting wetland locations.
Defendants further assert that no evidence exists to prove that they deposited fill material on the property.[3] Post-trial Memorandum by Defendants at 3. They concede that "limited wetlands" exist on the fringes of the pool, but claim that a proper wetlands delineation has not been conducted on the area. Defendants contend that a proper wetlands delineation would require mapping the entire area to determine precisely the extent of the wetlands on Malibu Beach. Id.; see Testimony of Lomax. Defendants therefore propose that the Government, in cooperation with Lomax, conduct a wetlands delineation to determine the extent to which wetlands exist in the half moon, 400 feet, road fill and eastern fill areas. Once a proper delineation *1309 establishes precisely which areas are wetlands, defendants offer to remove voluntarily any fill materials on such wetlands within a reasonable period of time. Posttrial Memorandum by Defendants at 3-4.
This court, however, finds that the declaration of Ann Ciccotti affirmatively establishes that wetlands exist on Malibu Beach. Ciccotti utilized the three-parameter approach for wetlands delineation, and determined that wetlands existed at all four sites. Defendants proffered no evidence to contradict Ciccotti's conclusion that Malibu Beach contains wetlands. In fact, defendants admit that wetlands are present on the property. Therefore, this court finds that the Government has shown that wetlands exist on Malibu Beach.
C. Wildlife on Malibu Beach
The Government proffered evidence to show that numerous birds inhabit the Malibu Beach property, including two endangered species, the piping plover and the least tern. C. David Jenkins, a Senior Zoologist for the State of New Jersey, Department of Environmental Protection, Division of Fish, Game & Wildlife & Nongame Species Program, reported that the piping plover utilizes the site for nesting. Declaration of Jenkins at 2-5. Jenkins indicated that the piping plover uses the pool behind the dunes as an alternative feeding ground, and that the dunes provide the birds with protection from humans and terrestrial predators. Id. at 4-5.
Lomax also testified regarding the nesting and feeding habits of the piping plover. He stated that the bird typically nests on the oceanward foot of beach dunes and feeds within the intertidal zone of the ocean. While the piping plover at Malibu Beach would typically nest and feed on the side of the dunes facing the Great Egg Harbor Inlet, Lomax agreed with Jenkins that the pool constitutes an important alternative feeding ground for this endangered species.
In addition, Lomax testified that the least tern, which has used Malibu Beach in the past, has not been seen at the property since 1983. The Government proffered no direct evidence to rebut Lomax's testimony, but asserted that migratory birds, including the piping plover and least tern, continue to use the property for feeding and nesting, and as a "stop-over" point during migration. Post trial brief by Government at 26.
The Government also introduced a photograph taken by Allen Jackson on August 20, 1987, which depicts numerous shore birds at the edge of the pool. Government exhibit 28. This photograph clearly indicates that birds utilized the pool area at Malibu Beach. Id.
This court finds that the Government has established that migratory and shore birds, including the piping plover, utilize the property and the pool for stop-over purposes and for feeding and nesting. Jenkins and Lomax agree that the piping plover nests at the site and uses the pool as an alternative to its primary feeding area, which is located on the inlet side of the dunes. Defendants do not dispute this fact. Post-trial memorandum by Defendants at 17-18. It is also undisputed that the piping plover has recently been seen at Malibu Beach. Furthermore, Government exhibit 28 clearly shows shore birds utilizing the area surrounding the pool as a stop-over and feeding ground.
The Government, however, failed to establish that the endangered least tern utilized the property any time after 1983. The Government did not proffer evidence to rebut Lomax's testimony that the bird has not recently been seen at Malibu Beach, and, therefore, has not satisfied its burden of proof.
In addition, other species of wildlife utilize the pool area at Malibu Beach. See Declaration of Ann Ciccotti at 6. Ciccotti reported that muskrat runs and fiddler crab burrows existed on the site on August 25, 1988. She observed two muskrats in the eastern area of the pool and numerous juvenile fishes, called "killifish," located among a thick growth of algae in the pool. Ciccotti opined that because the fish were very young, spawning had occurred within the pool. Id. at 8. Finally, she reported to have observed numerous minute mounds of *1310 earth along the edge of the pool, indicating the presence of invertebrates. Id.
III. CONCLUSIONS OF LAW
A. Standard for Preliminary Injunctive Relief
The traditional test for whether a preliminary injunction should issue was articulated by the Third Circuit in Ecri v. McGraw-Hill:
[T]he party seeking a preliminary injunction bears the burden of producing evidence sufficient to convince the court that (1) the movant has shown a reasonable probability of success on the merits; (2) the movant will be irreparably injured by denial of relief; (3) granting preliminary relief will not result in even greater harm to the other party; and (4) granting preliminary relief will be in the public interest.
Ecri v. McGraw-Hill, 809 F.2d 223, 226 (3d Cir.1987) (citation omitted).
In addition to having the authority to forbid the continuance of a course of conduct, the court may also compel a party to perform a particular act. See United States v. Price, 688 F.2d 204, 212 (3d Cir. 1982). Mandatory injunctive relief "is an extraordinary remedy that should be granted only under compelling circumstances and in a limited manner to restore the status quo." Golden State Transit Corp. v. City of Los Angeles, 660 F. Supp. 571, 575 (C.D.Cal.1987); see Price, 688 F.2d at 212-13. A mandatory injunction may be issued if the status quo "is a condition not of rest, but of action, and the condition of rest is exactly what will inflict the irreparable injury upon complainant." Price, 688 F.2d at 212 (quoting Toledo, A.A. & N.M. Ry. Co. v. Pennsylvania Co., 54 F. 730, 741 (N.D.Ohio 1893)). A mandatory preliminary injunction designed to prevent that injury is "appropriate if the other criteria relevant to issuing preliminary injunctions are satisfied." Price, 688 F.2d at 212.
1. Reasonable Likelihood of Success on the Merits
(a) Waters of the United States
The CWA prohibits discharge of any pollutants by any person. 33 U.S.C. § 1311(a). The Act's jurisdiction extends to "all waters of the United States, including territorial seas." 33 U.S.C. § 1362(7); see 33 U.S.C. § 1311(a). The CWA regulations extend the definition of waters to include all waters subject to the ebb and flow of the tide. 33 C.F.R. § 328.3(a)(1); supra at 1303.
The landward limit of CWA jurisdiction in tidal waters extends to the high tide line. C.F.R. 328.4(b)(1); supra at 1303. The high tide line encompasses all tides, except for those tides affected by "strong winds such as those accompanying a hurricane or other intense storm." 33 C.F.R. § 328.3(d); supra at 1303.
Defendants contend that the Government cannot utilize information gathered in August of 1987 to establish tidal influence in the pool. Defendants argue that any storm activity would cause the high tide line for that day to occur beyond the normal and predictable range of the tide. See 33 C.F.R. § 328.3(d). In the alternative, defendants argue that the winds that accompanied the August, 1987 storm activity, reported to have had velocities between 29 and 41 miles per hour, were "strong winds such as those accompanying a hurricane or other intense storm." Id. Therefore, defendants assert that the Government has failed to establish that the central breaches did not close by natural causes before the alleged fill activities occurred.
The Government asserts that the regulations exclude only those tides affected by intense storms of a synoptic scale. Such storms are "a complex of pressure, winds, clouds, and precipitation that is typically associated with systems of low pressure on the order of a few hundred to 1000 miles in diameter with a well-defined center." Post-trial Brief by Government at 13. Thus, the Government argues that the regulations refer only to large scale storms causing predictable departures from the normal high tide line.
This court rejects the Government's narrow interpretation of section 328.3(d). Such an interpretation would write into the *1311 regulations specific dimensional requirements for the term "other intense storms." A plain reading of the regulation indicates that no such limitation is contemplated in the CWA. Localized storms, accompanied by hurricane force winds, for example, would not satisfy the Government's definition, but certainly may cause the type of departure from the normal and predictable range of the tides contemplated by regulation 328.3(d).
However, this court also rejects defendants' position that any storm activity could fall within the section 328.3(d) exception. The regulation clearly refers to the strength of the winds accompanying the storm, and does not contemplate that evidence of any storm or rain in the vicinity can defeat jurisdiction of the CWA. Excluded from the high tide line are those tides affected by intense storms, accompanied by strong winds. The regulations, however, do not exclude tides that involve mere rain storms with lighter wind activity.
Defendants proffered evidence to show that wind conditions on August 25, 1987 ranged between 29 and 41 miles per hour. Even if accompanied by rain storm activity, winds of this magnitude do not rise to the level of "hurricane or other intense storms." Hurricane force winds, by definition, occur at wind velocity of 74 miles per hour or greater. The Weather Almanac at 44 (J. Ruffner & F. Bair 3d ed. 1981). This court need not determine the minimum wind force that falls within the exception of section 328.3(d). However, this court finds that winds of 41 miles per hour do not constitute "strong winds" as contemplated by section 328.3(d). The high tide lines observed in August, 1987, fall within the defined normal and predictable range of the tides.
The Government has presented strong evidence demonstrating that the pool was subject to the ebb and flow of the tide at the time it was filled. Supra at 1304-1305. A tidal connection existed through the central breaches on November 3 and 4, 1986, at a time when the tide was unaffected by intense storm activity. Id. at 1305, 1306. Observations of the site made throughout August, 1987 indicate that the water level in the pool rose periodically, evincing tidal influence in the pool. Id. at 1304-1305. Dr. Psuty's testimony merely suggests that the tidal flow may have been blocked by the dunes before fill material was dumped. Id. at 1305-1306, 1307. Accordingly, this court finds the pool behind the dunes at Malibu Beach was subject to the ebb and flow of the tide up until fill activities began on the property. The pool is therefore a water of the United States within the jurisdiction of the CWA as defined in regulation 328.3(a)(1). Defendants, therefore, were required to obtain a permit from the Army Corps of Engineers before they began filling on the property.
(b) Adjacent Wetlands
Wetlands, for the purpose of the CWA, are those areas that are inundated or saturated by water at such a frequency to support vegetation typically adapted for life in saturated soil conditions. 33 C.F.R. § 328.3(b). The regulations define "adjacent" to mean "bordering, contiguous, or neighboring." 33 C.F.R. § 328.3(c). "Adjacent wetlands," therefore, are all wetlands bordering, contiguous, or neighboring waters of the United States, including those wetlands that are separated therefrom "by man-made dikes or barriers, natural river berms, beach dunes and the like." 33 C.F.R. § 328.3(a)(7), (b), (c).
The Supreme Court in United States v. Riverside Bayview Homes, Inc., 474 U.S. 121, 106 S. Ct. 455, 88 L. Ed. 2d 419 (1985), examined the definition of wetlands for the purpose of the CWA. The Sixth Circuit had held that an area is not an adjacent wetland unless it is subject to flooding by adjacent navigable waters at a frequency sufficient to support the growth of aquatic vegetation. United States v. Riverside Bayview Homes, Inc., 729 F.2d 391 (6th Cir.1984). The Supreme Court reversed, determining that
[t]he plain language of the regulation refutes the Court of Appeals' conclusion that inundation or "frequent flooding" by the adjacent body of water is a sine qua non of a wetland under the regulation. *1312 Indeed, the regulation could hardly state more clearly that saturation by either surface or ground water is sufficient to bring an area within the category of wetlands, provided that the saturation is sufficient to and does support wetland vegetation.
474 U.S. at 129-30, 106 S.Ct. at 460-61.
In the present case, the Government has presented ample evidence to show that wetlands exist on Malibu Beach. Supra at 1307-1308. Ann Ciccotti observed the presence of water only eight to nine inches below the surface at each site on Malibu Beach. Each area contains both obligate wetland plants, present in wetland areas over 99% of the time, and facultative wetland plants, commonly found in wetland areas with a frequency of 67%-99%. Ciccotti's findings indicate that the property contains wetlands as defined in regulation 328.3(b). Defendants failed to present any evidence to refute this determination. This court, therefore, concludes that Malibu Beach contains wetlands for the purposes of the CWA. Id. at 1308.
To fall within the definition of adjacent wetlands, a wetland area must be "bordering, contiguous or neighboring" waters of the United States. This court has already determined that the pool was subject to the ebb and flow of the tide from Great Egg Harbor Inlet, which is a navigable waterway within the definition of "waters of the United States." Thus, the wetlands at Malibu Beach are adjacent to waters of the United States for the purpose of the CWA.
Additionally, the wetland areas of Malibu Beach fall within the jurisdiction of the CWA by an alternative means. The CWA regulations include as adjacent wetlands those areas separated by certain man-made or natural structures, including "beach dunes and the like." 33 C.F.R. § 328.3(c). Great Egg Harbor Inlet is a navigable waterway and therefore a water of the United States within the jurisdiction of the CWA. The wetlands of Malibu Beach are separated from the inlet only by beach dunes and sand. Even if this court concluded that the central breach areas had closed by natural causes before fill materials were deposited and that therefore there was no tidal connection between the two bodies of water, the wetlands contained in Sites 2, 3 and 4 are adjacent to the waters of the Great Egg Harbor inlet. Because defendants' property contains wetlands adjacent to waters of the United States, defendants were required to have a permit to fill on the property. See Riverside Bayview, 474 U.S. at 135, 106 S.Ct. at 464.[4]
2. Irreparable Injury
The Government has made a sufficient showing of irreparable harm to the environment of Malibu Beach.[5] The Government established that migratory birds use the property for feeding and nesting. Supra at 1309-1310. The piping plover, an endangered species, uses the tidal pool as an alternative feeding ground. Id. Defendants assert that the destruction of an alternative feeding ground does not constitute irreparable harm because the piping plover remains free to utilize the inlet side of the dunes as its primary feeding area. This court disagrees. Although the piping plover uses the pool only as an alternative feeding ground, that area may be needed for protection from predators and from tides affected by storms. The availability of alternative feeding grounds does not eliminate the potential injury to these endangered birds. Also, fiddler crabs and muskrats, which require a moist habitat, *1313 utilize the wetlands on the pool side of the dunes, and juvenile fish have been observed in the pool waters. If the fill remains on the property, precluding the passage of water from the inlet to the pool, the habitat for these animals will eventually disappear.
Equitable relief is appropriate here because there is no adequate remedy at law to compensate the public for the harm caused by the disposal of fill material into waters of the United States or in wetlands. Ciampitti, 583 F.Supp. at 498. The tidal pool and the wetlands serve a variety of critical functions, including providing a habitat for wildlife, a stop-over and feeding ground for migratory birds, and a nesting ground for the piping plover. Just as the court observed in Ciampitti, "[o]nly if the filling is immediately enjoined will the United States have the continuing benefit of the ecologically valuable lands." Id.
3. Possibility of Harm to Defendant
This court finds that the only foreseeable injury to defendants or any other interested party is economic loss. Defendants' loss, however, would be minimal, because injunctive relief would only require them to cease fill activities and remove fill material placed on the property. This will permit the tidal waters to return until the issues are finally decided. See Ciampitti, 583 F.Supp. at 499.
4. Public Interest
The express purpose of the Clean Water Act is "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." 33 U.S.C. § 1251(a). Strict enforcement of the CWA can only further the public interest of cleaning up the nation's waters and preserving the surrounding ecological environment. Ciampitti, 583 F.Supp. at 499. In the present case, the relief sought by the Government goes beyond private interests, and clearly involves matters of public concern. Accordingly, this court finds that the requested injunctive relief would further the public interest.
B. Relief
The Government has satisfied its burden for the issuance of preliminary injunctive relief barring defendants from further filling at Malibu Beach. In addition, this court is satisfied that mandatory injunctive relief requiring the removal of fill material placed at the site is necessary.
In this case, the status quo is a condition of action, and the existing condition of rest, where the fill material continues to exist at Malibu Beach precluding the flow of water into the pool, will cause serious harm to the ecological value of the property. See Price, 688 F.2d at 212. If this court allowed the fill to remain on the site, the very damage sought to be remedied by this action would continue, irreparably injuring the environment.
1. Defendants are required to remove all fill material from waters of the United States present on the Malibu Beach property, to the extent described:
a. Western Breach. The western breach is a berm area lying between Great Egg Harbor and the tidal pool of the Malibu Beach property in the extreme western portion of the property. Fill is to be removed from the western breach between the area marked by the yellow ribbons which have been placed at each end of the berm. This area constitutes a distance of 63 feet from west to east. Fill is to be removed to the depth indicated by a marker at the base of the berm.
b. Central Breaches. The central breaches are located eastward along the beach from the western breach. Fill is to be removed from the first central breach between the area marked by the yellow ribbons which have been placed at both ends of the fill, which spans some 19 feet from west to east. Fill is to be removed from the second central breach between the area marked by the yellow ribbons which have been placed at both ends of the fill, which spans some 36 feet from west to east. Fill is to be removed from the third central breach between the area marked by the yellow ribbons which have been placed *1314 at both ends of the fill, which spans some 31 feet from west to east.
c. Road Fill. The road fill is located east along the beach and through the dunes to the tidal pool and the southern end of the violation that the parties have designated as such. Fill is to be removed from the road fill area beginning at the point on the southern end marked by a yellow ribbon and northward for the entire length of the fill area which extends to the northern edge of the tidal pool. This fill shall be removed to a depth that is level with the natural contour of the tidal pool bottom.
d. Beach Fill. The beach fill is located toward the beach from the road fill and eastward until one reaches an area constituting a long mound of material approximately 4 feet high. The area of the violation measures approximately 170 feet east to west. This fill shall be removed.
e. Eastern Fill. The eastern fill is located in the tidal pool, on the northern side, just west of Sutor's Sports Club. The violation is comprised of two areas of fill: the first or northernmost area (located a short distance from the edge of the tidal pool) is approximately 10 feet high and 27 feet wide measured east to west. The second area of fill lies just to the south and west of the first. It is a graded area that forms an "L" shape that measures approximately 62 feet north to south and 50 feet west to east. The particular location and dimensions of the eastern fill areas are evidenced by the raised contour they form in contrast to the undisturbed grade of the tidal pool bottom. This fill shall be removed.
f. Half Moon Fill. The half moon fill is a fill in the shape of a half moon that exists on the edge of the tidal pool oceanward of Longport Boulevard. The portion of the half moon fill that lies in waters of the United States measures 138 feet from west to east and 58 feet from north to south. This portion of the fill shall be removed.
Any and all additional removal of fill, including removal of fill from the 400 feet fill, and any additional restoration of the affected areas shall occur following a final disposition of the case on the merits.
The removal of the fill ordered above shall occur under the supervision of representatives of the United States. Any disputes regarding the proper implementation of this order shall be resolved in the first instance between representatives of defendants and representatives of the United States. Should such resolution prove impossible, then such dispute shall be presented to this Court.
IV. CONCLUSION
This court concludes that preliminary relief barring further fill activity at Malibu Beach, and mandatory injunctive relief, requiring removal of fill material already in place at the site, must issue. The Government has established a strong likelihood of success that defendants placed fill in waters of the United States and on adjacent wetlands, in violation of the Clean Water Act. This court also finds that irreparable injury will occur to wildlife and to the environment if such relief is not granted. Further, the potential economic harm to defendants is minimal compared to the potential damage to the environment if relief is not granted. Finally, the public interest of maintaining clean waters and preserving the surrounding ecological environment can only be furthered by the granting of this preliminary injunction.
The foregoing serves as the court's Findings of Facts and Conclusion of Law pursuant to Fed.R.Civ.P. 52(a).
An appropriate order will be issued.
NOTES
[1] A wrack line is a line of debris left on the beach by the receding tide. If debris is present in the ocean water during high tide, a wrack line will remain at the high water mark after the tide has receded.
[2] The three-parameter approach requires an individual to record the species of vegetation, soil condition, and evidence of hydrology at a particular site.
[3] The record, however, indicates that three cease-and-desist orders were issued by the Corps to defendant Ciardi, directing him to stop all fill activities. Pre-trial brief by Government at 9-13. On each occasion, defendant Ciardi asserted his objection to CWA jurisdiction over the property. Id. The record does not indicate that defendants complied with any of the cease and desist orders. See id.
[4] As the Riverside court indicated, not all adjacent wetland areas are of great importance to the environment. 474 U.S. at 135 n. 9, 106 S.Ct. at 463 n. 9. In those situations, "the Corps may always allow development of the wetland for other uses simply by issuing a permit." Id. However, whether the wetlands are significantly intertwined with the ecosystems of adjacent waterways does not effect CWA jurisdiction over the property. Id.
[5] It is unclear in this circuit whether the Government must make a showing of irreparable harm for a violation of the Clean Water Act. See Ciampitti, 583 F.Supp. at 498. This court does not need to decide this issue because the Government has made a sufficient showing of irreparable harm. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1195793/ | 545 F.3d 179 (2008)
UNITED STATES of America, Appellee,
v.
Leonel MEJIA, a/k/a Little Chino, Defendant,
David Vasquez, a/k/a Gigante, and Ledwin Castro, a/k/a Hueso, Defendants-Appellants.
Docket Nos. 05-2856-cr, 05-6683-cr(CON), 06-1744-cr(CON).
United States Court of Appeals, Second Circuit.
Argued: August 30, 2007.
Decided: October 6, 2008.
*182 Richard P. Donoghue, Assistant United States Attorney (Roslynn R. Mauskopf, United States Attorney for the Eastern District of New York, and David C. James, Assistant United States Attorney, on the brief), Brooklyn, NY, for Appellee.
Peter J. Tomao, Garden City, NY, for Defendant-Appellant Ledwin Castro.
Charles S. Hochbaum, Brooklyn, NY, for Defendant-Appellant David Vasquez.
*183 Before: JACOBS, B.D. PARKER, and HALL, Circuit Judges.
HALL, Circuit Judge:
Appeal from judgment of conviction entered in the United States District Court for the Eastern District of New York (Wexler, J.) for conspiracy to commit assaults with a dangerous weapon in aid of racketeering activity, 18 U.S.C. § 1959(a)(6), three counts of assault with a dangerous weapon in aid of racketeering activity, id. § 1959(a)(3), and three counts of discharge of a firearm during a crime of violence, id. § 924(c)(1). We vacate the judgment after finding that the admission of expert witness Hector Alicea's testimony violated the Federal Rules of Evidence and the Sixth Amendment Confrontation Clause, and that the error was not harmless. We remand for retrial.
BACKGROUND
I. The Drive-By Shootings
On June 18, 2003, Ledwin Castro and David Vasquez (collectively, "Appellants"), along with several others, participated in two drive-by shootings on Long Island, New York. At the time, Appellants were members of the MS-13 gang.[1] MS-13 is a nationwide criminal gang organized into local subunits known as "cliques." At the time, to become a full member of MS-13, an individual was required to "make his quota," which meant to engage in acts of violence against members of rival gangs, such as the SWP and the Bloods. MS-13 had local cliques on Long Island, and Castro was the leader of the Freeport clique (the "Freeport Locos Salvatruchas," or "FLS").
On the day of the shootings, Vasquez, Castro, Ralph Admettre (a member of MS-13), and Nieves Argueta, a new initiate into MS-13, met at the apartment of Bonerje Menjivar (also a member of MS-13). There, the group discussed their plan to shoot members of rival gangs. They had been preparing to carry out the shootings for quite some time. A few weeks earlier, Admettre, acting at Castro's direction, had stolen the van that they would use. Earlier that day, Vasquez had informed Admettre that heVasquezhad procured a handgun belonging to the Freeport clique. While the group was at Menjivar's apartment, Menjivar gave Castro ammunition for the handgun.
Admettre, Castro, Vasquez, and Argueta put the plan into action that night. At about 9:40 p.m., Admettre drove the others to a laundromat in Hempstead, New York. After Vasquez and Castro reconnoitered the scene, attempting to determine whether anyone in the parking lot was a member of SWP, a rival gang, Admettre left the laundromat parking lot and stationed the van in a gas station parking lot across the street. Once the van was in position, Vasquez fired at the crowd in the laundromat parking lot from inside the van. Two individuals were hit. Ricardo Ramirez, age fifteen, was hit by three shots in the chest, arm, and leg. Douglas Sorto, age sixteen, was hit once in the leg. Both victims survived the shooting. After Vasquez fired these shots, Admettre drove away. Castro then called Menjivar and informed him that more ammunition would be needed. Admettre drove everyone back to Menjivar's apartment, and Menjivar gave Vasquez additional ammunition.
*184 Shortly thereafter, at approximately 10:20 p.m., Admettre, Castro, Vasquez, and Argueta traveled to a delicatessen parking lot in Freeport, New York. Upon arriving, they saw a group of young black men who they believed were members of the Bloods, a rival gang. Vasquez handed the handgun to Argueta, who proceeded to shoot one of the young men, Carlton Alexander, seven times in the back. Despite being hit by multiple shots, Alexander survived. After the shooting, the four men immediately abandoned the van. About one month later, local law enforcement arrested Castro, Vasquez, Admettre, and Argueta.
II. Indictment and Trial
In February 2004, a federal grand jury indicted Vasquez, Castro, and twelve others for various offenses stemming from a series of violent incidents on Long Island between August 2000 and September 13, 2003. A superseding indictment ("the Indictment") was returned on June 23, 2005. The Indictment described MS-13, or "La Mara Salvatrucha," as a gang that originated in El Salvador but had members throughout the United States. It accused all of the defendants of being members of MS-13, and it alleged that MS-13 members "engaged in criminal activity" in order to increase their position within the organization. According to the Indictment, MS-13 constituted an "enterprise" under 18 U.S.C. § 1959(b)(2) because it was an ongoing organization the activities of which affected interstate commerce. The Indictment furthermore stated that MS-13 engaged in two forms of racketeering activity under 18 U.S.C. § 1961(1):(1) acts and threats involving murder as defined by New York State law, and (2) narcotics trafficking as defined by federal law.
The Indictment charged both Appellants with ten counts. Count One charged them with conspiracy to commit assaults with a dangerous weapon in order to maintain and increase their position within the MS-13 racketeering enterprise, in violation of 18 U.S.C. § 1959(a)(6). Counts Six, Seven, and Eight charged Appellants with assaulting Ramirez, Sorto, and Alexander, respectively, with a dangerous weapon in order to maintain or increase their positions in the MS-13 racketeering enterprise, in violation of 18 U.S.C. § 1959(a)(3). Counts Twelve, Thirteen, and Fourteen accused Appellants of discharging a firearm during a crime of violence, in violation of 18 U.S.C. § 924(c)(1)(A)(iii). The Indictment identified the relevant crimes of violence as the assaults charged in Counts Six, Seven, and Eight. Finally, Counts Seventeen, Eighteen, and Nineteen charged Appellants with using an explosive to commit a felonythe felonies being the assaults charged in Counts Six, Seven, and Eightin violation of 18 U.S.C. § 844(h)(1).[2]
The district court severed the charges against Appellants from the charges against some of their co-defendants. Appellants' remaining co-defendants pleaded guilty to assault, and Admettre pleaded guilty to the conspiracy charge and to using a firearm during a crime of violence. Appellants proceeded to trial before the district court. During the course of the trial, which took place between July 19 and July 26, 2005, the Government called Hector Alicea, an officer with the New York State Police, as an expert witness. The Government also called the three shooting victims and co-defendants Admettre and Menjivar. In addition, the Government *185 introduced into evidence telephone records, the firearm used in the shootings, ballistics records, and Appellants' post-arrest confessions.
Admettre testified to his membership in MS-13 and about the gang's structure and operations. He stated that MS-13 was in "an all out war with rival gangs"a war that included shootings, stabbings, fighting, and murderand that MS-13 had a policy to murder the members of rival gangs. Admettre went on to identify Appellants as members of MS-13. He also described an uncharged shooting involving both Appellants that took place in February 2003:
David Vasquez identified [an] SWP member and opened fire. And Castro jumped out along with Vasquez to chase the SWP member down the block and both of them fired.
Later, Menjivar also testified about his membership in MS-13 and about the gang's structure and operations. Menjivar further testified that the Freeport clique sent money to El Salvador to help members who had been deported from the United States. Alicea testified about MS-13's history and structure, and he also explained MS-13's activities on Long Island. Because the nature of Alicea's testimony is an important and disputed issue on appeal, the subjects about which he testified are discussed further in our analysis of Appellants' challenge to the admission of his testimony.
III. The Jury Verdict and Sentencing
On July 26, 2005, the jury found Appellants guilty on all ten counts. In a special verdict, the jury further found that MS-13 was an enterprise that affected interstate commerce; that MS-13 engaged in acts and threats of murder; that Appellants were members of the MS-13 enterprise; and that Appellants had participated in the conspiracy to assault and in the charged assaults in order to maintain or increase their positions within MS-13. The jury failed to find, however, that MS-13 engaged in the racketeering activity of narcotics trafficking.
One week later, Appellants asked the district court to set aside the verdict and enter a judgment of not guilty pursuant to Federal Rule of Criminal Procedure 29, or in the alternative to vacate the judgment and order a new trial pursuant to Federal Rule of Criminal Procedure 33. They claimed multiple errors. First, they claimed that the jury's failure to find that MS-13 engaged in narcotics trafficking was fatal to the verdict because the Indictment had not pleaded the two racketeering activities (murder and narcotics trafficking) in the alternative. Second, they argued that the proof of MS-13's involvement in murder was insufficient. Third, they asserted that the Government had failed to prove that the MS-13 enterprise had an existence separate from the charged offenses. The district court docket does not indicate when or how the district court denied the motion, but that it did so is clear from the progression of the case to sentencing.
On December 5, 2005, the district court sentenced Vasquez principally to a total of 63 years' imprisonment. The sentence consisted of 3 years' concurrent imprisonment for the conspiracy count (Count One) and each of the three assault charges (Counts Six, Seven, and Eight), as well as a consecutive 10-year term for the first firearm count (Count Twelve) and two additional consecutive 25-year terms for each of the other two firearm counts (Counts Thirteen and Fourteen). The district court imposed longer sentences for Counts Thirteen and Fourteen because it considered them to be second or subsequent firearm offenses. The court, acting sua *186 sponte, dismissed the three explosive counts (Counts Seventeen, Eighteen, and Nineteen), ostensibly on the theory that those counts were in the nature of lesser-included offenses of the firearm counts. Judgment entered on December 13, 2005.
On January 6, 2006, the district court sentenced Castro principally to 60 years plus 1 day of imprisonment. The 1 day consisted of concurrent 1-day sentences for the conspiracy count (Count One) and the three assault charges (Counts Six, Seven, and Eight). As had been the case for Vasquez, the total of 60 years' imprisonment was imposed for the three firearm offenses. The district court also dismissed the three explosive counts, for the same reasons it did so in Vasquez's case.
IV. Arguments on Appeal
On appeal, Appellants challenge their convictions and sentences on multiple grounds. With one exception, Appellants bring these challenges jointly. They devote the bulk of their argument to their claim that the district court erred in allowing the Government to call Alicea as an expert witness and to their further claim that Alicea's testimony violated the Federal Rules of Evidence and Crawford v. Washington, 541 U.S. 36, 124 S. Ct. 1354, 158 L. Ed. 2d 177 (2004). Beyond their challenge to Alicea's testimony, Appellants argue that the district court erred in admitting evidence of narcotics trafficking and an uncharged shooting, that the Government failed to prove that MS-13 was a racketeering enterprise, and that the three firearm counts were duplicative. They also object to their sentences on the second and third firearm offenses (Counts Thirteen and Fourteen), which the district court considered to be second or subsequent offenses, because the Indictment failed to charge those offenses as second or subsequent offenses. Castro raises one additional challenge on his own, arguing that the two assault charges stemming from the Hempstead shootings were multiplicitous because the Government failed to introduce evidence that Vasquez intended to shoot more than one victim. Because the parties focused both at trial and on appeal on questions regarding Alicea's testimony, we begin with that issue.
DISCUSSION
I. Hector Alicea's Testimony as an Expert Witness
A. The Substance of Alicea's Testimony
The Government called Hector Alicea, an investigator with the New York State Police, to testify regarding MS-13's "enterprise structure and the derivation, background and migration of the MS-13 organization, its history and conflicts," as well as MS-13's "hierarchy, cliques, methods and activities, modes of communication and slang." Alicea had been an officer of the New York State Police for eighteen years, and he had been an investigator since 1992. In June 2000, five years before the trial, Alicea had been assigned to the FBI Long Island Gang Task Force. He was also the Chair of the Intelligence Committee of the East Coast Gang Investigators Association.
Prior to trial, Appellants objected to the Government's stated plan to call Alicea on the ground that Alicea would rely on "impermissible hearsay" to reach his conclusions. The accompanying memorandum of law cited to this Court's opinion in United States v. Dukagjini, 326 F.3d 45 (2d Cir. 2003). The parties argued the motion before the district court, and the district court reserved its decision. Defense counsel continued to press the issue at trial, and Vasquez's attorney was permitted to conduct a voir dire examination of Alicea *187 prior to direct examination by the Government. In response to defense counsel's questioning, Alicea stated that he had participated in somewhere between fifteen and fifty custodial interrogations of MS-13 members. When asked whether he could distinguish between information he had learned during custodial interrogations and information he had learned elsewhere, Alicea responded that his knowledge was based on "a combination of both." At the conclusion of the voir dire, defense counsel again argued that Alicea was not qualified as an expert and that his testimony would introduce testimonial evidence in violation of Crawford. See 541 U.S. 36, 124 S. Ct. 1354, 158 L. Ed. 2d 177. The district court then denied the motion.
Much of Alicea's testimony concerned MS-13's background. He testified about MS-13's history, its presence on Long Island, and its national and international presence; about the gang's colors, hand signs, graffiti use, naming practices, and tattoos; and about its local subunit structure, leadership structure, division of responsibilities, and membership rules. In addition, Alicea testified to more specific details about MS-13's operations. He stated that when MS-13 members fled from prosecution or needed to travel for "gang business reasons," such as "to transport narcotics," "to transport weapons," or "to commit crimes in other areas," they traveled "on a Greyhound bus" or by car. According to Alicea, MS-13 members from Virginia, California, and El Salvador had attended organizational meetings in New York State, and MS-13 leaders throughout the nation communicated with each other by telephone. He testified that MS-13 treasury money "[was] used to buy guns," to help members in prison or in other states, or to buy narcotics. Significantly, Alicea also asserted that MS-13 needed guns "to do what MS 13 does, which is, you know, shoot at rival gang members, and sometimes in the process, obviously, some people get hit."
With respect to MS-13's activities on Long Island, Alicea testified that since he had joined the Task Force in June 2000, the Task Force had seized "[p]robably between 15 and 25" firearms from MS-13 members. He further testified that Task Force members had seized ammunition, manufactured outside of New York State, from MS-13 members on Long Island. Moving on to MS-13's narcotics-related operations, Alicea told the jury that MS-13 members on Long Island had been arrested for dealing narcotics, primarily cocaine, and that the gang also occasionally dealt marijuana. Alicea also stated that MS-13 "tax[ed]" non-gang drug dealers who wished to deal drugs in bars controlled by MS-13. Most importantly, Alicea attested that MS-13 had committed "between 18 and 22, 23" murders on Long Island between June 2000 and the trial.
On cross-examination, defense counsel probed the sources of Alicea's information. Because of the importance of Alicea's answers, we quote from his testimony at length:
Q. .... I thought you mentioned FLS... funded itself at the beginning from the sale of marijuana?
A. No. I was referring to the MS-13 gang as a whole.
Q. Is it fair to say that somebody told you that?
A. I had read that from some of the articles that I had researched.
Q. Newspaper articles?
A. Reports from other law enforcement personnel.
. . .
Q. You also told us that MS members... put a tax on narcotics sales in certain bars; is that correct?
*188 . . .
A. I was told that by a gang member, yes.[3]
. . .
Q. And I believe you told us that some of those [membership] dues were used to purchase narcotics?
A. That's correct.
Q. Is it fair to say that that was told to you also by somebody who was in custody?
A. In custody and some that were not.
Q. Well, can you tell me ... how many people in custody told you in substance that monies collected were used for narcotics?
A. Probably like a dozen.
. . .
A. .... I said I am aware that there has been contact between California and New York.
Q. And how did you become aware of it?
A. Listening to recordings.
. . .
Q. And you stated that you got information with regard to MS-13s involved with Mexican drug cartels; is that correct?
A. Yes.
Q. And where did you get that information from?
A. From research on the Internet.
Q. Do you know the source of that information on the Internet?
A. Not off the top of my head. But I did retrieve that.
Q. Is it law enforcement or reporters?
A. I think it is a combination of a reporter doing a story and having a conversation with law enforcement.
. . .
Q. ... [W]ith regard to the involvement of MS-13 [with] the Mexican cartels or Colombian cartels, you never interviewed anybody who told you that, it was strictly from the Internet; is that correct?
A. That is correct.
B. The Emergence of the Officer Expert
Under Federal Rule of Evidence 702, in those situations where "scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue," testimony by "a witness qualified as an expert by knowledge, skill, experience, training, or education" is permissible so long as "(1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case." Fed.R.Evid. 702. The broad phrasing of the description "scientific, technical, or other specialized knowledge" *189 brings within the scope of the Rule both "experts in the strict sense of the word," such as scientists, and "the large group sometimes called `skilled' witnesses, such as bankers or landowners testifying to land values." Id. advisory committee's note. On the question of when expert testimony is appropriate, the Advisory Committee Notes refer to the traditional common law rule that expert testimony is called for when the "untrained layman" would be unable intelligently to determine "the particular issue" in the absence of guidance from an expert. Id. advisory committee's note (quoting Mason Ladd, Expert Testimony, 5 Vand. L.Rev. 414, 418 (1952)) (internal quotation marks omitted).
In the 1980s, a new type of "skilled witness" began emerging: the law enforcement officer. In criminal cases, the Government began calling law enforcement officers to testify as experts on what we referred to as "the nature and structure of organized crime families." United States v. Daly, 842 F.2d 1380, 1388 (2d Cir.1988). This Court first reviewed a challenge to the use of such an expert in United States v. Ardito, 782 F.2d 358 (2d Cir.1986). The Government had called an FBI agent to testify as an expert about terms such as "captain," "capo," "regime," and "crew." Id. at 363. We upheld the admission of that expert testimony because it "aided the jury in its understanding of" recorded conversations between the two defendants. Id. Furthermore, we noted, the district court had reminded the jury that the defendants there had not been charged with any conduct relating to organized crime. Id.
One year later, we upheld the admission of expert testimony by a law enforcement officer on the related matter of the meaning of messages written in code. United States v. Levasseur, 816 F.2d 37, 45 (2d Cir.1987). Upholding such testimony was consistent with pre-Ardito cases where we and other Circuits had allowed law enforcement officers to testify as experts about the meaning of jargon relating to narcotics trafficking. E.g., United States v. Borrone-Iglar, 468 F.2d 419, 421 (2d Cir.1972) (upholding a law enforcement officer's testimony "concerning the narcotics vernacular used in [recorded] telephone conversations"); see also United States v. Theodoropoulos, 866 F.2d 587, 590-91 (3d Cir.1989) (describing testimony "concerning the meaning of ... coded conversations" as "the paradigm situation for expert testimony under Rule 702") (overruled on other grounds).
In subsequent years, we have encountered novel uses of these "officer experts" and approved of their testifying on a broader range of issues. For example, in United States v. Daly, 842 F.2d 1380 (2d Cir.1988), where the defendants were charged with "various crimes arising out of activities of the Gambino crime family," we upheld the expert testimony of an FBI agent who "identified the five organized crime families that operate in the New York area" and "described their requirements for membership, their rules of conduct and code of silence, and the meaning of certain jargon." Id. at 1383, 1388. After the Government had played surveillance tapes for the jury, the agent interpreted the jargon the speakers had used. Id. at 1384. This Court upheld the district court's decision to admit the agent's testimony, finding that the agent had testified about "much that was outside the expectable realm of knowledge of the average juror." Id. at 1388. The district court's judgment that the agent's testimony would be helpful to the juror "was not unreasonable." Id. Finally, the agent had not testified about the defendants or any of the charged offenses. Id. The only offense element to which the agent had testified "was the existence of a RICO enterprise, *190 as he gave his understanding of the existence of organized crime and the Gambino family." Id.
Since Daly, we have repeatedly upheld the admission of similar testimony. See, e.g., United States v. Locascio, 6 F.3d 924, 936 (2d Cir.1993) (upholding an FBI agent's expert testimony about the internal operating rules of organized crime families, the meaning of recorded conversations, and the identification of members of the Gambino crime family); United States v. Feliciano, 223 F.3d 102, 109 (2d Cir.2000) (upholding an FBI agent's expert testimony about "the structure, leadership, practices, terminology, and operations of [a street gang, Los Solidos]"); United States v. Matera, 489 F.3d 115, 121 (2d Cir.2007) (upholding the admission of an officer's expert testimony "about the composition and structure of New York organized crime families" and observing that the district court had limited the expert's testimony to general information rather than information about the defendants themselves). Our decision to permit such expert testimony reflects our understanding that, just as an anthropologist might be equipped by education and fieldwork to testify to the cultural mores of a particular social group, see Dang Vang v. Toyed, 944 F.2d 476, 481-82 (9th Cir.1991) (upholding the district court's admission of expert testimony on Hmong culture), law enforcement officers may be equipped by experience and training to speak to the operation, symbols, jargon, and internal structure of criminal organizations. Officers interact with members of the organization, study its operations, and exchange information with other officers. As a result, they are able to break through the group's antipathy toward outsiders and gain valuable knowledge about its parochial practices and insular lexicon. Allowing law enforcement officers to act as experts in cases involving these oft-impenetrable criminal organizations thus responds to the same concerns that animated the enactment of the criminal laws that such organizations (and their members) are typically charged with violating, such as the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-68, and the more recent Violent Crimes in Aid of Racketeering Act, id. § 1959. See Organized Crime Control Act of 1970, Pub.L. 91-452 pmbl., 84 Stat. 922, 923 (1970) ("[O]rganized crime continues to grow because of defects in the evidence-gathering process of the law inhibiting the development of the legally admissible evidence necessary to bring criminal ... sanctions... to bear on the unlawful activities of those engaged in organized crime. ...").
Yet despite the utility of, and need for, expertise of this sort, its use must be limited to those issues where sociological knowledge is appropriate. An increasingly thinning line separates the legitimate use of an officer expert to translate esoteric terminology or to explicate an organization's hierarchical structure from the illegitimate and impermissible substitution of expert opinion for factual evidence. If the officer expert strays beyond the bounds of appropriately "expert" matters, that officer becomes, rather than a sociologist describing the inner workings of a closed community, a chronicler of the recent past whose pronouncements on elements of the charged offense serve as shortcuts to proving guilt. As the officer's purported expertise narrows from "organized crime" to "this particular gang," from the meaning of "capo" to the criminality of the defendant, the officer's testimony becomes more central to the case, more corroborative of the fact witnesses, and thus more like a summary of the facts than an aide in understanding them. The officer expert transforms into the hub of the case, displacing the jury by connecting *191 and combining all other testimony and physical evidence into a coherent, discernible, internally consistent picture of the defendant's guilt.
In such instances, it is a little too convenient that the Government has found an individual who is expert on precisely those facts that the Government must prove to secure a guilty verdicteven more so when that expert happens to be one of the Government's own investigators. Any effective law enforcement agency will necessarily develop expertise on the criminal organizations it investigates, but the primary value of that expertise is in facilitating the agency's gathering of evidence, identification of targets for prosecution, and proving guilt at the subsequent trial. When the Government skips the intermediate steps and proceeds directly from internal expertise to trial, and when those officer experts come to court and simply disgorge their factual knowledge to the jury, the experts are no longer aiding the jury in its factfinding; they are instructing the jury on the existence of the facts needed to satisfy the elements of the charged offense. See United States v. Nersesian, 824 F.2d 1294, 1308 (2d Cir.1987) ("In the past, we have upheld the admission of expert testimony to explain the use of narcotics codes and jargon. ... We acknowledge some degree of discomfiture [when] this practice is employed, since, uncontrolled, such use of expert testimony may have the effect of providing the government with an additional summation by having the expert interpret the evidence."). It is as though the law enforcement agency in question is a standing master for the criminal court, and the officer expert its representative charged with reporting that master's findings of fact. Not only are masters a creature of civil rather than criminal courts, see Amalia D. Kessler, Our Inquisitorial Tradition: Equity Procedure, Due Process, and the Search for an Alternative to the Adversarial, 90 Cornell L.Rev. 1181, 1200, 1204 (2005) (describing the advent of masters in fifteenth-century English courts of equity), that sort of usurpation of the jury's role is unacceptable even in the civil context, see James Wm. Moore, 9 Moore's Federal Practice § 53.13[1], at 53-78 (3d ed. 2005) ("The 2003 amendments [to the Federal Rules of Civil Procedure] abolish the authority of trial courts to appoint trial masters respecting matters to be decided by a jury unless a statute provides otherwise."). The Government cannot satisfy its burden of proof by taking the easy route of calling an "expert" whose expertise happens to be the defendant. Our occasional use of abstract language to describe the subjects of permissible officer expert testimony, e.g., Locascio, 6 F.3d at 936 ("We have ... previously upheld the use of expert testimony to help explain the operation, structure, membership, and terminology of organized crime families."); United States v. Lombardozzi, 491 F.3d 61, 78 (2d Cir.2007) ("This Court has also permitted expert testimony regarding the organization and structure of organized crime families in [RICO] prosecutions. ..."), cannot be read to suggest otherwise.
This Court has not been blind to these risks. More than fifteen years ago, we observed that although "the operations of narcotics dealers are a proper subject for expert testimony under Fed.R.Evid. 702, we have carefully circumscribed the use of such testimony to occasions where the subject matter of the testimony is beyond the ken of the average juror." United States v. Castillo, 924 F.2d 1227, 1232 (2d Cir. 1991) (citations omitted); see also United States v. Tapia-Ortiz, 23 F.3d 738, 740 (2d Cir.1994) (cautioning that expert testimony relating to "the operations of narcotics dealers ... should normally be used only for subjects that have esoteric aspects reasonably *192 perceived as beyond the ken of the jury" (internal quotation marks omitted)). Two years later, in Locascio, after approving of an FBI agent's expert testimony on the structure of the Gambino family, we nonetheless "remind[ed] the district courts... that they are not required to admit such testimony, and when they do the testimony should be carefully circumscribed to ensure that the expert does not usurp either the role of the judge in instructing on the law, or the role of the jury in applying the law to the facts before it." Locascio, 6 F.3d at 939. In most cases, of course, no reminder was needed, often because the district court had taken affirmative steps on its own to prevent such usurpation. See, e.g., Ardito, 782 F.2d at 363 (noting that the district court had "specifically cautioned the jury as to the limited purpose of the agent's testimony"); Daly, 842 F.2d at 1389 ("[T]he final [jury] instructions made clear that it was the jury's province to determine whether or not the individuals named in the indictment functioned as an `enterprise'. ..."); Matera, 489 F.3d at 121 ("Immediately after [the officer expert's] testimony, the district court gave a limiting instruction. ...").
We more recently cautioned the Government of our concern about these risks in United States v. Dukagjini, 326 F.3d 45 (2d Cir.2003), and Lombardozzi, 491 F.3d 61. In Dukagjini, the Government called the case agent, a DEA officer, as an expert witness for the purpose of interpreting recorded conversations. 326 F.3d at 49-50. The district court allowed the agent to testify, but it "cautioned the prosecutor to limit [the agent's] testimony to `words of the trade, jargon,' and general practices of drug dealers." Id. at 50. During his testimony, the agent interpreted various terms, such as "dry" and "cooked." Id. The agent also addressed specific exchanges in recorded conversations and explained their meaning to the jury. Id. In doing so, the agent relied on both his experience and his knowledge of the case. Id.
After reviewing the agent's testimony, we concluded that the agent had "stray[ed] from his proper expert function" by "act[ing] at times as a summary prosecution witness." Id. at 55. The Government's decision to call the case agent as an expert witness, we observed, had "increase[d] the likelihood that inadmissible and prejudicial testimony [would] be proffered." Id. at 53. The officer expert's status, we suggested, was likely to give his factual testimony an "unmerited credibility" before the jury. Id.; see also United States v. Alvarez, 837 F.2d 1024, 1030 (11th Cir.1988) ("When the expert is a government law enforcement agent testifying on behalf of the prosecution about participation in prior and similar cases, the possibility that the jury will give undue weight to the expert's testimony is greatly increased."). The defense's inability to meaningfully challenge the case agent's expert opinions inadvertently reinforces the agent's credibility on questions of fact. Dukagjini, 326 F.3d at 53-54. In addition, case agents testifying as experts are particularly vulnerable to making "sweeping conclusions" about the defendants' activities. Id. at 54.
We have identified two distinct ways in which the officer expert might "stray from the scope of his expertise." Id. at 55. The expert might, as did the agent in Dukagjini, "testif[y] about the meaning of conversations in general, beyond the interpretation of code words." Id.; see also United States v. Freeman, 488 F.3d 1217, 1227 (9th Cir.2007) ("The fact that [the officer expert] possessed specialized knowledge of the particular language of drug traffickers did not give him carte blanche to testify as to the meaning of other words in recorded telephone calls without regard to reliability or relevance."). *193 Or, we noted, the expert might "interpret[] ambiguous slang terms" based on knowledge gained through involvement in the case, rather than by reference to the "fixed meaning" of those terms "either within the narcotics world or within this particular conspiracy." Dukagjini, 326 F.3d at 55.
We went on to find that, because the officer expert had relied on hearsay and custodial interrogations when forming his opinions, his testimony that went outside the scope of his expertise violated the Federal Rules of Evidence and the Confrontation Clause of the Sixth Amendment. Id. at 58-59. When the agent "departed from the bounds of Rules 702 and 703" by "repeatedly deviat[ing] from his expertise on drug jargon," he thereby "crossed [the] line" between "permissible and impermissible reliance on hearsay." Id. at 58-59. We held that the agent's testimony violated the rules governing expert witnesses, id. at 55, the hearsay rules, id. at 59, and the Confrontation Clause, id. We affirmed the convictions nonetheless because the Confrontation Clause violation had not been plain error, id. at 61, and the hearsay violation had been harmless, id. at 62.
Similar concerns arose in Lombardozzi, 491 F.3d 61. There, the defendant had been charged with loan sharking, and the Government called an investigator with the U.S. Attorney's Office for the Southern District of New York "as an expert who testified as to, inter alia, the general structure of La Cosa Nostra in New York and Lombardozzi's affiliation with organized crime." Id. at 72. In addition to testifying about the structure of La Cosa Nostra, the officer told the jury that the defendant was "a soldier in the Gambino crime family." Id. When questioned by defense counsel as to his basis for that opinion, the witness testified that his knowledge of the defendant's position in the Gambino family "was based on conversations with cooperating witnesses and confidential informants." Id. He added that "he personally observed Lombardozzi's activities approximately two dozen times since 1985." Id. Because the defendant had failed to raise a Confrontation Clause challenge to the officer expert's testimony, we reviewed that testimony for plain error and found that it did not affect the defendant's substantial rights. Id. We commented, however, that "the record indicate[d] that" the expert may have "communicated out-of-court testimonial statements of cooperating witnesses and confidential informants directly to the jury in the guise of an expert opinion." Id.
It is in light of these concerns that we now turn to Appellants' specific challenges to Alicea's testimony. In doing so, we review the district court's admission of expert testimony for abuse of discretion, and we will not find error unless the district court's ruling was "manifestly erroneous." Dukagjini, 326 F.3d at 52 (quoting Locascio, 6 F.3d at 936).
C. Alicea's Qualifications as an Expert
Appellants' first challenge to Alicea's testimony is a claim that he was unqualified to testify as an expert. They argue that because much of Alicea's background is in the area of narcotics rather than gangs, he is not qualified to testify about the operations and structure of MS-13.
Under Rule 702, the district court may admit expert testimony if the witness is "qualified as an expert by knowledge, skill, experience, training, or education." Fed.R.Evid. 702. At trial, Alicea testified that he had been an officer with the New York State Police for eighteen years and that he had been an investigator since 1992. He had been trained at the New York State Police academy, and he had *194 received additional training in the field and through refresher courses. In addition, he had been a member of the FBI Gang Task Force on Long Island since 2000 and served as Chair of the Intelligence Committee of the East Coast Gang Investigators' Association. Alicea also had extensive experience relating to MS-13 in particular. He testified that he had "listened to many conversations on tape," performed surveillance in the course of investigations of MS-13, executed search warrants, debriefed MS-13 members, and trained other police departments on MS-13. Since joining the Task Force, he had arrested "between 50 and a hundred" and interviewed "[o]ver a hundred" MS-13 members. He said that he had also "read a lot of documents related to MS, either on the internet or the media or from our instructors or other people from the conferences I have gone to," and that he read "a web site" dealing with MS-13 on a daily basis.
Alicea's qualifications are quite similar to those of experts whose qualifications we have upheld in the past. In Locascio, for example, the officer expert "had been an FBI agent for seventeen years, and for five years had been on the FBI's Organized Crime Program, a squad that investigated only organized crime cases." 6 F.3d at 937. Similarly, Alicea had been an investigator with the New York State Police for thirteen years and a member of the Task Force for five. Likewise, in Matera, the officer expert had "extensive experience investigating organized crime as a New York Police Department Detective and later as an Investigator for the United States Attorney's Office." 489 F.3d at 122. And in Feliciano, we described an officer expert as having "extensive experience" with a particular criminal gang based on the officer's participation in a joint task force for approximately five years, "execution of federal and state search warrants at [gang] locations," participation in electronic surveillance, and review of reports by other agents. 223 F.3d at 109. Alicea's work experience, training, and involvement in investigations of MS-13 are at least as "extensive." The district court did not err in finding that Alicea was qualified to testify as an expert.
The problem was not Alicea's qualifications. It was the subjects about which he testified and the sources on which he relied. We address those concerns below.
D. The Appropriate Boundaries of Alicea's Expertise Under Rule 702
Appellants argue that some of the matters about which Alicea testified were outside the scope of his expertise. Rule 702 requires that expert testimony concern "scientific, technical, or other specialized knowledge." Fed.R.Evid. 702. Testimony is properly characterized as "expert" only if it concerns matters that the average juror is not capable of understanding on his or her own. See United States v. Amuso, 21 F.3d 1251, 1263 (2d Cir.1994) ("A district court may commit manifest error by admitting expert testimony where the evidence impermissibly mirrors the testimony offered by fact witnesses, or the subject matter of the expert's testimony is not beyond the ken of the average juror."); Locascio, 6 F.3d at 936 (applying the "untrained layman" standard articulated in the Advisory Committee Notes to Rule 702).
Much of Alicea's testimony concerned material well within the grasp of the average juror. A few examples are particularly striking: Alicea's testimony that the FBI gang task force had seized "[p]robably between 15 and 25" firearms, as well as ammunition, from MS-13 members; his statement that MS-13 members on Long Island had been arrested for dealing narcotics; *195 and his statement that MS-13 had committed "between 18 and 22, 23" murders on Long Island between June 2000 and the trial. No expertise is required to understand any of these facts. Had the Government introduced lay witness testimony, arrest records, death certificates, and other competent evidence of these highly specific facts, the jury could have "intelligently" interpreted and understood it. For example, in United States v. Feliz, 467 F.3d 227 (2d Cir.2006), where the defendant was charged with RICO murder, "[i]n order to establish the manner and cause of death for each of [the defendant's] victims in the charged homicides, the Government offered nine autopsy reports through the testimony of [a medical examiner]," id. at 229. The Government could have done the same here. Expert testimony might have been helpful in establishing the relationship between these facts and MS-13, but it was not helpful in establishing the facts themselves.
In addition to these stark examples, much of the remainder of Alicea's testimony also addressed matters that the average juror could have understood had such factual evidence been introduced. Alicea's testimony about the ways that MS-13 members traveled when fleeing from prosecution or when transporting contraband, his assertion that MS-13 members from Virginia, California, and El Salvador had attended organizational meetings in New York State, and his statement that MS-13 leaders communicated by telephone all fall into this category. So, too, did his testimony about the use of MS-13 treasury funds to buy firearms and narcotics, his statement that the gang occasionally dealt narcotics, and his statement that MS-13 taxed non-member drug dealers.
This testimony, which ranged from MS-13's activities on Long Island to aspects of the gang's operations more generally, went far beyond interpreting jargon or coded messages, Ardito, 782 F.2d at 363; Levasseur, 816 F.2d at 45, describing membership rules, Daly, 842 F.2d at 1388, or explaining organizational hierarchy, Locascio, 6 F.3d at 936. We find especially disturbing the portion of Alicea's testimony that essentially summarized the results of the Task Force investigation on Long Island, and in particular Alicea's testimony that MS-13 had committed between eighteen and twenty-three murders since 2000.
We recognize that expertise may have been necessary to connect specific murders to MS-13. An appropriate (admissible) example of such expertise would have been an expert's explanation of how the graffiti near a body indicated that the murderer was a member of MS-13, or an expert's testimony that the gang used a particular method to kill enemies and that as a result of his review of the autopsy reports (which would have been in evidence before the jury), he had concluded that MS-13 committed those murders. The acceptable use of expert testimony for this limited purpose, however, does not make it acceptable to substitute expert testimony for factual evidence of murder in the first instance (a fact, as we must remember, that is an element of the charged offense). If the Government is going to use the fact of murders as a way of proving that the gang engaged in a pattern of racketeering activity involving murder, that an individual was murdered remains a fact that must be proven by competent evidence. Only then does expertise of the sort proffered by Alicea become necessary to help the jury understand the particular evidence and to show a connection between MS-13 and the murder. The Government cannot take a shortcut around its obligation to prove murder beyond a reasonable doubt just by having an expert pronounce that unspecified deaths of eighteen *196 to twenty-three persons have been homicides committed by members of MS-13. Alicea's testimony in this regard went beyond those issues on which his "expert" testimony would have been helpful and appropriate.
In Feliciano, the one case where we have approved of testimony that even arguably approached the scope of Alicea's testimony here, the officer was testifying as both a fact witness and an expert witness. 223 F.3d at 121. Like Appellants, the defendants in Feliciano had been charged with offenses under the Violent Crimes in Aid of Racketeering Act. Id. at 107. The racketeering enterprise of which those defendants were members was the Los Solidos gang. Id. At trial, the Government called the coordinator of a joint task force on gang activity in Hartford, Connecticut as both an expert witness and a fact witness. Id. at 109-10. As an expert, the agent testified about "the structure, leadership, practices, terminology, and operations of Los Solidos." Id. at 109. As a fact witness, he testified about his involvement in the task force investigation of Los Solidos. Id. at 109-10. On appeal, the defendants argued that the agent had testified to legal conclusions. Id. at 120-21. They did not challenge the agent's testimony as outside the scope of his expertise. We upheld the district court's admission of the testimony after finding that the agent had not testified to any legal conclusions. Id. at 121. Even as we affirmed the convictions, however, we expressed concern that "the line between [the agent's] opinion and fact witness testimony [was] often hard to discern, and the `facts' testified to are often stated very broadly and generally." Id. Nonetheless, because the defense had had ample opportunity to cross-examine the agent as to the basis for those broadly stated facts, we found that the district court had not manifestly erred in admitting the testimony.
Feliciano thus reinforces our conclusion that it would be improper for the Government to rely on an officer expert's testimony about matters outside the scope of any conceivable expertise and that the district court errs in allowing it to do so. There, the Government correctly realized that it could not call the task force coordinator to testify as an expert about the precise operations of the racketeering enterprise charged in the indictment, and it had the agent testify in dual roles: as a fact witness and as an expert witness. Alicea, in contrast, was proffered and testified in the case before us only as an expert. Those parts of his testimony that involved purely factual matters, as well as those in which Alicea simply summarized the results of the Task Force investigation, fell far beyond the proper bounds of expert testimony. Alicea was acting as a de facto "case agent" in providing this summary information to the jury (the case being the ongoing investigation into MS-13's activities on Long Island).
Testifying as he did, Alicea's evidence runs afoul of our admonition in Dukagjini. When case agents testify as experts, they gain "unmerited credibility when testifying about factual matters from first-hand knowledge." Dukagjini, 326 F.3d at 53. The testimony loses its expert character and the entire process transforms into "the grand jury practice, improper at trial, of a single agent simply summarizing an investigation by others that is not part of the record." Id. at 54. Alicea's factual testimony about matters that required no specialized knowledge clearly implicates these concerns, and the district court erred in allowing him to testify beyond the bounds for which expert testimony would have assisted the jury in understanding the evidence.
*197 E. Alicea's Reliance on Inadmissible Evidence Under Rule 703
At trial and on appeal, Appellants also claim that Alicea impermissibly relied on inadmissible hearsay in forming his conclusions.
Under Rule 703, experts can testify to opinions based on inadmissible evidence, including hearsay, if "experts in the field reasonably rely on such evidence in forming their opinions." Locascio, 6 F.3d at 938; accord Fed.R.Evid. 703. Alicea unquestionably relied on hearsay evidence in forming his opinions. This hearsay evidence took the form of statements by MS-13 members given in interviews, both custodial and noncustodial, as well as statements made by other law enforcement officers, statements from intercepted telephone conversations among MS-13 members (which may or may not have been hearsay, depending on whether the conversations were in the course of and in furtherance of the charged conspiracies, see Fed.R.Evid. 801(d)(2)(E)), and printed and online materials. Alicea's reliance on such materials was consistent with the ordinary practices of law enforcement officers, who "routinely and reasonably rely upon hearsay in reaching their conclusions," Dukagjini, 326 F.3d at 57.
The expert may not, however, simply transmit that hearsay to the jury. Id. at 54 ("When an expert is no longer applying his extensive experience and a reliable methodology, Daubert teaches that the testimony should be excluded."). Instead, the expert must form his own opinions by "applying his extensive experience and a reliable methodology" to the inadmissible materials. Id. at 58. Otherwise, the expert is simply "repeating hearsay evidence without applying any expertise whatsoever," a practice that allows the Government "to circumvent the rules prohibiting hearsay." Id. at 58-59.
At trial, Alicea was unable to separate the sources of his information, stating that his testimony was based on "a combination of both" custodial interrogations and other sources. On cross-examination, however, Alicea identified hearsay as the source of much of his information. For example, his testimony that the Freeport clique initially funded itself through drug sales was based on "some of the articles that [he] had researched" and "[r]eports from law enforcement personnel." His testimony about MS-13's taxation of drug sales by non-members was based on a gang member having told him so during a custodial interrogation in this case. Alicea had learned about MS-13 treasury funds from about a dozen MS-13 members both in and out of custody. Additionally, Alicea discovered his information about MS-13's involvement in Mexican immigrant smuggling through "research on the Internet," and more specifically from a website containing a media report and an interview with a law enforcement official. And although Alicea did not identify the source of his statements about the number of firearms the Task Force had seized and the number of murders on Long Island that MS-13 members had committed, we cannot imagine any source for that information other than hearsay (likely consisting of police reports, Task Force meetings, conversations with other officers, or conversations with members of MS-13).
Not all of Alicea's testimony was flawed, and some of the information that he provided to the jury resulted from his synthesis of various source materials. As a review of his testimony shows, however, at least some of his testimony involved merely repeating information he had read or heardinformation he learned from witnesses through custodial interrogations, newspaper articles, police reports, and tape recordings. When asked how he *198 learned particular facts, Alicea did not explain how he had pieced together bits of information from different sources and reached a studied conclusion that he then gave to the jury. Instead, he testified that he had read an article, or had talked to gang members in custody (including, on at least one occasion, a gang member arrested as part of this investigation), or listened to a recording (evidence that could have been played to the jury in its original form, notwithstanding that some informants may have been identified in the process). This testimony strongly suggests that Alicea was acting not as an expert but instead as a case agent, thereby implicating our warning in Dukagjinia warning the Government appears not to have heard or heeded. Alicea did not analyze his source materials so much as repeat their contents. Alicea thus provided evidence to the jury without also giving the jury the information it needed "to factor into its deliberations the reliability (or unreliability) of the particular source," Dukagjini, 326 F.3d at 57 n. 7. These statements therefore violated Rule 703.
F. Alicea's Reliance on Testimonial Statements and Crawford
For similar reasons, some of Alicea's testimony also violated Crawford. In Crawford, 541 U.S. 36, 124 S. Ct. 1354, 158 L. Ed. 2d 177, the Supreme Court held that the Confrontation Clause of the Sixth Amendment prohibits the introduction into evidence of the out-of-court testimonial statements made by an absent witness unless that witness is unavailable and the defendant had a prior opportunity for cross-examination. Id. at 54, 124 S. Ct. 1354. While the Court did not provide a comprehensive definition for the term "testimonial," it placed custodial interrogations within the "core class" covered by the rule it had just announced. Id. at 51, 124 S. Ct. 1354; see also Davis v. Washington, 547 U.S. 813, 822, 126 S. Ct. 2266, 2273, 165 L. Ed. 2d 224 (2006) (explaining that a custodial police interrogation after a Miranda warning "`qualifies under any conceivable definition' of an `interrogation'" (quoting Crawford, 541 U.S. at 53, 124 S. Ct. 1354)).
When faced with the intersection of the Crawford rule and officer experts,[4] we have determined that an officer expert's testimony violates Crawford "if [the expert] communicated out-of-court testimonial statements of cooperating witnesses and confidential informants directly to the jury in the guise of an expert opinion." Lombardozzi, 491 F.3d at 72. As with a Rule 703 challenge to the expert's reliance on hearsay, the question under Crawford is whether the expert "applied his expertise to those statements but did not directly convey the substance of the statements to the jury," id. at 73. In fact, when the inadmissible hearsay at issue is a testimonial statement, the Supreme Court has recognized that Rule 703 hearsay claims and Sixth Amendment Crawford claims are "are generally designed to protect similar values." Dukagjini, 326 F.3d at 56 n. 6 (citing Idaho v. Wright, 497 U.S. 805, 814, 110 S. Ct. 3139, 111 L. Ed. 2d 638 (1990)) (remarking that "[i]n this case, the appellants' hearsay and Confrontation Clause claims are coextensive," but noting that the Supreme Court has "been careful not to equate" the two types of claims). Because it is a question of law whether an expert witness's testimony violated Crawford, *199 our review is de novo. United States v. Wallace, 447 F.3d 184, 186 (2d Cir.2006).
Alicea's reliance on hearsay is beyond doubt; a more difficult question is the extent to which that hearsay took the form of custodial statements and was thus testimonial. At trial, he testified that he had participated in between fifteen and fifty custodial interrogations of Long Island MS-13 members. He also testified that he had learned through a custodial interrogation that MS-13 taxed non-member drug dealers. The interrogation was one that he conducted as part of the same investigation that resulted in the convictions being appealed here. Among the other facts that he learned at least partially from custodial interrogations were that MS-13 treasury funds were used to purchase narcotics and that MS-13 members used interstate telephone calls to coordinate activities.
We are at a loss in understanding how Alicea might have "applied his expertise" to these statements before conveying them to the jury, such that he could have avoided "convey[ing] the substance of [those] statements to the jury." Lombardozzi, 491 F.3d at 73. Although the exact source of much of his information remains unclear, there was at least one fact to which Alicea testifiedthe drug taxthat was based directly on statements made by an MS-13 member in custody (during the course of this very investigation). This impugns the legitimacy of all of his testimony and strongly suggests to us that Alicea was "simply summarizing an investigation by others that [was] not part of the record," Dukagjini, 326 F.3d at 54, and presenting it "in the guise of an expert opinion," Lombardozzi, 491 F.3d at 72. We hold, therefore, that Alicea's reliance on and repetition of out-of-court testimonial statements made by individuals during the course of custodial interrogations violated Appellants's rights under the Confrontation Clause of the Sixth Amendment.
G. Harmless Error
Having found error in much of Alicea's testimony, vacatur is required unless we are "convinced that the error was harmless beyond a reasonable doubt." United States v. Reifler, 446 F.3d 65, 87 (2d Cir.2006). Several factors are relevant when evaluating the error's likely impact: (1) the strength of the Government's case; (2) the degree to which the statement was material to a critical issue; (3) the extent to which the statement was cumulative; and (4) the degree to which the Government emphasized the inadmissible evidence in its presentation of its case. Id. Though all of these factors are relevant, we have stated that the strength of the Government's case is "probably the single most critical factor."[5]Id.
*200 Alicea's erroneously admitted statements were relevant to several issues in the case, including whether MS-13 was an enterprise, whether MS-13 "had an effect on interstate or foreign commerce", whether MS-13 engaged in narcotics trafficking, and whether MS-13 engaged in acts and threats of murder. All of these issues were highly material to the case, so much so that the district judge asked the jury for special findings with regard to each of them. Because the jury found that the Government had failed to show that MS-13 engaged in narcotics trafficking, however, we will not address whether the erroneous admission of expert testimony would have been harmless with respect to that issue.
1. MS-13's Enterprise Status and Effect on Interstate Commerce
In addition to that portion of Alicea's testimony that violated either Federal Rule of Evidence 703 or Crawford, the Government introduced a great deal of other evidence relevant to prove MS-13's status as an enterprise and the organization's effect on interstate commerce. We are satisfied that Alicea's erroneously admitted testimony on these issues was harmless beyond a reasonable doubt. For example, on the element of enterprise status, Alicea, in the portion of his testimony addressing MS-13's background, testified about the gang's structure, membership rules, symbols, and history; both Appellants, in their confessions, identified themselves as "members" and described MS-13's membership rules; and the cooperating witnesses testified about MS-13's narcotics operations, treasury, and membership rules. With respect to the interstate commerce element, Alicea, in his background testimony, testified that MS-13 was a national and international organization with local subunits; Vasquez confessed that the van used during the shootings had been stolen; the cooperating witnesses testified about MS-13's narcotics operations, the tax imposed on non-member drug dealers, the use of treasury money to *201 purchase firearms, and the gang's national and international membership, and the use of stolen cars for drive-by shootings; and evidence showed that the firearm used in the shooting had been manufactured outside of New York State. On both elements, Alicea's erroneously admitted testimony was cumulative, and its admission was harmless.
2. Acts and Threats of Murder
As for proof that the enterprise engaged in acts and threats of murder, however, the Government's case was weaker and Alicea's testimony was more material. Though the Government did introduce evidence other than Alicea's testimony tending to prove that MS-13 engaged in acts and threats of murder, the evidence tending to prove that element was less extensive. Vasquez stated in his confession that "we are at war with the SWP gang." He further stated that he was threatened with murder during the Hempstead shooting: "They told me to do it, and if I didn't do that, they would rub me out, meaning kill me. . . ." Castro made similar statements in his oral confession, as recounted by a police detective:
Q. Did [Castro] say who the targets of that shooting were?
A. Yes, he said SWP was the target.
Q. Did he say why they were shooting at SWP?
A. He said that they were the enemy, and MS was at war with them.
Q. What if anything did he say about the relationship between MS-13 and the Bloods?
A. He also said MS was at war with the Bloods, and that they, meaning MS, had to protect themselves.
When asked to explain what it means to "make a quota," Castro stated that it meant "[t]o stab, shoot, beat, kill the enemy, which he described as SWP, the Bloods and 18 Street gangs." In addition, Admettre testified that MS-13 had a policy "to shoot and kill rival gang members" and "to attack and defend." He also testified about a separate February 2003 shooting involving both Appellants:
David Vasquez identified [an] SWP member and opened fire. And Castro jumped out along with Vasquez to chase the SWP member down the block and both of them fired.
Menjivar testified that "MS-13 engaged in violent acts such as `fights, shootings, beating someone up.'"
Despite the volume of evidence that the Government introduced on this element, the question of whether it was harmless to admit Alicea's testimonyincluding his statement that MS-13 had committed between eighteen and twenty-three murders on Long Island and his statement that the purpose of MS-13 was to commit murdersremains. On first impression, it is difficult to imagine how a law enforcement officer's testimony that the gang had killed eighteen to twenty-three people would fail to affect the jury's finding that the gang engaged in acts and threats of murder. Alicea was alone in testifying that MS-13 had actually committed eighteen to twenty-two or twenty-three murders in the preceding five years. Not considering Alicea's testimony, much of the remaining evidence consists of what is essentially "tough talk," and none of the remaining evidence shows that MS-13 had committed any murders. Even more so than the evidence of the drive-by shootings and the February 2003 incident, Alicea's testimony provided proof that this tough talk reflected the gang's actual practices rather than mere posturing. And while the Government did not spend a great deal of time in its closing argument emphasizing Alicea's testimony on that point, his testimony *202 is virtually the first thing that the Government mentioned when directing the jury's attention to the proof that MS-13 engaged in acts and threats of murder:
You heard from Investigator Alicea, our first witness, that in the five years that he's been on the task force, the last five years, there have been at least 18 murders here on Long Island, committed by MS 13 members in furtherance of their gang wars.
After carefully considering the evidence introduced at trial, we conclude that the introduction of Alicea's inadmissible testimony was not harmless beyond a reasonable doubt. The Government was required to prove acts and threats of murder as an element of every offense with which Appellants were charged. Apart from Alicea's testimony, the Government introduced only circumstantial evidence tending to prove that element; evidence that, though capable of supporting a jury's finding of guilt, does not compel such a determination. The Government appears to have recognized this possible weakness in its case, as it invoked Alicea's testimony at the start of its summation discussion, expecting, we assume, that Alicea's testimonial assertion of eighteen murders would color the jury's interpretation of the other evidence on this issue. Only in the rarest of cases will we find harmless the admission of the only direct evidence of murder, all other evidence of murderous conduct being partial and inexact. Where, as here, the Government must demonstrate acts and threats of murder, yet the Government introduces no admissible evidence of murder and only circumstantial evidence of threats, we cannot find the admission of direct evidence of multiple murders to have been harmless.
Because proof of the racketeering element, which was based on acts and threats of murder, was essential to securing Appellants' convictions for conspiracy and assault, and because the assault counts were the predicate offenses for the firearm offenses, our finding of non-harmless error is fatal to the Appellants' convictions on all counts.
II. Remaining Issues
We have reviewed Appellants' remaining claims, and we find them to be without merit. Because some of the arguments they raise would arise again in any possible retrial, however, we will address them here.
A. Sufficiency
Appellants argue that the evidence was insufficient to show that MS-13 was an enterprise engaged in racketeering activity. More specifically, they argue a failure to show that MS-13 was an entity that existed separately from the conduct of its members, that MS-13 affected interstate commerce, and that MS-13 engaged in acts and threats of murder. Castro also appears to challenge the sufficiency of the evidence on the element of intent.
On review of a claim of insufficiency of the evidence, we "view the evidence. . . in the light most favorable to the government and credit every inference that could have been drawn in its favor." United States v. Diaz, 176 F.3d 52, 89 (2d Cir.1999). "[T]he convictions must be affirmed, so long as, from the inferences reasonably drawn, the jury might fairly have concluded guilt beyond a reasonable doubt." Id. (citing Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 61 L. Ed. 2d 560 (1979)). Because "where some government evidence was erroneously admitted, we must make our determination concerning sufficiency taking into consideration even the improperly admitted evidence," United States v. Cruz, 363 F.3d 187, 197 (2d Cir.2004), we consider the *203 entirety of Alicea's testimony when evaluating sufficiency.
An enterprise is "a group of persons associated together for a common purpose of engaging in a course of conduct." United States v. Turkette, 452 U.S. 576, 583, 101 S. Ct. 2524, 69 L. Ed. 2d 246 (1981); see also 18 U.S.C. § 1959(b)(2) (defining "enterprise"). This enterprise must have an existence separate from the series of criminal acts that constitute its racketeering activity. Turkette, 452 U.S. at 583, 101 S. Ct. 2524. We have no difficulty finding that the evidence was sufficient to show that MS-13 satisfied this definition. Multiple witnesses described MS-13's membership rules, organizational treasury, and symbols. In addition, Alicea testified about MS-13's history, national and international membership, and leadership structure, and Admettre testified that MS-13 had a "policy . . . to attack and defend" and that Castro was the leader of the Freeport clique. Drawing all reasonable inferences in favor of the Government, this testimony shows MS-13 to be a national organization, organized into local subunits, with its own leadership structure, membership rules, symbols, policies, and financial operations. Such an organization constitutes an enterprise as defined in Turkette.
With regard to the interstate commerce element, Appellants appear to argue that because the Government relied on narcotics trafficking to show an effect on interstate commerce, the jury's finding that the Government failed to prove narcotics trafficking as a racketeering activity necessarily means that the Government also failed to show an effect on interstate commerce. The conspiracy and the assault offenses of which Appellants were convicted require that the offense be in furtherance of an enterprise "engaged in, or the activities of which affect, interstate or foreign commerce." 18 U.S.C. § 1959(b). Transporting goods, such as firearms or stolen vehicles, across state lines is a classic example of engaging in interstate commerce. Cf. United States v. Robertson, 514 U.S. 669, 672, 115 S. Ct. 1732, 131 L. Ed. 2d 714 (1995) ("[A] corporation is generally `engaged in commerce' when it is itself `directly engaged in the production, distribution, or acquisition of goods or services in interstate commerce.'" (quoting United States v. Am. Bldg. Maint. Indus., 422 U.S. 271, 283, 95 S. Ct. 2150, 45 L. Ed. 2d 177 (1975))). Use of an instrumentality of commerce, such as telephone lines, is also generally viewed as an activity that affects interstate commerce. Cf. United States v. Atcheson, 94 F.3d 1237, 1243 (9th Cir.1996) (finding defendants' "placement of out-of-state phone calls" to be a "connection with interstate commerce" under Hobbs Act); United States v. Muskovsky, 863 F.2d 1319, 1325 (7th Cir.1988) (finding effect on interstate commerce based on the use of interstate telephone calls to verify credit card transactions). Beyond these traditional examples, any other conduct having even a de minimis effect on interstate commerce suffices. United States v. Davila, 461 F.3d 298, 306 (2d Cir.2006).
At trial, Alicea testified that out-of-state members had traveled to New York State for MS-13 meetings; that MS-13 treasury funds were used to purchase firearms manufactured outside New York State; that Mexican MS-13 cliques act as smugglers; that MS-13 leaders make interstate telephone calls to coordinate their activities; and that MS-13 is engaged in international narcotics smuggling and the interstate transportation of stolen vehicles. Both Menjivar and Admettre testified that individuals traveled across state lines to attend MS-13 meetings in New York State. Menjivar also testified that MS-13 sent money to individuals located in El *204 Salvador. Based on this evidence, the jury could reasonably have found that MS-13 engages in or affects interstate commerce.
Appellants' final argument is that the evidence was insufficient to show that MS-13 engaged in acts and threats of murder. In their confessions, both Appellants stated that MS-13 was "at war" with rival gangs. Castro defined making a quota as "[t]o stab, shoot, beat, kill the enemy." In his confession, Vasquez stated that during the Hempstead shooting, the other individuals in the van "told me to do it, and if I didn't do that, they would rub me out, meaning kill me." Moreover, Admettre testified that MS-13 had a policy "to shoot and kill rival gang members." Menjivar similarly testified that "MS-13 engaged in violent acts such as `fights, shootings, beating someone up'", while Aliceaover defense objectiontestified that "[t]hey need guns to do what MS-13 does, which is, you know, shoot at rival gang members, and sometimes in the process, obviously, some people get hit." Finally, Admettre described a February 2003 incident in which Appellants chased and shot at an SWP member. Drawing all reasonable inferences in favor of the Government, and with Alicea's erroneously admitted testimony taken into consideration, the jury fairly could have found the evidence sufficient to find that MS-13 engaged in acts and threats of murder.
Castro alone further claims that the two assault counts stemming from the Hempstead shootings are multiplicitous because the Government failed to show that either Vasquez (the shooter) or Castro intended to target more than one person. He characterizes the Hempstead shooting as "a single shooting of 4 or 5 shots by another person" that resulted in injuries to two individuals. Because Castro's challenge hinges on his claim that the Government failed to satisfy the element of intent, we will construe it as a challenge to the sufficiency of the evidence on that issue. We find that the evidence was more than sufficient to find that Castro intended to injure multiple victims. At trial, a police detective described Castro's confession to the Hempstead shootings:
Q: Did [Castro] say who the targets of that shooting were?
A: Yes, he said SWP was the target.
Q: Did he say why they were shooting at SWP?
A: He said that they were the enemy, and MS was at war with them.
This testimony tends to show that Castro knew that the purpose of the Hempstead shooting was to shoot at multiple people. Furthermore, Menjivar testified that he gave the bullets to Castro, and from that testimony, one can easily infer that Castro knew that the weapon was loaded with multiple bullets. The jury reasonably could have found that Castro intended to harm multiple individuals.
B. Multiplicity of the Indictment
Appellants also claim that the district court should have sentenced them to concurrent sentences for each of the three counts of use of a firearm in furtherance of a crime of violence, 18 U.S.C. § 924(c)(1), because the firearms were all used in furtherance of the same conspiracy. Because § 924(c)(1)(D)(ii) expressly prohibits concurrent sentencing under § 924(c)(1), we construe their challenge as a claim that Appellants' three § 924(c)(1) convictions were multiplicitous. Therefore, the issue is whether the three underlying shootings constituted separate predicate crimes under § 924(c)(1). Because that issue is a question of law, our review is de novo. United States v. Wallace, 447 F.3d 184, 186 (2d Cir.2006).
In United States v. Lindsay, 985 F.2d 666 (2d Cir.1993), we held that the appropriate *205 unit of prosecution under § 924(c)(1) is the predicate offense (i.e., the "crime of violence") rather than the number of firearms. Id. at 674. Despite that general rule, we have twice found that multiple predicate offenses gave rise to only a single § 924(c)(1) offense. In the first, United States v. Finley, 245 F.3d 199 (2d Cir. 2001), the defendant had been convicted of two § 924(c)(1) counts. Id. at 201. The predicate crimes were (1) drug possession and (2) drug distribution. Id. Both predicate crimes stemmed from a single transaction in which Finley had (1) possessed multiple packets of cocaine and (2) sold two of those packets to an undercover officer. Id. at 201-02. We reversed Finley's second § 924(c)(1) conviction, id. at 208, finding that "[t]he statute does not clearly manifest an intention to punish a defendant twice for continuous possession of a firearm in furtherance of simultaneous predicate offenses consisting of virtually the same conduct." Id. at 207.
We reached a similar conclusion in United States v. Wallace, 447 F.3d 184, where two defendants had each been convicted of two § 924(c)(1) counts in connection with a narcotics-related drive-by shooting. Id. at 185-86. The § 924(c)(1) offenses were based on two separate predicate crimes: (1) conspiracy to traffic in narcotics, and (2) firing of a weapon into a crowd of two or more persons in furtherance of a major drug offense (i.e., the conspiracy). Id. at 187. Despite the existence of two separate predicate crimes, we found that "[t]he relevant conduct underlying the offenses predicating Counts Thirteen and Fourteen consists of the same shooting." Id. at 189. Both offenses involved one defendant's use of a firearm in connection with a drug offense, and both involved the murder of a single victim during the drive-by shooting. Id.
We distinguished Finley in United States v. Salameh, 261 F.3d 271 (2d Cir. 2001), where the defendants had each been convicted of multiple crimes in connection with the 1993 bombing of the World Trade Center. Id. at 274. The defendants had each been convicted of two § 924(c)(1) counts. Id. at 275. One count had been based on the predicate crime of conspiracy, and the other count had been based on the predicate crime of assaulting Secret Service officers during the bombing. Id. The defendants there relied on Finley to argue that their two § 924(c)(1) convictions were duplicative. Id. at 277. We found, however, that while the two § 924(c)(1) convictions in Finley were based on a single use of a single firearm, the two § 924(c)(1) counts in Salameh were based on two separate uses of the bomb: transportation and detonation. Id. at 279.
The instant case raises none of the concerns present in Finley and Wallace. We hold, therefore, that the rule in Lindsay, which establishes that the appropriate unit of prosecution under § 924(c)(1) is the predicate offense, applies here. In Finley and Wallace, the defendants had been convicted of various substantive narcotics-related offenses based on single criminal acts. On the other hand, Appellants here were convicted of three counts of the same criminal violation, assault, but the assaults were based on two separate drive-by shootings that resulted in the shooting of three separate victims. As in Salameh, the existence of a single conspiracy connecting the three assaults does not preclude treating them as separate predicate offenses. 261 F.3d at 278-79. And although Appellants now describe the shootings as a "single incident," the jury found both Appellants culpable of the shooting of three separate individuals. Although those separate shootings are clustered in time and space, that clustering *206 does not somehow merge them into one predicate crime.
This case does not raise the concerns that led us in Finley and Wallace to depart from the general rule in Lindsay. In Finley, we observed that it would be absurd to find multiple § 924(c)(1) offenses when a drug dealer possesses drugs and sells only a portion (thus committing the predicate offenses of possession and distribution) but then to find only a single § 924(c)(1) offense when the same dealer, in possession of the same drugs, sells all of them. 245 F.3d at 208. There, we were responding to the unique manner in which a single course of conduct involving controlled substances, such as continuing possession of a large quantity of contraband, gives rise to multiple possible offenses, such as possession, possession with intent, and so forth. The assaults involved here raise no concerns of that sort, and thus Finley and Wallace do not control the outcome.
C. Prior Act Evidence
Appellants also object to the district court's admission of evidence relating to an uncharged shooting and of evidence that MS-13 engaged in narcotics trafficking. They claim that this evidence was offered to show their propensity for criminality and that it was overly prejudicial. With respect to the evidence of narcotics trafficking, they argue that it should have been excluded because it was likely to cause the jury to reach a verdict on an improper basis.
Evidence of uncharged crimes is inadmissible when offered to show a person's propensity to act in a particular way. Fed.R.Evid. 404(b). Such evidence is admissible, however, when offered to show "motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident." Id. Given our "inclusionary approach," prior act evidence is admissible if offered "for any purpose other than to show a defendant's criminal propensity." United States v. Garcia, 291 F.3d 127, 136 (2d Cir.2002) (internal quotation marks omitted). We review the district court's admission of prior act evidence for abuse of discretion, and the district court's ruling stands unless it was arbitrary and irrational. United States v. Lombardozzi, 491 F.3d 61, 78-79 (2d Cir. 2007).
First, Appellants' arguments regarding evidence of narcotics trafficking have little merit. MS-13's involvement in narcotics trafficking was an element of the charged offenses, and as a result, evidence of narcotics trafficking is not prior act evidence, but rather direct evidence of the charged offense. Second, with regard to evidence of the February 2003 shooting, we find no error. The district court admitted the evidence to show the existence of the racketeering enterprise, and it expressly instructed the jury as to the limited use it could make of that evidence. Even the defense counsel stated that "I don't dispute that one could conceive the testimony that the government wants to adduce as being background proof of the existence of a conspiracy and 404(b)." Where, as here, the existence of a racketeering enterprise is at issue, evidence of uncharged crimes committed by members of that enterprise, including evidence of uncharged crimes committed by the defendants themselves, is admissible "to prove an essential element of the RICO crimes chargedthe existence of a criminal enterprise in which the defendants participated." Matera, 489 F.3d at 120 (upholding admission of evidence of uncharged murders). The evidence was also admissible to show the existence of the conspiracy with which both Appellants were charged. United States v. Diaz, 176 F.3d 52, 79 (2d *207 Cir.1999) ("Where . . . the indictment contains a conspiracy charge, uncharged acts may be admissible as direct evidence of the conspiracy itself." (internal quotation marks omitted)). Although Appellants are correct in noting that evidence of a prior shooting presents a significant risk of prejudice, "[w]hen a defendant engages in a criminal enterprise which involves very serious crimes, there is a likelihood that evidence proving the existence of the enterprise through its acts will involve a considerable degree of prejudice. Nonetheless, the evidence may be of important probative value in proving the enterprise." Matera, 489 F.3d at 121. Under these circumstances, the district court did not abuse its discretion when it admitted the evidence.[6]
D. Constructive Amendment of the Indictment
Appellants also argue that because the Indictment alleged that MS-13 engaged in two forms of racketeering activity (acts and threats of murder, and narcotics trafficking), and because the jury did not find that MS-13 engaged in narcotics trafficking, "the specific enterprise set out in the indictment was not proven." This claim is entirely without merit and requires little discussion: "Where there are several ways to violate a criminal statute . . . federal pleading requires. . . that an indictment charge [be] in the conjunctive to inform the accused fully of the charges. A conviction under such an indictment will be sustained if the evidence indicates that the statute was violated in any of the ways charged." United States v. McDonough, 56 F.3d 381, 390 (2d Cir.1995) (internal quotation marks, citations, and alterations omitted). Thus, although the Indictment alleged that MS-13 engaged in both acts and threats of murder and narcotics trafficking, Appellants' "conviction under [that] indictment" was proper because the jury found that "the evidence indicate[d] that the statute was violated in [the other] way[] charged." Id.
E. Sentencing Under § 924(c)(1)
Appellants' final claim is that the district court erred when it imposed 25-year sentences for their second and third § 924(c)(1) offenses based on 18 U.S.C. § 924(c)(1)(C)(i), which requires a 25-year sentence for each "second or subsequent conviction" under § 924(c)(1). They argue that because the Indictment did not charge that any of the firearm counts were "second or subsequent" convictions, the jury did not find Appellants guilty of having committed any second or subsequent firearm offenses, and its verdict therefore did not support such a finding by the district court. This claim is foreclosed by United States v. Campbell, 300 F.3d 202 (2d Cir. 2002), where we held that because the fact of a prior conviction is not an element of § 924(c), and because Apprendi v. New Jersey, 530 U.S. 466, 120 S. Ct. 2348, 147 L. Ed. 2d 435 (2000) excluded prior convictions from its requirements, "there was no requirement that the existence of prior convictions be alleged in the indictment or that any of the multiple firearms convictions returned by the jury be described by *208 the jury as second or subsequent."[7]Campbell, 300 F.3d at 212-213. Campbell is directly on point and controls our review here; the sentences imposed by the district court did not violate Apprendi.
CONCLUSION
Because the testimony of the Government expert witness violated the Federal Rules of Evidence and the Confrontation Clause of the Sixth Amendment, and because that error was not harmless, we VACATE Appellants' convictions on all counts and REMAND to the district court in the event that the Government chooses to retry the case.
NOTES
[1] MS-13 has also appeared in cases in the Fourth, Fifth, Sixth, and Eleventh Circuits. See United States v. Calles, 250 Fed.Appx. 939 (11th Cir.2007); United States v. Funes, 248 Fed.Appx. 593 (5th Cir.2007); United States v. Hernandez-Villanueva, 473 F.3d 118 (4th Cir. 2006); Castellano-Chacon v. INS, 341 F.3d 533 (6th Cir.2003).
[2] The Government's theory was that the ammunition that was used to commit the drive-by shootings constituted an "explosive" under federal law.
[3] After initially characterizing how he learned about the drug tax as a casual conversation with an MS-13 member, Alicea later clarified that he learned about the drug tax during a custodial interrogation of an MS-13 member. Upon further questioning, Alicea stated that this "conversation" had taken place "at the United States Attorney's Office." The MS-13 member with whom Alicea had been "conversing" had been indicted and had not been released on bail, and he had been escorted to the "conversation" by "the U.S. marshals." When asked why that MS-13 member had been arrested, Alicea answered that the individual was "[p]art of this investigation as well, yes."
In other words, Alicea learned about the drug tax from an MS-13 member in custody during the course of this very investigation. The interrogation took place at the U.S. Attorney's Office. The record does not reflect whether the Assistant United States Attorney in charge of this case was present.
[4] We have not been alone in facing questions about the collision between Crawford and testimony by police officers. As the First Circuit has noted, "[p]ost-Crawford, the admission of non-testifying informants' out-of-court testimonial statements, through the testimony of police officers, is a recurring issue in the courts of appeals." United States v. Maher, 454 F.3d 13, 19 (1st Cir.2006).
[5] Although harmless error analysis originally focused on whether the error had affected the jury, see Chapman v. California, 386 U.S. 18, 23-24, 87 S. Ct. 824, 17 L. Ed. 2d 705 (1967) (defining an error as harmless only where there was no "reasonable possibility that the evidence complained of might have contributed to the conviction"), over the years our focus has shifted from the impact of the error on the jury's analysis to an assessment of the strength of the remaining evidence of guilt, see Stephen Alan Childress & Martha S. Davis, 2 Federal Standards of Review § 7.03 (3rd ed.2004) (identifying this shift in Harrington v. California, 395 U.S. 250, 254, 89 S. Ct. 1726, 23 L. Ed. 2d 284 (1969), where the Supreme Court determined the harmlessness of an error by evaluating whether the properly admitted evidence of guilt was "overwhelming"); Schneble v. Florida, 405 U.S. 427, 432, 92 S. Ct. 1056, 31 L. Ed. 2d 340 (1972) (holding error harmless because "the minds of an average jury would not have found the State's case significantly less persuasive" in the absence of the erroneously admitted evidence (internal quotation marks omitted)). That shift, away from a retrospective reconstruction of the actual jury's decisionmaking process and toward a metajuridical evaluation of the importance the error should reasonably have had, has given rise to multiple types and levels of uncertainty. On the general level of the structure of our review, the shift creates "uncertainty ... [as to] whether the reviewing court is to consider the effect of the error on the jury or predict what verdict would have been rendered in the absence of the error." Peck v. United States, 102 F.3d 1319, 1326 (2d Cir. 1996) (en banc) (Newman, J., concurring).
On the more specific level of administering the multifactored balancing tests that we have developed in this context, the question arises whether the reviewing court must conduct its review having drawn all reasonable inferences from the remaining evidence in favor of the defendant. See Schneble, 405 U.S. at 435, 92 S. Ct. 1056 (Marshall, J., dissenting) ("[A]ll reasonable inferences that might be drawn from the evidence must be drawn in favor of the defendant, since the jury may very well have made just these inferences."); United States v. Santos, 449 F.3d 93, 100 (2d Cir. 2006) (reviewing government's principal evidence in light of what "reasonable jurors could have determined"). We have never held that drawing those inferences is part of harmless error review, however, and prevailing precedent dictates that it is not. See Rose v. Clark, 478 U.S. 570, 579, 106 S. Ct. 3101, 92 L. Ed. 2d 460 (1986) ("Where a reviewing court can find that the record developed at trial establishes guilt beyond a reasonable doubt, the interest in fairness has been satisfied and the judgment should be affirmed." (emphasis added)); United States v. Reifler, 446 F.3d 65, 88-90 (2d Cir.2006) (omitting any mention of reasonable inferences when articulating the factors relevant to harmless error review); Zappulla v. New York, 391 F.3d 462, 468 (2d Cir.2004) (same).
Because the result in this case is the same whether or not we draw inferences in favor of the defendants, we need not resolve any such conflict here. We take this opportunity, however, to flag for the Court our concern that our approach to harmless error analysis proceed consistently.
[6] The district court's failure to balance the probative value of the evidence with the possibility of prejudice on the record does not change this conclusion. Defense counsel objected to admission of the evidence because "the probative value here [does not] outweigh[ ] the prejudice to this jury." When the district court admits evidence after hearing such an objection, it is "not required to make mechanical recitation that it balanced probative value against prejudicial effect"; the balancing is presumed. United States v. Pitre, 960 F.2d 1112, 1120 (2d Cir.1992).
[7] Despite the striking parallels between Campbell and the facts here, neither Appellant cited to or acknowledged Campbell when making their Apprendi claims. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1746527/ | 83 So. 2d 667 (1955)
Marshall J. GAUTREAUX, Plaintiff-Appellant,
v.
SOUTHERN FARM BUREAU CASUALTY COMPANY, et al., Defendants-Appellees.
No. 4090.
Court of Appeal of Louisiana, First Circuit.
November 22, 1955.
*668 Durrett & Hardin, Baton Rouge, for appellant.
Taylor, Porter, Brooks, Fuller & Phillips, Baton Rouge, for appellees.
TATE, Judge.
This property damage suit involves an intersectional collision. Plaintiff appeals from judgment which dismissed his demand. Defendant's reconventional demand was also dismissed. Defendant neither appealed nor answered the appeal.
Prior to the accident at about 10 a. m. January 15, 1954, plaintiff Gautreaux was driving his 1953 Ford west on North Boulevard in the City of Baton Rouge, Louisiana. Defendant, Mrs. R. H. Barrow, was driving her 1951 Ford north on S. 18th Street; codefendant Southern Farm Bureau Casualty Company carried a policy of liability insurance on the operation of said Barrow automobile.
At the intersection involved, there was a stopsign located on the corner facing traffic bound north on South 18th Street, as was defendant Mrs. Barrow. North Boulevard was approximately 30 feet in width. It had been raining, and the brick streets were wet. The collision occurred approximately in the center of the intersection, where the right front end of the Gautreaux automobile struck the right rear door of the Barrow automobile. Thus the front of the Barrow automobile had almost cleared the intersection. Gautreaux testified that he had pulled to his left in an unsuccessful attempt to clear the rear of the Barrow automobile, which suddenly rolled into his path.
Following the impact, the rear of the Barrow automobile skidded westward, jumped a 6 inch curb, and knocked down the slender steel rod of the stopsign, moving a total of approximately 24 feet. After the accident, the Barrow automobile was headed approximately east, having more or less pivoted on its front end; while the Gautreaux automobile was in the center of the intersection and had moved approximately 3 feet after the impact.
The District Court concluded in oral reasons for judgment that at this clear intersection both parties were contributorily negligent, in these words:
"Certainly, in my opinion, if Mrs. Barrow, in fact, did stop as she testified that she did prior to entering the intersection she must be held to be guilty of negligence in entering the street when the Gautreaux car was at a point so close that for her to enter the street would result in a collision.
"While my personal views are that a person should be permitted to rely on the fact that a stop sign should prohibit a person from entering a thoroughfare as I understand the law it is that even though there is a stop sign which requires that a vehicle entering the favored street to stop prior to enteringa person on a favored street *669 is required, when the intersection is open, as the evidence shows in this case, to observe the fact that the car did or did not stop.
"I am inclined to believe that Mr. Gautreaux, from the testimony, was in fact paying attention to returning to his work and probably recounting in his own mind his visit with the dentist immediately prior to the collision and in all probability was so preoccupied that he did not observe, as under the law I believe he is required to have done so, the car driven by Mrs. Barrow entering the intersection at a time when a collision would follow unless he applied his brakes timely."
In our opinion, the able District Court correctly felt that the motorist on the favored street should be permitted to rely on the existence of a stopsign inhibiting the entrance of traffic from inferior streets; but we feel that the mere fact he failed to see whether the other automobile did or did not stop does not constitute contributory negligence. To bar recovery, the deficient lookout must be a proximate cause of the accident.
To paraphrase the rule we have stated several times: A motorist crossing an intersection has the right to rely on the assumption that those approaching it will respect a stopsign which the motorist knows is located there, and accordingly he may proceed. If, however, in driving on the favored street he sees, or in the exercise of due care should see, that the other vehicle neglected to make the stop required by law, the motorist may himself be under a duty of stopping if by the exercise of reasonable care on his part the accident could have been avoided at the time he saw or should have seen the other vehicle violating its legal duty to stop before entering the favored thoroughfare. See Blashfield, Cyclopedia of Automobile Law and Practice, (Perm. Edition) Volume 2, Section 1032, pp. 333-334, cited in Miller v. Abshire, La. App. 1 Cir., 68 So. 2d 143; Droddy v. Southern Bus Lines, Inc., La.App. 1 Cir., 26 So. 2d 761; Termini v. Aetna Life Insurance Co., La.App. 1 Cir., 19 So. 2d 286. See also Federal Insurance Co. v. Lepine, La.App. 1 Cir., 55 So. 2d 83, where excessive speed on part of driver on main thoroughfare at blind intersection was held not to be proximate cause of accident.
In the everyday world, ordinarily prudent motorists on the main thoroughfare do not slow before each corner and attempt to peer down the sidestreets, but instead concentrate most of their attention on the path ahead, relying on their legal "right of way". Legislative provisions for right of way are to facilitate the passage of traffic in this congested twentieth century world. If to accomplish this purpose, and in realization that even observing the path ahead may tax the ordinary motorists' powers of sustained observation, the legislature has relieved the motorist on the right of way street of a duty ordinarily to slow before each intersection (and, consequently, of a duty to take his attention from the path ahead by darting glances each way down the intersecting streets), appellate courts should not supply artificial standards in an unrealistic attempt to allocate damages after an accident has occurred.
In the present instance, Mrs. Barrow's negligence was undoubtedly a proximate cause of the accident when she entered the intersection when (as found the District Court) the Gautreaux vehicle was so close to the intersection, whether she stopped at the stopsign or not. However, Gautreaux was under no duty (even if maintaining an adequate lookout) to expect her to proceed into the intersection if she had stopped or was slowing for the stopsign. But, further, if Gautreaux was approaching at a speed of 20 mph (i. e., 29' per second) as he informed the investigating officers immediately after the accident and testified at the trial, while Mrs. Barrow as she claimed was crossing said intersection at a speed of 15-20 mph (i. e., 21.9'-29' per second), it does not appear to us, even if Gautreaux observed Mrs. Barrow failing to stop at the stopsign, that he hadthus far having proceeded free of negligence and under no duty up until that time to anticipate the inferior motorist's failure to observe *670 her legal duty to stopphysical opportunity to avoid the collision. It is to be remembered that Mrs. Barrow's entry and crossing of the intersection occurred within 1 to 1½ seconds. Thus the sole proximate cause of the accident was Mrs. Barrow's negligent entry onto the main thoroughfare in the face of oncoming traffic, Robbins v. Mydland, La.App. 1 Cir., 81 So. 2d 561.
Defendants, however, urge that the physical results of the accident indicate plaintiff was proceeding at excessive speed, which was at least a proximate contributory cause of the accident, thus seeking to bring the situation within cases such as Comeaux v. Blanchet, La.App. 1 Cir., 69 So. 2d 527, Miller v. Abshire, La.App. 1 Cir., 68 So. 2d 143, Gauthier v. Fogleman, La.App. 1 Cir., 50 So. 2d 321, where the driver on the superior thoroughfare was held guilty of proximate cause negligence for that reason.
Considering the wet and slippery conditions of the brick street, the burden of proof upon him alleging contributory negligence to prove it, the positive testimony as to the legal speed of plaintiff, and the absence of any contradictory testimony other than the estimate of Mrs. Barrow's daughter based on a momentary glimpse at the moment of impact, and in view of the relatively slight damage to both vehicles, we do not believe that the evidence is necessarily indicative of any great or excessive speed, in the absence of a contrary finding by the District Court. Rather, we believe, the physical evidence supports the plaintiff's version of the accident that defendant's car appeared in his path when he was so close to the intersection that he was unable to avoid same, even though he pulled hard to his left, thus causing the right front end of his car to strike the rear of the Barrow car in the very center line of the intersection.
Since each case depends upon its individual facts and circumstances, little purpose would be served by detailed analysis of the cases cited by defendants in support of their thesis that plaintiff was at least contributorily negligent under the facts of this case. Suffice it to say, almost all of them can be factually distinguished in that the driver on the main thoroughfare was a sufficient distance away therefrom to avoid the collision, had he been proceeding with proper lookout or not at excessive speed.[1]
We do not view defendant's claim to have pre-empted the intersection as well founded since as we have observed only recently, "The right of pre-emption is not accorded the driver who blindly enters a favored street, without regard to oncoming traffic, and then attempts to absolve himself of liability because of the mere fact that he was there first", Sonnier v. United States Fidelity & Guaranty Co., La.App. 1 Cir., 79 So. 2d 635, at page 638. Pre-emption means entry into an intersection with the opportunity to clear same without (under reasonably anticipated conditions) obstructing the passage of approaching vehicles, Wilson v. Williams, La. App. 1 Cir., 82 So. 2d 71.
Defendant further urges that plaintiff failed to prove by certified copy of ordinance or other valid proof that North Boulevard was a favored street at the place of the accident. While this objection was correct, since our courts may not take judicial notice of municipal ordinances, Pacific Fire Insurance Co. v. Employers Liability Assurance Corp., La.App., 34 So. 2d 796, Butler v. O'Neal, La.App., 26 So. 2d 753, nevertheless under the facts of this case even if no favored thoroughfare was proven, nevertheless plaintiff had the right of way as a vehicle approaching from the right under LSA-R.S. 32:237A, see Schech v. Pittman, La.App. 1 Cir., 51 So. 2d 119.
The property damage sustained by plaintiff was stipulated at $225.61.
*671 For the above and foregoing reasons, the judgment of the District Court herein is reversed. It is hereby ordered, adjudged, and decreed that there be judgment herein in favor of plaintiff, Marshall J. Gautreaux, and against defendants, Mrs. R. H. Barrow and Southern Farm Bureau Casualty Company, holding them liable in solido in the sum of $225.61 with legal interest thereon from judicial demand until paid, and for all costs of these proceedings and of this appeal.
Reversed and rendered.
NOTES
[1] Wilson v. Yellow Cab Co., La.App., 64 So. 2d 463, with facts very similar to the present, specifically noted that the common carrier defendant owed its plaintiff passenger the standard of care not of the reasonably prudent motorist (which is the standard applicable here) but that of the highest degree of care, so that the very slightest negligence was actionable. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1203834/ | 223 Ga. 768 (1967)
158 S.E.2d 370
ARKWRIGHT
v.
THE STATE.
24330.
Supreme Court of Georgia.
Argued October 9, 1967.
Decided November 9, 1967.
*769 Limerick L. Odom, L. H. Hilton, Kravitch & Hendrix, Aaron Kravitch, for appellant.
Cohen Anderson, Solicitor General, Arthur K. Bolton, Attorney General, Marion O. Gordon, Assistant Attorney General, Mathew Robins, Deputy Assistant Attorney General, for appellee.
MOBLEY, Justice.
The defendant and Johnnie B. Williams were jointly indicted for rape. The defendant requested a severance and the case proceeded to trial against him. He was found guilty without a recommendation of mercy and was sentenced to death. From this verdict and judgment he appealed. He filed enumerations of errors on August 31 and on September 5, 1967, within ten days after the transcript of record was filed in this court, as required by the Appellate Practice Act (Ga. L. 1965, pp. 18, 29, as amended by Ga. L. 1965, pp. 240, 243; Code Ann. § 6-810), and the rules of this court. Rule 20 (221 Ga. 884). A purported amendment to the enumerations of errors, filed after the time allowed for filing of the enumeration of errors, will not be considered by this court for failure to comply with the Appellate Practice Act and the rules of this court. Foskey v. Kirkland, 221 Ga. 773 (1) (147 SE2d 310).
*770 1. In his enumeration of errors the defendant alleges that the verdict is contrary to the evidence and without evidence to support it, and contrary to law and the principles of justice and equity. This contention is wholly without merit. The evidence shows that the defendant and Williams went to the home of the victim, which was in the country with no other home nearby, entered the home, robbed her of the money she had, then choked her, threatened to kill her, and dragged her into the woods, where she was held by Williams while, according to the defendant, he attempted to have sexual relations with her but was unable to do so. The victim testified that the defendant did accomplish his purpose, that he then held her while Williams raped her, and then the defendant again raped her. The doctor who examined her shortly afterwards at the hospital, where she was brought by a neighbor, testified that there was male sperm in her vagina and that she was in a state of shock or hysteria. After raping the victim, Williams stripped her wedding ring and band from her finger, and the defendant and Williams tied her to a tree and left her in the woods. She released herself and went looking for her four-year old child, who was alone at home with her when the defendant and Williams had entered the house. She was picked up on the road by a friend, as was her child, who had been seen walking down the road. The evidence shows the cruel, inhumane, wholly unprovoked, dastardly crime of rape committed upon this helpless young woman by the defendant and his companion.
2. The enumeration of error alleging that the court refused to declare a mistrial on the ground that the court had excluded from the panel of 48 jurors each juror who was opposed to capital punishment, in violation of the Fifth and Sixth Amendments of the United States Constitution (Code §§ 1-805, 1-806), has been settled adversely to the defendant's contention by full bench decisions of this court. Massey v. State, 222 Ga. 143 (5), 150 (149 SE2d 118); Cobb v. State, 222 Ga. 733, 737 (3) (152 SE2d 403); Gunter v. State, 223 Ga. 290 (2) (154 SE2d 608), and cases cited.
3. Ground 3 enumerates as error the failure of the court to charge the jury the law with respect to assault with intent to *771 rape. The victim testified that the defendant raped her twice and Williams raped her once, each aiding and abetting the other by holding her while the other raped her. The defendant admitted in his unsworn statement that he attempted to rape her twice, while Williams held her, and that he held her while Williams raped her. Under any theory of the evidence, the defendant was guilty of rape. If he actually raped her, as the victim testified, or if he aided and abetted Williams in raping her, he is guilty of rape, and consequently the court did not err in omitting to charge upon the subject of assault with intent to commit rape. Bailey v. State, 153 Ga. 413 (2) (112 S.E. 453). See also Whitley v. State, 188 Ga. 177, 178 (2) (3 SE2d 588), and cases cited.
4. It is asserted that the court erred in permitting the jury to disperse after returning its verdict and before the verdict was read and published. The record shows that before the judge charged the jury, counsel for the defendant and the State made the following agreement, as it appears in the record: "Stipulation. The Court: (Outside of the presence of the jury). Let the record in this case show that the Judge has conferred with counsel for both the State and the defendant and it is agreed by counsel for both the State and the defendant that the court instruct the jury trying this case, when they have agreed upon a verdict and written it on the back of the indictment and signed by the foreman and dated, that that verdict be sealed, that the foreman endorse his name on the outside of the sealed envelope, with the date, and return the sealed verdict to the court. That the clerk of the court will hold that verdict, unopened, until the jury is empaneled in the case of The State v. Johnnie B. Williams, the co-defendant and after the jury is empaneled to try that case, on July 18th, 1967, that the verdict of the jury in this case will then be opened and published. Let the record show too that counsel does not waive any other of its rights to poll the jury or any other rights that they have under the law. Mr. Hilton, you and Mr. Odom are present, that is agreeable? Mr. Hilton: Yes, sir, that's correct. Mr. L. L. Odom: That's correct. The Court: And you, Judge Odom, for the State, along with the Solicitor General, is that agreeable? Mr. Tom Odom: Yes, sir. Mr. Anderson: Yes, sir."
*772 The defendant contends that he did not acquiesce in this agreement, that it was not submitted to him, and he was not advised that his counsel was waiving his right to have the jury kept together. Obviously, the agreement was made in open court in his presence and was not objected to by him. After keeping silent in the presence of the court while his attorney made the agreement, he will not be heard thereafter to deny the authority of his attorney to make it. See Archer v. Clark, 202 Ga. 229 (1) (42 SE2d 924).
"It is a right of a defendant being tried for murder to have the jury kept together while hearing and considering his case (Berry v. State, 10 Ga. 511), but he may waive such right. Code § 102-106; Sarah v. State, 28 Ga. 576; 23 CJS, Criminal Law, 1014, 1064, §§ 1355, 1387... During the trial of the instant case but before it was submitted to the jury, and at a private conference between the trial judge, the solicitor general, and all the attorneys for the defendant, it was agreed that the jury might be dispersed for the night under instructions of the court, which were given. The defendant, having made such an agreement through his counsel, will not be heard to complain for the first time after the verdict, ..." Buttersworth v. State, 200 Ga. 13, 23 (36 SE2d 301). See also Atlanta Newspapers, Inc. v. State of Ga., 216 Ga. 399 (4) (116 SE2d 580) ; Thompkins v. State, 222 Ga. 420 (3) (151 SE2d 153).
5. The enumeration of error alleging that the court erred in admitting photographs and stating in the presence of the jury, "so far there has been nothing in the case to refute what this lady says that the thing began at her house, the rape was consummated near her house out in the woods from her house," is without merit, as the record does not substantiate the allegations. On the contrary, the record shows that the photographs were not admitted in evidence, and the statement of the judge was made outside the presence of the jury.
Judgment affirmed. All the Justices concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1967820/ | 841 A.2d 907 (2004)
366 N.J. Super. 485
Eric LUCIER and Karen A. Haley, Plaintiffs-Appellants,
v.
Angela M. WILLIAMS, James V. Williams, and/or Cambridge Associates, LTD., and/or Al Vasys, Defendants-Respondents.
Superior Court of New Jersey, Appellate Division.
Submitted October 9, 2003.
Decided February 13, 2004.
*908 Anthony J. Brady, Jr., Voorhees, attorney for appellants.
Amacker & Singley, attorneys for respondents Cambridge Associates, Ltd. and *909 Al Vasys (George J. Singley, Mount Laurel, on the brief).
Respondents Angela M. Williams and James V. Williams did not file a brief.
Before Judges KING, LINTNER and LISA.
The opinion of the court was delivered by LISA, J.A.D.
We consider in this appeal the enforceability of a limitation of liability provision in a home inspection contract. The Law Division judge found the provision enforceable, and granted partial summary judgment in favor of the home inspector. The effect of this order was to limit the home buyer's potential recovery to one-half of the fee paid for the home inspection service, namely $192.50. We hold that this limitation of liability provision is unconscionable, in contravention of public policy, and is therefore unenforceable. Accordingly, we reverse.[1]
I
Plaintiffs, Eric Lucier and Karen A. Haley, a young married couple, were first-time home buyers. They contracted with defendants, Angela M. Williams and James B. Williams, to purchase a single family residence in Berlin Township for $128,500. Lucier and Haley engaged the services of Cambridge Associates, Ltd. (CAL) to perform a home inspection. Defendant Al Vasys had formed CAL and was its president. Only Lucier signed the home inspection agreement, dated July 7, 1999. Lucier dealt directly with Vasys, and Vasys performed the inspection and issued the home inspection report, dated July 14, 1999, on behalf of CAL.
The home inspection agreement contains this provision limiting CAL's liability:
Client and CAL have discussed the risks, rewards and benefits of this assignment and CAL's total fee for services. It is acknowledged that benefits vary disproportionately between them. Accordingly, the risks have been allocated such that the Client agrees that, to the fullest extent permitted by law, CAL's total liability to Client for any and all injuries, claims, losses, expenses, damages or expenses arising out of this Agreement from any cause or causes shall not exceed the total amount of $500, or 50% of fees actually paid to CAL by Client, whichever sum is smaller. Such causes include, but are not limited to, CAL's negligence, errors, omissions, strict liability, breach of contract or breach of warranty. CAL will not be liable to Client or Client's insurers, in contract, warranty, tort, (including negligence), or otherwise, for any special, indirect, or consequential damages resulting from the performance of or failure to perform services under this Agreement, which damages shall include specifically, but without limitation, loss of use, cost of replacement substitute facilities, cost of capital or similar damages.
This provision, as several others in the form agreement prepared by CAL, was followed by a line for placement of the clients' initials. Lucier initialed this provision.
Lucier has certified that when he began to read the agreement, in Vasys' presence, he felt some of the language was unfair and confusing. According to Lucier, Vasys stated he would not change any provisions, that it was a standard contract *910 based upon home inspections done in New Jersey, and Lucier would have to sign the agreement "as-is" or not at all. Vasys does not dispute this, but relies upon Lucier's signing the agreement and initialing the limitation of liability clause. Likewise, Lucier does not deny signing the contract or initialing that clause.
Lucier has also certified other unrefuted facts: he reviewed and relied upon Vasys' resume in entering into the contract; he was never aware that Vasys or CAL were uninsured; he would not have entered into the contract had he known; he was not represented by an attorney in any aspect of this real estate transaction; and he relied upon the home inspection report issued by Vasys on behalf of CAL in going through with the home purchase. The fee for the home inspection contract was $385, which Lucier paid to CAL.
Vasys' resume reveals he holds a 1960 engineering degree with a major in structural design from Villanova University, he is a member of the National Society of Professional Engineers, the New Jersey Society of Professional Engineers and the Building Officials and Code Administrators (BOCA) International, and he has inspected more than 3,000 residential properties for prospective home buyers. The resume further states that Vasys is certified as a BOCA building inspector, he is a licensed New Jersey building inspector and a certified New Jersey radon measurement specialist, and he has qualified and served as a litigation expert involving residential dwellings.
Lucier and Haley went to settlement and obtained title to the property from the Williams'. Shortly after settlement, plaintiffs noticed leaks in the house. They contacted the Williams' regarding the problem, and engaged the services of a roofing contractor. Plaintiffs contend the roof was defective because of a lack of flashing, which they contend Vasys should have observed and reported to them. According to plaintiffs, had they known of this defect, they would have either withdrawn from the agreement of sale or attempted to negotiate a lower price to reflect the cost required to remedy the problem. They contend the cost of repair was about $8,000 to $10,000.
Plaintiffs brought suit against the Williams', CAL and Vasys, seeking damages to compensate them for the loss occasioned by the alleged defect. They asserted various theories, including fraud, breach of warranty, breach of contract, and negligence. After filing their answer, CAL and Vasys moved for partial summary judgment seeking a declaration that the limit of their liability in the action, if any, was one-half the contract price, or $192.50. On January 5, 2001, the motion for partial summary judgment was granted, supported by these findings:
I find that the exculpatory clause in this agreement is enforceable. All right.
I find that the clause is not the product of unduly disproportionate bargaining powers. The bargaining power of both sides was not sufficiently disproportionate.
I don't find the clause to be substantially unreasonable.
Theit's enforceable and it trumps plaintiff's usual rights of recovery.
Plaintiffs' subsequent motion for reconsideration was denied.
Relying on another provision in the contract that all disputes would be resolved through binding arbitration, CAL and Vasys moved for summary judgment to dismiss the complaint. Over plaintiffs' opposition, the motion was granted, and an order was entered on May 11, 2001 dismissing the complaint without prejudice *911 and directing that the matter be arbitrated as provided in the contract.
Meanwhile, Lucier and Haley agreed with the Williams' to submit the dispute between them to binding arbitration. CAL and Vasys did not participate in this proceeding, and they contend they were not even aware of it. As a result of the arbitration proceeding, Lucier and Haley and the Williams' reached an agreement by which the Williams' would pay $8,000 to Lucier and Haley and would receive an assignment of Lucier's and Haley's claim against CAL and Vasys. Lucier and Haley agreed to cooperate with the Williams' in pursuing the claim against CAL and Vasys. A consent order reflecting these terms was entered on July 18, 2002.
Lucier and Haley then filed this appeal, seeking review of the partial summary judgment order of January 5, 2001 (enforcing the limitation of liability provision) and the denial of reconsideration, and of the summary judgment order of May 11, 2001 (dismissing their complaint and directing the matter to arbitration).
II
We begin our analysis of the enforceability of the limitation of liability clause with the fundamental proposition that contracts will be enforced as written. Vasquez v. Glassboro Serv. Ass'n, 83 N.J. 86, 415 A.2d 1156 (1980). Ordinarily, courts will not rewrite contracts to favor a party, for the purpose of giving that party a better bargain. Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 161 A.2d 717 (1960). However, courts have not hesitated to strike limited liability clauses that are unconscionable or in violation of public policy. Moreira Constr. Co., Inc. v. Moretrench Corp., 97 N.J.Super. 391, 394, 235 A.2d 211 (App.Div.1967), aff'd, 51 N.J. 405, 241 A.2d 236 (1968).
There is no hard and fast definition of unconscionability. As the Supreme Court explained in Kugler v. Romain, 58 N.J. 522, 279 A.2d 640 (1971), unconscionability is "an amorphous concept obviously designed to establish a broad business ethic." Id. at 543, 279 A.2d 640. The standard of conduct that the term implies is a lack of "good faith, honesty in fact and observance of fair dealing." Id. at 544, 279 A.2d 640.
In determining whether to enforce the terms of a contract, we look not only to its adhesive nature, but also to "the subject matter of the contract, the parties' relative bargaining positions, the degree of economic compulsion motivating the `adhering' party, and the public interests affected by the contract." Rudbart v. North Jersey District Water Supply Comm'n, 127 N.J. 344, 356, 605 A.2d 681, cert. denied, 506 U.S. 871, 113 S.Ct. 203, 121 L.Ed.2d 145 (1992). Where the provision limits a party's liability, we pay particular attention to any inequality in the bargaining power and status of the parties, as well as the substance of the contract. Valhal Corp. v. Sullivan Assoc., Inc., 44 F.3d 195, 204 (3rd Cir.1995); Marbro, Inc. v. Borough of Tinton Falls, 297 N.J.Super. 411, 416-18, 688 A.2d 159 (Law Div.1996).
The first leading principle is that contractual exemption from liability for negligence is rarely allowed to stand where the contracting parties are not on roughly equal bargaining terms. The farther apart the contracting parties are in their relative strength the greater is the probability that the exculpatory clause will be held invalid.
[Kuzmiak v. Brookchester, 33 N.J.Super. 575, 586, 111 A.2d 425 (App.Div. 1955) (citing 175 A.L.R. 8-140).]
We also focus our inquiry on whether the limitation is a reasonable allocation of risk between the parties or *912 whether it runs afoul of the public policy disfavoring clauses which effectively immunize parties from liability for their own negligent actions. Valhal, supra, 44 F.3d at 202-04; Marbro, supra, 297 N.J.Super. at 416-18, 688 A.2d 159. To be enforceable, the amount of the cap on a party's liability must be sufficient to provide a realistic incentive to act diligently. Valhal, supra, 44 F.3d at 204; Marbro, supra, 297 N.J.Super. at 416, 688 A.2d 159.
Applying these principles to the home inspection contract before us, we find the limitation of liability provision unconscionable. We do not hesitate to hold it unenforceable for the following reasons: (1) the contract, prepared by the home inspector, is one of adhesion; (2) the parties, one a consumer and the other a professional expert, have grossly unequal bargaining status; and (3) the substance of the provision eviscerates the contract and its fundamental purpose because the potential damage level is so nominal that it has the practical effect of avoiding almost all responsibility for the professional's negligence. Additionally, the provision is contrary to our state's public policy of effectuating the purpose of a home inspection contract to render reliable evaluation of a home's fitness for purchase and holding professionals to certain industry standards.
This is a classic contract of adhesion. There were no negotiations leading up to its preparation. The contract was presented to Lucier on a standardized pre-preprinted form, prepared by CAL, on a take-it-or-leave-it basis, without any opportunity for him to negotiate or modify any of its terms. Rudbart, supra, 127 N.J. at 353-54, 605 A.2d 681; Jasphy v. Osinsky, 364 N.J.Super. 13, 21, 834 A.2d 426 (App. Div.2003).
The bargaining position between the parties was grossly disparate. Vasys has been in the home inspection business for twenty years. He has inspected thousands of homes. He has an engineering degree. He has served as an expert witness in construction matters. He holds various designations in the building and construction field. He advertises his company and holds it and himself out as possessing expertise in the home inspection field. Lucier and Haley, on the other hand, are unknowledgeable and unsophisticated in matters of home construction. They are consumers. They placed their trust in this expert. They had every reason to expect he would act with diligence and competence in inspecting the home they desired to purchase and discover and report major defects. The disparity in the positions of these parties is clear and substantial.
The foisting of a contract of this type in this setting on an inexperienced consumer clearly demonstrates a lack of fair dealing by the professional. The cost of homes in New Jersey is substantial.[2] It has often been said that the purchase of a home is usually the largest investment a person will make in life. The purchase of a home is, for most people, a very infrequent occurrence, and a very major undertaking. People may buy a home once in a lifetime, or not very often. Home inspectors, on the other hand, conduct a volume operation. As a businessperson who possesses knowledge about and experience in the industry, Vasys is aware of the cost of repairing major defects. In fact, that is a major selling point of his service to residential buyers.
In most cases, major defects will either not exist or, with due diligence and competence, they will be discovered and reported. *913 We can assume that the contract price here, a little under $400, is typical of fees charged for this service. If, upon the occasional dereliction, the home inspector's only consequence is the obligation to refund a few hundred dollars (the smaller of fifty percent of the inspection contract price or $500), there is no meaningful incentive to act diligently in the performance of home inspection contracts. To compound the problem, such excessively restricted damage allowance is grossly disproportionate to the potential loss to the home buyer if a substantial defect is negligently overlooked. The impact upon the home buyer can be indeed monumental, considering issues such as habitability, health and safety, and financing obligations.
We will not countenance enforcement of the limitation of liability provision in the home inspection contract in this case. To do so would render the underlying purpose of the contract worthless. It is immaterial to our analysis that this provision did not completely bar any cause of action against CAL and Vasys, or that Lucier expressly agreed to it. This excessively restricted damage allowance, which caps the inspector's exposure at $192.50, effectively immunizes him from the consequences of his own negligence. Although the cap is one-half of the fee paid for this job, we nonetheless deem it "so minimal compared with the expected compensation, that the concern for the consequences of a breach is drastically minimized." Marbro, supra, 297 N.J.Super. at 418, 688 A.2d 159 (citing Valhal, supra, 44 F.3d at 204). This is so because the home inspector's exposure is nominal with respect to this job and, more significantly, when viewed in the realistic context of the home inspector's high volume operation. In these circumstances, the limitation clause is tantamount to an exculpation clause, and warrants application of the same policy considerations.
The limitation of liability clause here is also against public policy. First, it allows the home inspector to circumvent the state's public policy of holding professional service providers to certain industry standards. Erlich v. First Nat'l Bank of Princeton, 208 N.J.Super. 264, 287, 505 A.2d 220 (Law Div.1984). Second, it contravenes the stated public policy of New Jersey regarding home inspectors.
We have recently described the purpose of a home inspection contract, that is, to render a reliable evaluation of a home's fitness for purchase:
The record before us establishes that what the [home buyers] wanted and what a consumer of home inspection services would generally and reasonably expect is an inspection and report which forthrightly discloses physical conditions of a house which could reasonably affect the health, safety and welfare of its occupants. It should reveal and report conditions which may, presently or in the reasonably foreseeable future, cause the consumer substantial inconvenience or require costly repairs or maintenance expense. Indeed, the purpose of such a home inspection is to give a consumer a rational basis upon which to decline to enter into a contract to buy, to provide lawful grounds to be relieved from a contractual commitment to buy, or to offer a sound basis upon which to negotiate a lower price.
[Herner v. HouseMaster of Am., 349 N.J.Super. 89, 106, 793 A.2d 55 (App. Div.), certif. denied, 174 N.J. 40, 803 A.2d 636 (2002) (finding that a home inspection company engaged in unconscionable commercial practice in violation of the consumer fraud statute by failing to provide a forthright report disclosing certain physical conditions *914 of the house and by failing to disclose its relationship with the realtor.) ]
We are satisfied that the nature of the service here is a professional service. The essence of a professional service is one that involves "specialized knowledge, labor or skill and the labor or skill is predominantly mental or intellectual, rather than physical or manual." Burlington Township v. Middle Department Inspection Agency, 175 N.J.Super. 624, 631, 421 A.2d 616 (Law Div.1980).
In New Jersey, professionals are held to the standards of their industry. Erlich, supra, 208 N.J.Super. at 287, 505 A.2d 220. There the court held unenforceable an exculpatory clause in a bank's investment management services contract, finding that investment advisors are professionals who hold themselves out to the public as having special knowledge, labor or skill. Id. at 288, 505 A.2d 220.
With professional services, exculpation clauses are particularly disfavored. Id. at 287-88, 505 A.2d 220. The very nature of a professional service is one in which the person receiving the service relies upon the expertise, training, knowledge and stature of the professional. Exculpation provisions are antithetical to such a relationship. It would be indeed a hollow arrangement if a physician could charge $100 for an office visit and then, if, due to negligence, a diagnosis is missed, resulting in a catastrophic illness or even death, the patient's only recourse would be a refund of $50 of the original $100 fee. Certainly, such a provision in a doctor-patient relationship would not be enforceable. A.M. Swarthout, Validity and Construction of Contract Exempting Hospital or Doctor from Liability for Negligence to Patient, 6 A.L.R.3d 704 (1996) ("The application of these principles to exculpatory contracts between hospitals or physicians, on the one hand, and patients, on the other, has been considered in relatively few instances. It can, however, be said that what rulings there are indicate generally, but not uniformly, that contracts of the kind mentioned are invalid."). See, e.g., Ash v. New York Univ. Dental Ctr., 164 A.D.2d 366, 564 N.Y.S.2d 308 (1990); Olson v. Molzen, 558 S.W.2d 429 (1977) (holding exculpatory contract between patient and doctor invalid as contrary to public policy). Here, the home inspector held himself out as an expert and a professional. The disparity between the consequences of negligence to the home inspector and to the home buyer, like that between a physician and a patient, is very substantial.
In evaluating the enforceability of contractual provisions, we also look to express statements of public policy. Declarations of public policy may derive from various sources, including legislation. In late 1997, our Legislature enacted the Home Inspection Professional Licensing Act (the Act), N.J.S.A. 45:8-61 to -77. The legislation was signed into law on January 8, 1998, effective 180 days thereafter. The Act requires that a person must be licensed to perform home inspection services. N.J.S.A. 45:8-67. In order to be licensed, the person must meet certain qualifications, such as possessing a minimum amount of experience and passing a home inspector's examination. The legislation also provides for regulatory oversight of the home inspection industry by the Home Inspection Advisory Committee. N.J.S.A. 45:8-63.
Important to our analysis here is the Act's provision requiring home inspectors, as a licensing prerequisite, to maintain errors and omissions insurance with a minimum coverage of $500,000 per occurrence. N.J.S.A. 45:8-76a. This legislative provision evinces a clear expression of policy that home inspectors shall not only provide recourse by being fully liable for their errors and omissions, but shall maintain *915 substantial insurance coverage to assure payment for any such liability. With this public policy clearly announced in January 1998, we have no doubt that the limitation of liability provision before us was in violation of that policy.
We recognize that the regulatory mechanisms envisioned by this legislation were not fully implemented by the summer of 1999, when the contract before us was entered into. Time was apparently needed to constitute the regulatory body and draft, propose, and adopt regulations. The regulations have now been adopted, N.J.A.C. 13:40-15.1 to -15.23, but they were not effective until June 3, 2002. Thus, we have nothing in the record to establish whether CAL or Vasys could have obtained a home inspection license prior to entering into the contract with plaintiffs.
Nonetheless, this law was "on the books," and the public policy thus announced, a full year-and-a half before the home inspection contract between the parties in this case was entered into. The legislative history behind the Act supports our conclusion regarding the public policy. Press accounts included in the official legislative history clearly express the Legislature's purpose to protect home buyers from negligence by home inspectors. They include the following statements:
[1] Currently, New Jersey has no regulatory authority over the home inspection industry. Inspectors often are hired to examine the structural soundness and any deficiencies of a home prior to sale.
"The current law in New Jersey is so weak that it does little to prevent anyone with a flashlight and clipboard from passing himself off as a home inspector," said Assemblyman Anthony Impreveduto, D-Hudson, one of the bill's sponsors.
[Bill Lets State License All Home Inspectors, Press of Atlantic City, Dec. 16, 1997, at "State Briefs."]
[2] Governor Whitman on Thursday signed a bill giving New Jersey what is arguably the nation's toughest controls on the home-inspection industry, protecting home buyers from scam artists and unqualified inspectors.
....
"It's a good piece of legislation, it's a piece of legislation that protects the biggest asset consumers ever buy," said Impreveduto. The key for consumers is that the license is dependent upon insurance.
To guarantee that an inspector maintains coverage, insurance companies will be required to notify state regulators if the policy is canceled. Without insurance, a consumer's only recourse to recover losses is to sue the inspector and the inspection company.
[Kevin G. DeMarrais, N.J. Enacts Controls on Home Inspectors, The Record, Jan. 9, 1998, (emphasis added).]
[3] [R]ecent surges in the popularity of home inspections have created an overpopulated inspection industry where not all inspectors have the training and experience to do a good job. Cost-conscious consumers find out too late that trying to save $50 to $100 on an inspection can result in an inadequate review. Unfortunately, this can translate into thousands of dollars in unexpected repairs being discovered after the sale.
....
[According to various legislators] consumers will no longer be hit with costly repairs after being misled about the condition of a house by unqualified inspectors.
....
These provisions, together with the educational, testing and insurance requirements of the law, provide the structure necessary to insure New Jersey's *916 home-buying consumers that they will be protected.
[Thomas Kraeutler, Inspecting Home Inspectors 154 N.J.L.J. 13, October 5, 1998 (emphasis added).]
The legislative intent here is clear, and it provides, through our State's elected representatives, a clear declaration of public policy in New Jersey. Where legislation protecting the interests of the home-buying public has been adopted for the home inspection industry, its protections cannot be contracted away. See, e.g., McCarthy v. National Association for Stock Car Auto Racing, 48 N.J. 539, 542-43, 226 A.2d 713 (1967) (holding that an exculpation clause signed by a stock car driver in favor of the raceway was unenforceable because it was in contravention of legislation regulating the safety of auto racing and could not be contracted away). Home buyers who avail themselves of the services of home inspectors who hold themselves out as experts, must be protected and must have meaningful recourse against the home inspector in the event errors are made.
We note that the Act classifies home inspection service as a professional service, and places jurisdiction for regulation under the State Board of Professional Engineers and Land Surveyors. N.J.S.A. 45:8-63. As we have stated, the nature of home inspection certainly qualifies it as a professional service. Inspecting the structure of a home requires "specialized knowledge," that is "predominantly mental or intellectual." Erlich, supra, 208 N.J.Super. at 264, 505 A.2d 220. As we have also stated, exculpation or limitation of liability clauses are particularly disfavored with regard to professional services.
In summary, the limitation of liability provision in this contract is unconscionable and violates the public policy of our State. The contract is one of adhesion, the bargaining power of the parties is unequal, the impact of the liability clause is negligible to the home inspector while potentially severe to the home buyer, and the provision conflicts with the purpose of home inspection contracts and our Legislature's requirement of accountability by home inspectors for their errors and omissions.
III
We comment briefly on the arbitration clause. Plaintiffs argue before us as they did before the trial court, that because defendants brought their partial summary judgment motion seeking a declaration enforcing the limitation of liability provision, defendants participated in the litigation and waived their right to enforce the arbitration clause. We disagree. Until a final judgment is entered, the viability of enforcement of the arbitration clause continues to exist. Wasserstein v. Kovatch, 261 N.J.Super. 277, 290, 618 A.2d 886 (App.Div.), certif. denied, 133 N.J. 440, 627 A.2d 1145 (1993). Defendants Vasys and CAL argue they were forced into litigation because of plaintiffs' failure to honor the arbitration clause. However, "[n]ot every foray into the courthouse effects a waiver of the right to arbitrate." Shevlin v. Prudential Commercial Ins. Co., 256 N.J.Super. 691, 700, 607 A.2d 1062 (Law Div.1991). Parties waive the right to arbitration where they commence litigation or use the litigation process improperly, such as to gain pretrial disclosure not generally available in arbitration. Id. at 700-01, 607 A.2d 1062. Here, however, defendants answered the complaint against them to prevent default judgment. This is an acceptable effort to preserve the status quo pending arbitration, and does not constitute waiver. Id. at 701, 607 A.2d 1062.
Vasys and CAL have raised two other issues in their appellate brief. They point to a non-assignability clause in the contract and contend that it is actually the Williams' who are pursuing the claim against them, which should be barred by *917 that clause. They also point to a sixty-day statute of limitation provision in the contract, which they contend was not complied with. However, no orders adverse to Vasys and CAL were entered by the trial court regarding these provisions, and no cross-appeal has been taken. These issues are not before us. The effect of these contractual provisions and any other appropriate matters can be dealt with upon remand.
Of course, we express no comment on whether or not Vasys or CAL breached any duty to Lucier and Haley under their agreement. Our holding here is only that if they are liable, the extent of any damages for which they should be liable is not limited by the terms of the contract.
The order of May 11, 2001 is affirmed. The order of January 5, 2001 is reversed. The matter is remanded for further proceedings. We do not retain jurisdiction.
NOTES
[1] As discussed in Part III of this opinion, plaintiffs have also appealed another order, which enforced an arbitration provision in the contract. We affirm that order.
[2] It is immaterial that the cost here, $128,500, was actually quite modest. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2286698/ | 323 S.W.3d 564 (2010)
CHUBB LLOYDS INSURANCE COMPANY OF TEXAS and Dr. Erwin Cruz, Appellants/Cross-Appellees,
v.
ANDREW'S RESTORATION, INC. d/b/a Protech Services, Appellee/Cross-Appellant, and
Rudy Martinez, Appellee.
No. 05-08-01099-CV.
Court of Appeals of Texas, Dallas.
August 20, 2010.
Rehearing Overruled October 26, 2010.
*568 Russell W. Schell, Schell Cooley LLP, Cyrus S.J. Manekshaw, Jennifer Gossom Martin, Douglas W. Brady, Brady & Cole, P.C., Dallas, TX, Adam J. Williams, Jerry R. Hall, Schell Cooley LLP, Addison, TX, for Appellants.
Shawn M. McCaskill, Goodwin Ronquillo, L.L.P., Alvin H. Badger, Dallas, TX, for Appellee.
Before Justices MOSELEY, FITZGERALD, and FILLMORE.
OPINION
Opinion By Justice FITZGERALD.
Andrew's Restoration, Inc. d/b/a Protech Services performed mold-remediation services on the home of Dr. Erwin Cruz and went unpaid. Protech sued Cruz and his homeowner's insurance carrier, Chubb Lloyds Insurance Company of Texas. Cruz and Chubb impleaded Protech's owner, Rudy Martinez, as a third-party defendant. Some of the claims were resolved by a separate bench trial. Others were resolved on summary judgment, and the rest were tried to a jury. The trial court rendered judgment on the jury verdict, awarding Protech roughly $700,000 jointly and severally against Cruz and Chubb. The court also awarded Protech its appellate attorneys' fees but no attorneys' fees for preparation and trial. Chubb, Cruz, and Protech appealed. We affirm in part, reverse and render in part, and modify the judgment interest rate from 6% to 5%.
I. BACKGROUND
A. Facts
The evidence at trial showed the following. Cruz first noticed a water-leakage problem with his house in Dallas in early 2001. He contacted his friend Martinez, because he knew Martinez "did that kind of work." Cruz signed a document on Protech letterhead called "Work Authorization and Assignment of Insurance Benefits" on or about March 2, 2001. In that document, Cruz authorized Protech to "perform the work essential to complete restoration," and he stated that he understood *569 he was "financially responsible for the payment" of his deductible and "all and any charges" that were not paid by his insurance company. Martinez arranged for a company called Afram International to perform some tests in the house, and he told Cruz that the house had tested positive for mold. Cruz and his family moved out of the house in or about May 2001.
At some point, Cruz notified Chubb of the damage to his house, and he hired an attorney named Adam Hardison to deal with Chubb on his behalf. William Marx was the Chubb adjuster who began working on Cruz's claim in May 2001. Martinez testified that Marx "verbally authorized" Protech to remove and "bio-clean" the contents of Cruz's house, and that Cruz paid for that service. In August 2001, Chubb acknowledged that Cruz's claim was covered. Marx testified that around that same time Martinez expressed the view that remediation of the house could exceed Cruz's policy limits.
In October 2001, Hardison sent Marx a letter advising that Cruz preferred to demolish the house rather than attempt to repair it. In that letter, Hardison quoted estimates from Protech as to how much it would cost to implement each of those options, which were about $124,000 to demolish the house and $437,000 to remove all contaminated and damaged parts. In January 2002, Hardison sent Marx another letter advising that Cruz wanted to call the house a total loss and demanding almost $4 million so that Cruz could tear down and rebuild the house. Marx responded with a letter in which he neither accepted nor rejected the demand, and in which he proposed to hire a contractor to estimate the cost of remediating and reconstructing the house instead of demolishing it.
Marx testified that Chubb hired a construction expert named David Gregg who examined the house around April 2002. Gregg reported that nothing had been done to prevent the mold from spreading within the house, and Marx advised Hardison that Cruz should do something to prevent the mold from spreading so as to mitigate his damages. On or about June 5, 2002, Cruz signed a one-page document on Protech letterhead setting forth a daily rate of $6,298.44 to supply dehumidification equipment and monitoring at his house. The document stated as follows:
I, Dr. Erwin Cruz, authorize Pro-Tech Services to begin controlling the humidity level at my residence ... per the fiduciary responsibilities of my insurance policy and per the recommendation of Afram International, Gregg Construction, and Pro-Tech Services.
I understand that this daily rate will be submitted to my insurance for payment. I also acknowledge that this daily rate will be in effect until a remediation decision is made or until written notice to remove the equipment is submitted to Pro-Tech Services.
Protech supplied humidity-control service at the house for about a year, from June 2002 to June 2003. Marx testified that conditions in the house were substantially stabilized by December 2002 and that the mold levels were significantly reduced after Protech began its work. During the same time frame, Protech prepared multiple estimates for the cost of remediating and restoring the house. Protech's June 2002 estimate was that remediation of the house would cost about $1 million and restoration of the house after remediation, including installation of a new roof, would cost about $1.7 million.
Martinez testified that Chubb paid Protech directly for the humidity-control services, at least for a time. Marx testified that Chubb put Protech's name on the checks at Hardison's direction. Protech stopped getting paid for its services at *570 some point, and its attorney sent letters to Marx requesting payment in March and April 2003. In June 2003, Hardison instructed Martinez to stop providing the humidity-control services. Marx testified that Chubb decided that same month to pay a reasonable and fair cost to remediate and repair the home.
Cruz testified that Chubb paid the policy limits in about November 2003, and he demolished the house in 2005.
B. Procedural history
In January 2004, Protech sued Cruz and Chubb on numerous legal theories. It alleged that both defendants were liable to it on theories of breach of an oral contract, quantum meruit, breach of an implied-in-fact contract, and fraud in the inducement. Protech also alleged breach of a written contract against Cruz and sought to foreclose on mechanics' and materialmen's liens on Cruz's house. Chubb counterclaimed for common-law fraud and insurance fraud. Cruz counterclaimed to void Protech's liens, for rescission of any contract with Protech, and for violations of the Texas Deceptive Trade Practices-Consumer Protection Act.
The trial court ordered separate trials. The first trial would determine whether the house in question was Cruz's homestead and whether Protech's liens were valid. Before that trial was held, the court rendered a partial summary judgment in which it ruled that Protech failed to comply with certain provisions of Texas law regarding liens. The court held a bench trial on the issue of whether Cruz had abandoned his homestead. The court signed an order in which it ruled that Protech failed to prove abandonment of the homestead, voided the liens, and severed those issues out of the case.
Cruz and Chubb amended their pleadings to assert third-party claims against Martinez. Cruz obtained a partial summary judgment in which the trial court ruled that he was a consumer under the DTPA and that Protech and Martinez violated the DTPA by failing to include certain language required by the Texas Property Code in their contracts with Cruz. Chubb obtained a partial summary judgment that Protech take nothing from Chubb on its claims for quantum meruit and fraud. Then Cruz obtained a partial summary judgment that Protech take nothing from Cruz on its fraud claim.
The rest of the claimsprincipally Protech's breach-of-contract claims against Cruz and Chubb, and Cruz's and Chubb's fraud and DTPA counterclaims and third-party claims against Protech and Martinezwere tried to a jury. During the trial, the trial court signed a partial summary judgment order ruling that it would take roughly $1 million to restore to Cruz all the money paid to Protech and Martinez by Cruz or on his behalf pursuant to contracts that the court had previously ruled violated the DTPA. The jury found that Chubb breached an agreement with Protech and caused Protech $705,548.02 in damages. The jury also found that there was an agreement between Cruz and Protech, that Cruz breached the agreement, and that the breach caused Protech $705,548.02 in damages. The jury did not find that Protech or Martinez committed fraud, negligent misrepresentation, or DTPA violations against Chubb or Cruz. The jury further found that Cruz suffered no damages from Protech's and Martinez's failure to include certain contract terms required by the Texas Property Code.
The trial court signed a final judgment that Protech recover the sum of $705,548.02 from Cruz and Chubb jointly and severally, plus contingent appellate attorneys' fees. The court later signed an amended judgment that modified the original *571 judgment only slightly. Chubb and Cruz filed motions for new trial, which the trial court denied. The court also denied Protech's motion to amend the final judgment.
Chubb, Protech, and Cruz each filed a notice of appeal from the judgment.
II. CHUBB'S APPEAL
Chubb raises three issues on appeal, the first two of which are intertwined. In its first issue, it contends the agreement that the jury found Chubb breached is unenforceable because it is within the "suretyship provision" of the statute of frauds but is not in writing. In its second issue, Chubb contends the evidence is legally and factually insufficient to support the jury's findings establishing the main-purpose exception to the statute of frauds. In its third issue, Chubb argues the trial court erred by making Chubb and Cruz jointly and severally liable for debts predicated on two different contracts.
A. Standard of review
With respect to Chubb's legal-sufficiency challenge, Chubb must show that there is no evidence to support the jury's adverse finding. In making this determination, we view the evidence in the light most favorable to the finding, crediting favorable evidence if a reasonable person could and disregarding contrary evidence unless a reasonable person could not. Anything more than a scintilla of evidence is legally sufficient to support a challenged finding. See generally Sutton v. Ebby Halliday Real Estate, Inc., 279 S.W.3d 418, 421-22 (Tex.App.-Dallas 2009, no pet.). Evidence does not exceed a scintilla if it is so weak as to do no more than create a mere surmise or suspicion that the fact exists. Adams v. State Farm Mut. Auto. Ins. Co., 264 S.W.3d 424, 427 (Tex.App.-Dallas 2008, pet. denied). But if the evidence would enable reasonable and fair-minded people to differ in their conclusions, we may not substitute our judgment for that of the jury. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex.2005).
As to Chubb's factual-sufficiency challenge, we consider all the evidence and set aside the verdict only if the evidence supporting the jury finding is so weak or so against the overwhelming weight of the evidence that the finding is clearly wrong and unjust. State Farm Lloyds v. Hamilton, 265 S.W.3d 725, 729 (Tex.App.-Dallas 2008, pet. dism'd).
B. Statute of frauds
We address Chubb's first two issues together, considering whether there is sufficient evidence to support the jury's answers to Question 1 regarding the main-purpose exception to the statute of frauds.
1. Law of the statute of frauds
A promise or agreement within the statute of frauds is not enforceable unless the promise or agreement, or a memorandum of it, is in writing and signed by the person to be charged or by someone lawfully authorized to sign for him. TEX. Bus. & COM.CODE ANN. § 26.01(a) (Vernon 2009). The statute of frauds applies to "a promise by one person to answer for the debt, default, or miscarriage of another person." Id. § 26.01(b)(2). In other words, a promise by one person to pay another's debt is generally not enforceable unless it is in writing. See id.; Chrissikos v. Chrissikos, No. 05-00-01548-CV, 2002 WL 342653, at *6 (Tex.App.-Dallas Mar. 6, 2002, pet. denied) (not designated for publication). "Probably the basic reason for requiring that a promise to answer for the default of another be in writing is that the promisor has received no direct benefit from the transaction." Cooper Petroleum Co. v. LaGloria Oil & Gas Co., 436 S.W.2d 889, 895 *572 (Tex.1969). Chubb contends, and Protech does not dispute, that any promises Chubb made to Protech were oral promises to cover Cruz's debts to Protech arising from Protech's work on Cruz's house.
Even if a promise comes within the suretyship provision of the statute of frauds, it may still be enforceable under the main-purpose doctrine. Haas Drilling Co. v. First Nat'l Bank in Dall., 456 S.W.2d 886, 890 (Tex.1970). Under this doctrine, if "the promise is made for the promisor's own benefit and not at all for the benefit of the third person," the reason for the statute of frauds fails, and the promise should be enforced. Cooper Petroleum Co., 436 S.W.2d at 895. Courts have identified three tests to determine if the main-purpose doctrine makes a particular oral promise enforceable despite the statute of frauds:
1. Did the promissor intend to become primarily liable for the debt, in effect making it his original obligation, rather than to merely become a surety for the original obligor?
2. Was there consideration for the promise?
3. Was receipt of the consideration the promissor's main purpose or leading object in making the promise, i.e., was the consideration given for the promise primarily for the promissor's own use and benefit[?]
Smith, Seckman, Reid, Inc. v. Metro Nat'l Corp., 836 S.W.2d 817, 821 (Tex.App.-Houston [1st Dist.] 1992, no writ); accord Haas Drilling Co., 456 S.W.2d at 890; Gulf Liquid Fertilizer Co. v. Titus, 163 Tex. 260, 267-68, 354 S.W.2d 378, 383 (Tex. 1962). As explained below, the jury found that all three tests were satisfied.
2. The jury's findings
Protech's only liability theory against Chubb that was submitted to the jury was breach of contract. In the absence of a relevant objection to the jury charge, we evaluate the sufficiency of the evidence based on the charge and instructions that were submitted to the jury. Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000); EMC Mortg. Corp. v. Jones, 252 S.W.3d 857, 869 (Tex.App.-Dallas 2008, no pet.). There were no objections to the charge pertinent to Chubb's argument, so we quote Question 1 of the jury charge in full, along with the jury's answers (in italics):
Did an agreement exist between ProTech and Chubb Lloyds with respect to the services to be performed by ProTech at Dr. Cruz's residence?
In deciding whether the parties reached an agreement, you may consider what they said and did in light of the surrounding circumstances, including any earlier course of dealing. You may not consider the parties['] unexpressed thoughts or intentions.
To form a valid contract, the parties must have the same understanding of the contract and all its essential terms. To be enforceable, a contract must be reasonably definite and certain. In attempting to reach an agreement, one party may specifically prescribe the time, manner or other requirements for the other party's acceptance of the offer. If the offer is not accepted as prescribed, there is no agreement.
You are further instructed that in order to find that an agreement existed between ProTech and Chubb Lloyds with respect to the services to be performed by ProTech at Dr. Cruz's residence, you must answer "Yes" to each and every of the following three questions:
a. Did Chubb Lloyds intend to accept primary liability for Dr. Cruz's debt, if any, to ProTech?
*573 Answer "Yes" or "No": yes
b. Did Chubb Lloyds receive direct consideration for its promise to be primarily liable for Dr. Cruz's debt?
Answer "Yes" or "No": yes
c. Was the direct consideration Chubb Lloyds received, if any, Chubb Lloyds' main purpose for agreeing to accept primary liability for Dr. Cruz's debt?
Answer "Yes" or "No": yes
If you answered "Yes" to each and every of the preceding three questions (a)-(c), then proceed to answer Question Number Two. Otherwise, go to Question Number Six.
In Question 2, the jury found that Chubb breached the agreement referenced in Question 1, and, in Question 4, the jury found that Protech's damages resulting from Chubb's breach were $705,548.02. The trial court denied Chubb's motion for judgment notwithstanding the verdict attacking all three jury findings in answer to Question 1 for lack of evidence.
3. Sufficiency of the evidence
Chubb attacks the sufficiency of the evidence as to all three subparts to Question 1. Because all three "yes" answers to Question 1 were essential to the jury's only liability and damages findings against Chubb, insufficient evidence to support any of the three subparts will require reversal. See Osterberg, 12 S.W.3d at 55. We proceed directly to subpart (b) and conclude that there was no evidence to support the jury's "yes" answer to that subpart.
a. Direct consideration
Chubb contends there is no evidence that it received direct consideration for its promise, if any, to be primarily liable for Cruz's debt. We agree.
Protech contends there was some evidence that in late June 2003after Protech had been instructed not to provide any more services at Cruz's houseMarx promised that Protech "would get paid for the outstanding invoices" to Cruz. But Protech cites no evidence showing it promised or furnished any additional consideration to Chubb in exchange for this alleged promise. We have found no evidence of any such consideration in the record. Protech's rendition of services at Cruz's house before Chubb's alleged June 2003 promise is no evidence of "direct consideration" to Chubb because "past consideration is not competent consideration for contract formation." Powerhouse Prods., Inc. v. Scott, 260 S.W.3d 693, 697 (Tex.App.-Dallas 2008, no pet.).
Otherwise, Protech relies wholly on alleged statements by Marx at the June 2002 meeting as establishing Chubb's promise to be directly liable to Protech, but there is no evidence of direct consideration to Chubb for that alleged promise either. The principal and direct benefit to be gained by controlling the humidity in Cruz's house was to improve the physical condition of that house by making it a less hospitable environment for mold. Cruz was the primary beneficiary of this service, both because it was his property that was being improved and because the service tended to satisfy his contractual obligation under the insurance policy to "protect the property from further damage." Protech contends Chubb benefited from the humidity-control services because those services afforded Chubb "a year to attempt to remediate and restore the Cruz residence and avoid having to declare the Cruz residence a total loss." We do not agree that this constituted direct consideration to Chubb. At most it was a remote and indirect benefit. This case is similar to Cooper Petroleum, in which a creditor sued an individual who had allegedly made an oral promise to guarantee a corporation's *574 debt, with the result that the creditor continued to do business with the corporation on credit. 436 S.W.2d at 896. The individual was not a stockholder of that corporation, and the only benefit he received from the creditor's extension of credit was through his being a stockholder of a different corporation that owned a potential stake in the debtor corporation. Id. That benefit, the supreme court held, was "too remote and indirect" to make the oral promise enforceable as the individual's original undertaking. Id.
Our unpublished decision in Chrissikos is also persuasive. After reviewing the authorities, we held that the consideration necessary to take a promise of suretyship out of the statute of frauds must be "a direct benefit to the promissor" rather than a "potential benefit." Chrissikos, 2002 WL 342653, at *6. We then concluded that an individual's oral promise to guaranty a corporate debt was not supported by direct consideration to her, even though she was one of the founders of the corporation and might have earned a salary if it had become profitable. Id. at *7. In the same way, any benefit to Chubb from Protech's services in the form of savings on its ultimate pay-out on Cruz's claim was purely speculative and does not constitute a direct benefit to Chubb.
b. Conclusion
There is no evidence that any agreement by Chubb to pay Protech's bill was supported by direct consideration, as the jury found in answer to Question 1(b). That finding was essential to Protech's recovery against Chubb, so the trial court erred by failing to grant Chubb's motion for judgment notwithstanding the verdict.
C. Disposition of Chubb's appeal
There is no evidence to support the jury's finding in answer to Question 1(b). Accordingly, we reverse the judgment against Chubb for damages and attorney's fees. We render judgment that Protech take nothing from Chubb. In light of this disposition, we need not address Chubb's third issue on appeal in which it complains of the imposition of joint and several liability on it and Cruz.
III. CRUZ'S APPEAL
Cruz raises eight issues on appeal: (1) the judgment interest rate is incorrect; (2) the trial court erred by failing to award Cruz the DTPA remedy of restoration of consideration; (3) the trial court erred by failing to award Cruz his attorneys' fees for removal of the liens against his homestead; (4) the trial court erred by failing to award Cruz his attorneys' fees for prevailing on his DTPA claim; (5) the agreement between Cruz and Protech is unenforceable as a matter of law; (6) there was insufficient evidence to support the jury's finding of an agreement between Cruz and Protech; (7) under the jury's findings and a prior determination of fact by the trial court, Protech had no damages and its net recovery from Cruz should have been zero; and (8) the trial court erred by making Cruz and Chubb jointly and severally liable. We address the issues in what we deem to be the logical order.
A. Sufficiency of the evidence of an enforceable agreement
In his sixth issue, Cruz contends the evidence is legally and factually insufficient to support the jury's finding that Cruz and Protech had an agreement. The jury answered "yes" to the following question, reprinted here with its accompanying instructions:
Did Protech Services and Dr. Cruz agree that Protech Services would provide services concerning Dr. Cruz's residence and that Dr. Cruz would personally *575 be responsible for paying for the services at the rates that were charged by Protech Services?
In order to have an agreement, the parties must have the same understanding of the subject matter of the contract and all its essential terms, and the agreement must be reasonably definite and certain.
In deciding whether the parties reached an agreement, you may consider what they said and did in light of the surrounding circumstances, including any earlier course of dealing. You may not consider the parties unexpressed thoughts or intentions.
In order to have an agreement, there must be a valid offer. To have a valid offer, (1) Protech Services must intend to make an offer, (2) the terms of the offer must be clear and definite, and (3) Protech Services must communicate the essential terms of the offer to Dr. Cruz.
The elements of a valid and enforceable contract are (1) an offer, (2) an acceptance in strict compliance with the terms of the offer, (3) a meeting of the minds, (4) each party's consent to the terms, and (5) execution and delivery of the contract with the intent that it be mutual and binding. Searcy v. DDA, Inc., 201 S.W.3d 319, 322 (Tex.App.-Dallas 2006, no pet.). To prove that an offer was made, a party must show (1) the alleged offeror intended to make an offer, (2) the terms of the offer were clear and definite, and (3) the offeror communicated the essential elements of the offer to the offeree. Domingo v. Mitchell, 257 S.W.3d 34, 39 (Tex. App.-Amarillo 2008, pet. denied). The determination of whether there was a meeting of the minds is based on an objective standard of what the parties said and did rather than on their subjective state of mind. Searcy, 201 S.W.3d at 322.
Cruz contends the documents he signed, taken individually, are too indefinite to constitute a valid offer, and that they cannot be combined to constitute a single offer. Protech responds that the documents together do constitute a valid offer to perform humidity-control services for Cruz in exchange for his promise to pay, and that Cruz accepted the offer when he signed the documents.
We review the evidence pertaining to the existence of a clear and definite offer. The March 2001 work authorization provided as follows:
I hereby assign to, and authorize my insurance company to pay directly to PROTECH SERVICES such portion of the proceeds of my insurance policy as shall be required to pay PROTECH SERVICES in full for restoration services rendered pursuant to this work authorization for the property[.]
I certify and further authorize PROTECH SERVICES to perform the work it deems essential to complete restoration, and understand that I am financially responsible for the payment of my deductible amount and for all and any charges that are not paid by my insurance company, and agree to pay or direct payment to PROTECH SERVICES upon receipt of their invoice.
The July 2002 proposal sets forth the equipment and labor charges that Protech proposed for its humidity-control services, which charges totaled almost $6,300 per day. The text of the document was as follows:
I, Dr. Erwin Cruz, authorize Pro-Tech Services to begin controlling the humidity level at my residence located at 5920 Gladeside Dr., Dallas, TX 75287 per the fiduciary responsibilities of my insurance policy and per the recommendations of Afram International, Gregg Construction, and Pro-Tech Services.
*576 I understand that this daily rate will be submitted to my insurance for payment. I also acknowledge that this daily rate will be in effect until a remediation decision is made or until written notice to remove the equipment is submitted to Pro-Tech Services.
Cruz signed both documents.
If the documents can properly be read together, as Protech contends, then Cruz's argument fails. The 2002 proposal set forth the specific services that Protech proposed to provide at the house and the specific charges for that work, but it contains no express promise by Cruz to pay. The 2002 proposal recites only that Cruz understood that the "daily rate" would be submitted to Chubb for payment. But if the 2001 work authorization was also part of the transaction, it supplies Cruz's express promise to pay for Protech's services. Thus, the question becomes whether the documents should be read together. We conclude that they can and must be read together.
"Under generally accepted principles of contract interpretation, all writings that pertain to the same transaction will be considered together, even if they were executed at different times and do not expressly refer to one another." DeWitt Cnty. Elec. Coop., Inc. v. Parks, 1 S.W.3d 96, 102 (Tex.1999) (footnote omitted). Only when the terms of one writing are so inconsistent with those of the other that the two cannot subsist together is there a presumption that the second writing superseded the first. IP Petroleum Co. v. Wevanco Energy, L.L.C., 116 S.W.3d 888, 899 (Tex.App.-Houston [1st Dist.] 2003, pet. denied). In this case, both documents pertain to the same transaction: the provision of services by Protech relating to the water and mold damage to Cruz's house. They are not inconsistent. The 2001 work authorization makes it clear that Cruz is financially responsible for payment of any amounts not paid by insurance. The 2002 proposal does not contradict the terms of the 2001 work authorization. Although it recites Cruz's understanding that Protech's bills would be submitted to Chubb for payment, it does not state that Protech would look only to Chubb for payment or otherwise indicate that Cruz would have no financial responsibility for the work done under the proposal. Thus, the two documents are consistent and must be considered together. The 2001 document supplies Cruz's promise to pay for Protech's services, and the 2002 document supplies the specific terms regarding the services and the price. Together, they are clear and definite enough to constitute an enforceable contract.
We reject Cruz's argument under his sixth issue.
B. Enforceability of the agreement as a matter of law
In Cruz's fifth issue, he argues that his agreement with Protech was unenforceable as a matter of law for three reasons: it violates a Texas statute, it is unconscionable, and it is contrary to Texas public policy. Protech does not dispute that the contract failed to comply with section 41.007(a) of the Texas Property Code, but it contends that this noncompliance did not render the agreement unenforceable. Protech also points out that the jury rejected Cruz's DTPA counterclaim based on unconscionability.
1. Illegality and public policy
At the relevant time, section 41.007(a) of the property code provided that a contract for work and material used in constructing improvements on a homestead *577 must contain the following warning conspicuously printed, stamped, or typed in a size equal to at least 10-point bold type or computer equivalent, next to the owner's signature line on the contract:
"IMPORTANT NOTICE: You and your contractor are responsible for meeting the terms and conditions of this contract. If you sign this contract and you fail to meet the terms and conditions of this contract, you may lose your legal ownership rights in your home. KNOW YOUR RIGHTS AND DUTIES UNDER THE LAW."
Act of April 15, 1993, 73d Leg., R.S., ch. 48, § 4, 1993 Tex. Gen. Laws 97, 98 (amended 2007) (current version at TEX. PROP.CODE ANN. § 41.007(a) (Vernon Supp. 2009)). Section 41.007(b) provided (and still provides) that a violation of section 41.007(a) is a false, misleading, or deceptive act or practice within the meaning of the DTPA and is actionable under the DTPA. TEX. PROP.CODE ANN. § 41.007(b) (Vernon Supp. 2009). It is undisputed that the statutory warning was not included in Cruz and Protech's agreement, and the trial court signed a partial summary judgment ruling as a matter of law that Protech and Martinez violated the DTPA by not including the required warning in the contract. Cruz contends in essence that the trial court erred by overruling his motion for judgment notwithstanding the verdict in which he argued that the agreement was unenforceable as a matter of law.
Cruz relies on "the general rule that an agreement which violates a valid statute is illegal and void, and cannot be enforced." Woolsey v. Panhandle Ref. Co., 131 Tex. 449, 455, 116 S.W.2d 675, 678 (Tex.1938). As the court observed later in the opinion, "this court has repeatedly refused to enforce contracts which are either expressly or impliedly prohibited by statutes or by public policy." Id. at 456, 116 S.W.2d at 678. "An illegal contract is one in which the parties undertake to do an act forbidden by the law of the place where it is to be done, and as such it is an invalid agreement which imposes no legal obligation." SCI Tex. Funeral Servs., Inc. v. Hijar, 214 S.W.3d 148, 156 (Tex.App.-El Paso 2007, pet. denied); accord Signal Peak Enters. of Tex., Inc. v. Bettina Invs., Inc., 138 S.W.3d 915, 920 (Tex.App.-Dallas 2004, no pet.) ("If parties contract to undertake illegal activity, their contract is void and will not be enforced by a court."). But Cruz has not shown that his agreement with Protech required a party to perform an illegal act. Rather, the agreement only failed to comply with a statutory requirement regulating the contents of that kind of contract. This kind of statutory violation comes within a different rule:
Where a regulatory statute imposes a penalty for its violation but does not expressly declare that contracts in violation of its provisions are void, a contract that contravenes the provisions of the statute is not necessarily invalid.... And a contract in contravention of a regulatory statute is not void and unenforceable if the expressly stated consequences of violating the statute are apparently ample to insure its observance.
New Boston Gen. Hosp., Inc. v. Tex. Workforce Comm'n, 47 S.W.3d 34, 40 (Tex. App.-Texarkana 2001, no pet.) (citation omitted); see also Davis v. Hendrick Autoguard, Inc., 294 S.W.3d 835, 840 (Tex. App.-Dallas 2009, no pet.) (using a similar analysis). Unlike some other statutes, section 41.007 of the property code does not provide that omission of the required warning makes a contract invalid or void. Cf. TEX. WATER CODE ANN. § 60.408(i) (Vernon Supp. 2009) ("A purchase or contract valued at more than the amount authorized under Section 60.403(a) for routine purchases *578 or contracts that is not in compliance with this subchapter is void and unenforceable."). And section 41.007 provides its own penalty for noncompliance: a failure to include the required warning in the contract is an actionable practice under the DTPA. TEX. PROP.CODE ANN. § 41.007(b). Given the numerous remedies available under the DTPA, we conclude that the statutory consequence for noncompliance is "apparently ample" to insure observance. We hold that the agreement's noncompliance with section 41.007(a) did not make the agreement void or unenforceable.
As to public policy, Cruz simply asserts that the agreement is against public policy because it violates the property code. He provides no argumentation in support of that assertion. We conclude that his public-policy argument presents nothing for us to review. See In re M.A.S., 233 S.W.3d 915, 924 (Tex.App.-Dallas 2007, pet. denied) ("Failure to provide substantive analysis waives an issue on appeal.").
2. Unconscionability
Cruz argues that the trial court should have ruled that his agreement with Protech was unenforceable as a matter of law because it was substantively and procedurally unconscionable. An unconscionable contract is unenforceable. In re Poly-Am., L.P., 262 S.W.3d 337, 348 (Tex. 2008). Whether a contract is unconscionable at the time it is formed is a question of law. Id. at 349; Arthur's Garage, Inc. v. Racal-Chubb Sec. Sys., Inc., 997 S.W.2d 803, 815 (Tex.App.-Dallas 1999, no pet.).
Substantive unconscionability refers to the fairness or unfairness of the contract or contractual provision itself. In re Palm Harbor Homes, Inc., 195 S.W.3d 672, 677 (Tex.2006). "[I]n general, a contract will be found unconscionable if it is grossly one-sided." In re Poly-Am., 262 S.W.3d at 348; accord Arthur's Garage, 997 S.W.2d at 815. In determining whether a contract is unconscionable, we consider factors such as (1) the "entire atmosphere" in which the agreement was made, (2) the alternatives, if any, available to the parties when the contract was made, (3) whether one party lacked bargaining power, (4) whether the contract was illegal or against public policy, and (5) whether the contract is oppressive or unreasonable. Ski River Dev., Inc. v. McCalla, 167 S.W.3d 121, 136 (Tex.App.-Waco 2005, pet. denied). Procedural unconscionability refers to the fairness or unfairness of the circumstances surrounding the execution of the contract. See In re Palm Harbor Homes, 195 S.W.3d at 677. Factors that may contribute to an unfair bargaining process include (1) knowledge of the stronger party that the weaker party will be unable to receive substantial benefits from the contract and (2) knowledge of the stronger party that the weaker party is unable reasonably to protect his interests by reason of physical or mental infirmities, ignorance, illiteracy, or inability to understand the language of the agreement. Ski River Dev., 167 S.W.3d at 136. In applying these principles, we keep in mind Texas's strong policy in favor of freedom of contract. Besteman v. Pitcock, 272 S.W.3d 777, 789 (Tex.App.-Texarkana 2008, no pet.). Thus, a contract or contract term is not unconscionable merely because it is foolish for one party and very advantageous to the other, but only when the inequity is so extreme as to shock the conscience. Id.
We conclude that the agreement between Cruz and Protech was not unconscionable. As to substantive unconscionability, Cruz relies on the evidence that Martinez himself thought the house should have been torn down rather than remediated, which tends to show that the dehumidification services should not have *579 been rendered at all. On the other hand, evidence shows that in June 2002, Cruz decided to rely on the opinion of others (unnamed, but presumably Chubb's representatives) that the house could be fixed. Thus, it is not clear that Cruz stood to gain no benefit from Protech's services. Cruz argues the agreement was unfair because its terms were not clear or definite, but we have already concluded that the documents, construed together, are sufficiently clear and definite that Cruz was promising to pay for Protech's services to the extent his insurance did not. Moreover, the 2002 proposal gave Cruz the right to stop the dehumidification work by submitting written notice to Protech, which shows that the agreement was not entirely one-sided. Cruz cites no evidence that the amount Protech charged for its dehumidification services was shockingly excessive. Finally, the fact that the house was later demolishedover a year after Protech stopped rendering its servicesdoes not establish unconscionability because we gauge unconscionability at the time the agreement was made. See In re Poly-Am., 262 S.W.3d at 349 ("Whether a contract is contrary to public policy or unconscionable at the time it is formed is a question of law.") (emphasis added). The agreement was not substantively unconscionable.
We also conclude that the agreement was not procedurally unconscionable. Cruz argues the evidence showed he was very busy with his medical practice during the relevant time period, that he lacked expertise in the area of home repair, and that he was relying on Martinez's expertise and Martinez knew it. On the other hand, Cruz admitted he did not read the agreements he signed. Cruz also had hired an attorney to work on his insurance claim who could have reviewed the agreements for him. Although Cruz testified that Martinez told him orally that he would have no responsibility whatsoever, Martinez testified that he did not remember ever telling Cruz that. There was no evidence that Cruz was prevented from protecting his own interests because of infirmity, ignorance, or illiteracy. Rather, the evidence showed that Cruz did not read the agreements he signed, accepted the advice of others to try to remediate the house, and hired Martinez "to take care of the house, whatever that means." There was nothing grossly unfair about the bargaining process in this case.
3. Conclusion
We reject Cruz's contention in his fifth issue that his agreement with Protech was unenforceable as a matter of law.
C. Protech's damages
Under his seventh issue, Cruz contends Protech had no damages as a matter of law based on (1) a ruling and jury instruction by the trial court that Protech was paid $1,059,940.52 for its services at Cruz's house and (2) the jury's finding that Protech's damages were $705,548.02. Cruz raised this argument below in his amended motion for new trial, which the trial court denied.
The pertinent facts are these. During trial, the trial judge orally instructed the jury that the following facts were undisputed: "monies were paid either by Dr. Cruz or on his behalf to Pro-Tech for services that Pro-Tech claims it was owed for services concerning Dr. Cruz' residence[,] and that sum was $1,059,940.52." Protech adduced evidence at trial that the total amount it was still owed under the agreement was $705,548.02. The jury found in answer to Question 11 of the jury charge that Cruz failed to comply with his agreement with Protech. The related damages question was Question 13, which stated as follows:
*580 What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Protech Services for its damages, if any, that resulted from such failure to comply?
Answer in dollars and cents for damages, if any, for each of the following:
Do not add any amount for interest on damages, if any. Answer in dollars and cents for damages, if any.
A. The value, if any, of the work performed by Protech
Answer: $..........
The jury's answer to Question 13 was $705,548,02, and the trial court rendered judgment against Cruz for that amount.
Cruz interprets Question 13 to have asked the jury to find the total value of all of the work Protech performed on Cruz's house. The jury's finding was less than the amount the trial court instructed the jury had already been paid. Thus, Cruz reasons that the jury's finding, in conjunction with the trial court's instruction, means that Protech was more than fully paid for its services, and its breach-of-contract damages were zero.
We reject Cruz's argument. If possible, we must interpret the jury's findings in a manner to support the judgment. Jackson v. U.S. Fid. & Guar. Co., 689 S.W.2d 408, 412 (Tex.1985); Otis Spunkmeyer, Inc. v. Blakely, 30 S.W.3d 678, 685 (Tex.App.-Dallas 2000, no pet.). Question 13 can reasonably be read in a manner that supports the judgment in this case, because its plain thrust was to seek the amount of money Protech claimed it had earned but had not been paid. The question asked the jury how much money it would take to compensate Protech for its "damages, if any, that resulted from [Cruz's] failure to comply" with their agreement. Afterwards, the jury was twice instructed to answer in dollars and cents "for damages, if any." The ordinary meaning of "damages," in context, is "a sum of money claimed or awarded in compensation for a loss or an injury." THE NEW OXFORD AMERICAN DICTIONARY 429 (2001) (emphasis added). A reasonable juror would therefore understand the question to be seeking the amount of money necessary to make Protech whole for the work it performed and was not paid for. Because the thrust of the question is to seek that amount, the concluding instruction's reference to "The value, if any, of the work performed by Protech" can reasonably be understood to mean the value of the work that Protech was not paid for, and not the value of all the work Protech did.
Cruz's seventh issue is without merit.
D. Restoration of consideration under the DTPA
In his second issue, Cruz contends the trial court erred by failing to award him the DTPA remedy of restoration of consideration, even though the court granted Cruz summary judgment (1) that Cruz was a "consumer" under the DTPA, (2) that Protech and Martinez had violated the DTPA by violating section 41.007(a) of the property code, (3) that their violation was a producing cause of injury or harm to Cruz, and (4) that $1,059,940.52 would restore to Cruz all money paid to Protech and Martinez by him or on his behalf pursuant to the contracts that violated the DTPA. Cruz requested that relief in a posttrial "Motion for Court to Award Remedy of Restoration and Rescission," and also in his motion for judgment notwithstanding the verdict. The trial court denied both of those motions in the final judgment.
As previously noted, a violation of section 41.007(a) of the property code is a false, misleading, or deceptive practice *581 that is actionable under the DTPA. TEX. PROP.CODE ANN. § 41.007(b). The remedies provision of the DTPA provides as follows:
(b) In a suit filed under this section, each consumer who prevails may obtain:
(1) the amount of economic damages found by the trier of fact ...;
(2) an order enjoining such acts or failure to act;
(3) orders necessary to restore to any party to the suit any money or property, real or personal, which may have been acquired in violation of this subchapter; and
(4) any other relief which the court deems proper....
TEX. Bus. & Com.Code Ann. § 17.50(b) (Vernon Supp. 2009). The question presented is whether the trial court's summary-judgment rulings entitled Cruz to a recovery of $1,059,940.52 under section 17.50(b)(3).
Protech and Martinez argue that the trial court properly denied restoration to Cruz because he did not surrender the benefits he had received from them. Cruz replies that the DTPA does not require a claimant to restore benefits to the defendant as a prerequisite for the remedy of restoration, and alternatively that he is not retaining any benefits from Protech and Martinez because his house was ultimately demolished. We agree with Protech and Martinez.
We have interpreted section 17.50(b)(3) to incorporate the equitable doctrine of rescission, including the requirement that the claimant must surrender any benefits he received under the contract:
[R]estoration of the consideration paid, as authorized by subdivision (3) [of § 17.50(b) ], is a statutory recognition of the equitable remedy of rescission and restitution, based on the theory that the complaining party may elect to avoid the contract, surrender any benefits received, and recover that [which] he parted with.
Smith v. Kinslow, 598 S.W.2d 910, 915 (Tex.Civ.App.-Dallas 1980, no writ). We enforced this rule in David McDavid Pontiac, Inc. v. Nix, 681 S.W.2d 831 (Tex. App.-Dallas 1984, writ ref'd n.r.e.). Nix bought a car from David McDavid Pontiac, used it for about a month, sued under the DTPA, and won a judgment for both actual damages and restoration. Id. at 833-34, 835. We reversed the award of restoration and rendered judgment that Nix take nothing on that theory of recovery because she failed to prove any tender or offer of tender of the value of using the car for a month. Id. at 836. Thus, under Smith and David McDavid, Cruz was obliged to prove and obtain a finding that he had surrendered or offered to surrender to Protech and Martinez the value of the services they provided at his house as a prerequisite for recovering under section 17.50(b)(3).
Cruz argues that we should depart from stare decisis on this occasion because Smith and David McDavid wrongly engrafted common-law rescission rules onto the new and independent remedy of restoration under the DTPA. But we are obliged to follow the law as set forth in our prior panel decisions unless the law is changed by this Court en banc or by a higher authority. MobileVision Imaging Servs., L.L.C. v. LifeCare Hosps. of N. Tex., L.P., 260 S.W.3d 561, 566 (Tex.App.-Dallas 2008, no pet.). At oral argument, Cruz brought to our attention the case of United Postage Corp. v. Kammeyer, 581 S.W.2d 716 (Tex.Civ.App.-Dallas 1979, no writ), in which we affirmed an award based on section 17.50(b)(3) and did not mention any requirement that the plaintiff surrender the benefits received under the contract. Id. at 722-23. But the United *582 Postage opinion does not indicate that the defendant made Cruz's precise argument against restoration. Rather, the United Postage defendant apparently argued that the claimant had failed to prove a proper measure of damages by failing to prove the value of what he had received from the defendant. Id. at 722. The rule of Smith and David McDavid is not a measure-of-damages rule, but rather a separate and independent element of recovery under section 17.50(b)(3). Thus, United Postage is distinguishable.
Finally, Cruz argues that he conclusively showed he did not retain any benefits from Protech's and Martinez's services because the house was ultimately demolished. We do not agree that this fact proves compliance with Smith and David McDavid. There was some evidence that Protech's services at Cruz's house did in fact dehumidify the house and reduce the levels of mold in the house. Cruz did not demolish the house until 2005, at least a year and a half after Protech stopped performing its services in the house, so he continued to own the house for a significant length of time after Protech reduced the humidity and mold levels there. A reasonable person could conclude that Cruz derived some benefit from Protech's services at his house, and Cruz did not obtain a finding that the services were of no value or benefit to him. Thus, Cruz has not shown that the trial court erred by denying his request for restoration of consideration under § 17.50(b)(3) of the DTPA.
Cruz's second issue is without merit.
E. Attorneys' fees under the DTPA
In his fourth issue, Cruz contends the trial court erred by failing to award him his attorneys' fees after granting him partial summary judgment that Protech and Martinez violated the DTPA. We reject this contention. "A party is not entitled to a recovery of attorneys' fees [in a DTPA case] where a jury awards no damages." Blue Star Operating Co. v. Tetra Techs., Inc., 119 S.W.3d 916, 922 (Tex. App.-Dallas 2003, pet. denied). The jury awarded no damages to Cruz on his DTPA claim, and we have affirmed the trial court's denial of a restoration remedy as well. The trial court did not err by failing to award him his attorneys' fees.
F. Attorneys' fees for removal of liens
In his third issue on appeal, Cruz contends that the trial court erred by failing to award him his attorneys' fees after he prevailed on his claim to remove the liens. Cruz relies on a provision in the property code providing that "in any proceeding to declare that any lien or claim is invalid or unenforceable in whole or in part, the court may award costs and reasonable attorney's fees as are equitable and just." TEX. PROP.CODE ANN. § 53.156 (Vernon 2007). Protech responds that the trial court's denial of fees was not an abuse of discretion. See Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex.1998) (holding that statutes providing that a court "may" award attorneys' fees are discretionary).
As noted in the factual recitation above, the trial court held two separate trials in this case. The first trial was a bench trial regarding the validity of certain liens, after which the court rendered judgment that the liens Protech had placed on Cruz's house were null and void. The court also severed that judgment so as to make it final. In the second trial, an attorney for Cruz testified about the amount of attorneys' fees Cruz had incurred in the case, and in the course of that testimony stated that "a fair and reasonable fee related just to the issue of removing those liens going to that trial is $72,500." The jury was not asked what a reasonable and necessary attorneys' fee would be for the legal services *583 that led to the removal of Protech's liens. In its final judgment, the trial court specifically ordered that Cruz recover no attorneys' fees for prevailing in the lien trial.
We conclude Cruz has not shown that the trial court abused its discretion by denying him a recovery of fees relating to the removal of the liens. Any fee award had to be both reasonable and just. TEX. PROP.CODE ANN. § 53.156. The reasonableness of a particular amount of attorneys' fees "is a question of fact for the jury's determination." Bocquet, 972 S.W.2d at 21 (internal quotations and citations omitted). Whether an award of fees would be equitable and just is a matter addressed to the court's discretion. Id. "Unreasonable fees cannot be awarded, even if the court believed them just, but the court may conclude that it is not equitable or just to award even reasonable and necessary fees." Id. In this case, Cruz did not obtain a jury finding on the fact question of whether his attorneys' fees in pursuit of the lien judgment were reasonable. Moreover, the trial court reasonably could have concluded that Cruz's evidence of the reasonableness of the $72,500 figure was too conclusory. One of the four attorneys who worked on the case for Cruz testified about Cruz's attorneys' fees. Although the attorney testified about his background and experience, he did not testify about the number of hours spent on the lien-removal claim, nor did he offer any details about the work performed specifically on that part of the case. The court could reasonably have decided it would not be equitable and just to award any fee based on the quality of Cruz's evidence of the reasonableness of the amount sought, particularly without a jury finding of reasonableness in support. Its denial of fees was not an abuse of discretion.
We conclude that Cruz's third issue on appeal is without merit.
G. Joint and several liability
In his eighth issue on appeal, Cruz contends the trial court erred by making him and Chubb jointly and severally liable to Protech in the judgment. We are rendering judgment that Protech take nothing on its claims against Chubb, which leaves only Cruz liable to Protech and eliminates his joint and several liability with Chubb. Cruz's eighth issue on appeal is moot.
H. Judgment interest rate
In his first issue on appeal, Cruz argues the trial court erred by awarding Protech prejudgment and postjudgment interest at the rate of 6%. He contends the correct interest rate is 5%. Protech agrees. Accordingly, we will modify the judgment to reflect prejudgment and postjudgment interest rates of 5%. See TEX.FIN.CODE ANN. § 304.003 (Vernon 2006) (governing calculation of judgment interest rate).
IV. PROTECH'S APPEAL
Protech presents the same issue against both Chubb and Cruz: that the trial court erred by refusing to submit Protech's proposed jury question regarding its attorneys' fees for preparation and trial. Because we are reversing the judgment against Chubb and rendering judgment that Protech take nothing from Chubb, there is no basis for Protech to recover trial and preparation attorneys' fees against Chubb. We consider Protech's issue against Cruz only, and we conclude Protech failed to preserve error in the trial court.
The pertinent jury question is Question 14. A conditioning instruction told the jury to answer Question 14 if it had previously found that Cruz breached an agreement with Protech without any legal *584 excuse. Question 14 asked, "What is a reasonable fee for the necessary services of Protech's attorney in this case, stated in dollars and cents?" The question then instructed the jury to consider eight factors in making its finding, and it provided answer blanks for "an appeal to the Court of Appeals" and for "an appeal to the Supreme Court of Texas." It provided no answer blank for preparation and trial. We note that Question 5 was basically identical to Question 14 except that it was conditioned on previous findings in favor of Protech on its claims against Chubb instead of Cruz.
When a trial court omits a jury question, the party who relies on that question must tender that question in writing in substantially correct form and obtain a ruling in order to preserve error. See TEX.R. CIV. P. 278 (tender requirement); id. 276 (procedure for ruling on requests); see also Johnson v. Johnson, 869 S.W.2d 490, 492 (Tex.App.-Eastland 1993, writ denied) (stating error-preservation rule when trial court omits jury question). For its written tender, Protech cites only to a complete proposed jury charge that it filed before trial. That charge contained twenty-two proposed jury questions. Six of the proposed questions concerned Protech's attorneys' fees, and each of those six questions contained three blanks: one for fees for preparation and trial, one for fees for an appeal to the court of appeals, and one for fees for an appeal to the Texas Supreme Court. Each of the twenty-two proposed jury questions was followed by two blanks labeled "Granted" and "Denied." None of the blanks was marked by the trial judge. During the charge conference, Protech made only one objection:
Your Honor, we would object to Question No. 5 and would submit that a ninth factor be added to the list of factors to be considered in determining the reasonableness of an attorney's fee award. In that regard, I would propose that a No. 9 be added that would say whether the services rendered related to the prosecution of plaintiff's claims, which are recoverable, or the defense of defendant's counterclaims, which are not recoverable. I think that's an equitable way of pointing out the distinction, Your Honor. It gives the jury the latitude to distinguish and the latitude toif they see fit to do so, to find a lesser amount, but to exclude the entirety is grossly inequitable and this is a fair middle ground, which I would ask the Court to consider. And depending on how the Jury's verdict comes up, the Court can always reconsider post verdict.
THE COURT: Okay. Anything else?
The Court later overruled all objections made by all parties.
Protech did not obtain a written ruling from the trial court refusing to submit a proposed jury question about Protech's attorneys' fees for preparation and trial. The question is whether the ruling on Protech's oral objection suffices. The supreme court has indicated that an oral ruling on a written request will suffice "when the court's refusal is otherwise clear from the record." Dallas Mkt. Ctr. Dev. Co. v. Liedeker, 958 S.W.2d 382, 387 (Tex. 1997) (per curiam), overruled in part on other grounds by Torrington Co. v. Stutzman, 46 S.W.3d 829, 840 n. 9 (Tex.2000). In Liedeker, the record reflected that the appellant submitted written requests to the trial judge, the judge said he would sign them later, and through inadvertence the judge never signed them. Id. at 385-86. The supreme court held that the trial court's "statements on the record clearly preserved [appellant]'s complaint." Id. at 387.
We conclude that the overruling of Protech's oral objection did not preserve error *585 as to the trial court's failure to submit a jury question asking about Protech's reasonable and necessary attorneys' fees incurred in suing Cruz. Protech's oral objection did not refer the court's attention to the pertinent jury question, Question 14. Protech's objection referred only to Question 5, which was connected with Protech's claims against Chubb rather than Cruz. Even if we were to construe Protech's oral objection as relating to Question 14 as well, the objection did not draw the court's attention to the specific defect Protech complains of on appealthe omission of a blank asking the jury to find an amount of attorneys' fees for preparation and trial. Protech's objection related only to the omission of an instruction regarding a ninth factor for the jury to consider "in determining the reasonableness of an attorney's fee award." The trial court's overruling of this objection does not show that it was refusing to submit a jury question or blank regarding attorneys' fees incurred for preparation and trial, so Liedeker is inapplicable. Because the record does not show that Protech drew the trial court's attention specifically to Protech's written request for a jury question on preparation and trial attorneys' fees, the trial court's ruling did not preserve error on that point. See Riddick v. Quail Harbor Condo. Ass'n, Inc., 7 S.W.3d 663, 675-76 (Tex.App.-Houston [14th Dist.] 1999, no pet.) (holding that party's submission of complete proposed jury charge did not preserve error because there was no indication that the trial court ruled on any part of the tendered charge); see also Coates v. Coates, No. 05-08-00440-CV, 2009 WL 679592, at *2-3 (Tex.App.-Dallas Mar. 17, 2009, pet. denied) (mem. op.) (holding that submission of complete charge did not preserve error because party did not draw trial court's attention to specific part being urged on appeal).
We reject Protech's single issue on appeal.
V. CONCLUSION
We reverse the judgment against Chubb and render judgment that Protech take nothing from Chubb. We modify the judgment against Cruz to provide that the prejudgment and postjudgment interest rate is 5% instead of 6%. In all other respects we affirm the judgment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1995358/ | 855 N.E.2d 378 (2006)
Ty EVANS, Appellant-Defendant,
v.
STATE of Indiana, Appellee-Plaintiff.
No. 49A02-0601-CR-81.
Court of Appeals of Indiana.
October 19, 2006.
*380 Elizabeth A. Gabig, Marion County Public Defender Agency, Indianapolis, IN, Attorney for Appellant.
Steve Carter, Attorney General of Indiana, Ellen H. Meilaender, Deputy Attorney General, Indianapolis, IN, Attorneys for Appellee.
OPINION
CRONE, Judge.
Case Summary
Ty Evans appeals his convictions and sentence for attempted murder[1] and resisting *381 law enforcement.[2] We affirm.
Issues
Evans raises three issues, which we restate as follows:
I. Whether the prosecutor committed misconduct during closing argument;
II. Whether the trial court abused its discretion in denying his motion for mistrial; and
III. Whether the trial court abused its discretion in denying his motion to continue the sentencing hearing.
Facts and Procedural History
Evans occasionally paid nineteen-year-old Melinda Keedy to clean his house, do his laundry, and care for his yard. Keedy kept all her belongings at Evans's home and sometimes stayed there. Evans and Keedy were also partners in a scheme to commit bank fraud in Tennessee and Kentucky. Evans created false identity papers for Keedy that she used to open a bank account as well as checks that Keedy deposited in that bank account. He created these checks by stealing mail from mailboxes and copying information from the checks he found therein. Keedy would deposit or cash the checks created by Evans using a false thumbprint. However, in early May 2005, Keedy used her actual thumbprint to cash a check. When she informed Evans that she had done so, he became very angry. Evans was afraid the police would catch them, and he decided to kill Keedy.
On May 15, 2005, Evans contacted his friend and employee, Billy Neely, and offered him an unspecified job for which Neely could earn three or four thousand dollars. On May 16, 2005, Neely went to Evans's house. Evans then told Neely that he wanted to kill Keedy, whom Neely also knew. Evans explained the plan to Neely: Evans had told Keedy that he was going to rob a house in Geist that night, and Keedy had agreed to drive him. Keedy was to meet Evans at a grocery store where he would pick her up. After Evans picked up Keedy, he would bring her back to his house, where Neely would be waiting. Once inside the house, Evans would strangle Keedy with a rope while Neely remained ready to apprehend Keedy should she attempt to escape. Evans would wash the body in a wading pool to remove any evidence and place it in a box, both of which he had in his garage. Finally, Neely would bury Keedy in an excavation for a new house. After explaining the plan, Evans drove Neely to the construction site where Neely was to bury Keedy. They then returned to Evans's house, and Neely waited there while Evans picked up Keedy.
Evans, however, was unaware that Keedy had agreed to act as a police informant. A few days earlier, Ryan Stephenson, Keedy's intermittent boyfriend, had contacted United States Postal Inspector Richard Petry and provided him with information regarding Evans and Keedy's bank fraud scheme. On May 16, 2005, at approximately 5:00 p.m., Inspector Petry learned of Keedy's location, and Indianapolis police officers pulled Keedy over. Keedy admitted her involvement in the bank fraud scheme and agreed to accompany Inspector Petry to his office for an interview. On the way to Inspector Petry's office, Keedy told him about the robbery she was to help Evans with that very evening. Inspector Petry immediately stopped his car and contacted the Indianapolis Police Department. Keedy drove with police officers to the home that she thought Evans had targeted for the robbery. *382 The police formulated a plan wherein Keedy would meet Evans as planned, and while under police surveillance, they would drive to the Geist home, and the officers would interrupt the robbery before it occurred. Keedy agreed to wear a wire. The police put the wire on Keedy, and she went to meet Evans at the grocery store.
At approximately 7:30 p.m., Keedy arrived at the grocery store parking lot. Evans was waiting there as planned. Keedy got in his car, but Evans did not drive to the Geist house. Instead, he drove to his house, explaining to Keedy that he had to get his gun. Evans parked his car in his garage and closed the garage door. Just before she exited the car, Keedy saw Evans put a glove on his left hand. She entered the house in front of Evans. After she had taken a step or two, Evans put a rope around her neck, started strangling her, pulled her to the ground, and said: "You robbed the wrong motherfucker this time, didn't ya? $2,000 out of my dresser. It's all over with bitch. You can't be trusted. About two minutes, it'll be all over. This ain't no game. . . . . You were told." State's Exhibits 10, 11. Neely was also in the house and made derogatory comments to Keedy. Evans continued, saying, "Yeah, you were told time and time again to keep your . . . mouth shut." Id.
Meanwhile, the police officers monitoring the transmission from Keedy's wire realized something was wrong and attempted to enter the house. Evans's house had two doors. Some officers ran to the front door, while Officers Jeffrey Krider, Dewey Poskon, and Jeffrey Avington ran to the side door. Next to the side door, there was a full-length window approximately three feet wide. Officer Poskon looked in the window and saw a pool table. On the other side of the pool table, he saw two pairs of legs, perpendicular to each other. One set of legs was bare, and the other set had on light blue jeans. Officer Poskon yelled, "They're in there." Tr. at 235. The officers yelled, "Police," and tried to open the door, but it was locked. Id. at 244. Officer Avington attempted to kick the door open three times, but it would not open. Evans came to the window and said that he could not open the door. Officer Avington kicked the door once more, and it opened. He rushed in and ran after Neely, who had jumped over the banister and run up the stairs. Neely had on a hooded sweatshirt, brown work pants, and brown boots. Neely ran to the front door and unlocked it, allowing the officers there to enter. After the officers subdued Neely, Officer Avington returned to the room in which Keedy lay.
Meanwhile, Officer Krider had knocked Evans down. Evans was wearing light blue jeans. Officer Krider attempted to subdue Evans, who continued to fight. Evans was face down and was kicking and bucking while Officer Krider was on his back. Officer Poskon went to the other side of the pool table and saw Keedy face down with her head in the fireplace. He yelled for an ambulance and then went to assist Officer Krider in subduing Evans. Having returned to the room, Officer Avington went to help Keedy. He turned her over and removed the rope from around her neck. She had blood on her face and was foaming at the mouth; her eyes were rolled back in her head; and she had urinated on herself. He was unsure whether she was dead or alive. After a few seconds, Keedy gasped and started to cough and moan. Her face was "cherry red" due to the extensive hemorrhaging, she had an abrasion on her neck from the rope, her voice was raspy and hoarse, she was gasping for breath and hyperventilating, and she had difficulty swallowing. Id. at 468. However, she was able to indicate that Evans was the person who had attempted *383 to strangle her. At some point, the police were able to handcuff Evans.
Police found two gloves in the room and two other gloves that Neely had dropped as he attempted to flee. Inside Evans's garage, police found a small wading pool, a box large enough to hold a grown adult, a bottle of acid, a bottle of 409 spray, three bottles of isopropyl alcohol, and two packs of disposable rubber gloves. In Evans's car, police found two bags of ready mix concrete, a shovel, a pick ax, a big heavy-duty trash bag, a towel, and a complete change of clothes. A brown paper grocery bag was taped over the overhead dome light. Neely showed police the construction site where he was supposed to bury Keedy's body.
On May 18, 2005, the State charged Evans with class A felony attempted murder, class B felony aggravated battery, class B felony criminal confinement, and class D felony resisting law enforcement. On October 12, 2005, the State amended the information to include a habitual offender charge.
A jury trial was held December 12, 13, and 14, 2005. The jury found Evans guilty as charged. Evans admitted to being a habitual offender. The sentencing hearing was scheduled for January 6, 2006. On January 5, 2006, Evans filed a motion to continue the sentencing hearing, stating that the presentence investigation report had not been filed as of January 4, 2006, and it now appeared that he might benefit from the assistance of a sentencing consultant. The trial court denied the motion. The presentence investigation report was filed January 5, 2006. Evans did not renew the motion at the sentencing hearing. The trial court vacated the aggravated battery and criminal confinement convictions on double jeopardy grounds. The trial court imposed a forty-year sentence for Evans's attempted murder conviction, enhanced by thirty years for the habitual offender finding, and a one-year sentence for the resisting law enforcement conviction, to be served consecutively, for an aggregate sentence of seventy-one years. Evans now appeals.
Discussion and Decision
I. Prosecutorial Misconduct
Evans argues that the prosecutor committed misconduct during closing argument. The essential facts are as follows. Evans did not testify at trial. During closing arguments, defense counsel asserted that the voice on the recording of Keedy's wire transmission that the State had identified as Evans's was actually Neely's voice. As the prosecutor was arguing on rebuttal that Evans attempted to kill Keedy, Evans twice shouted, "No, I didn't," followed by, "I never put my hands on her and you know it, you know it, and you know it's a fact." Id. at 920. The trial court ordered the bailiff to take the jury out. Evans continued yelling, "Never touched her. Never touched her. Never touched Melinda Keedy." Id. After the jury was removed, the State moved for a mistrial, which the trial court denied. The trial court had Evans removed from the courtroom. As Evans was being escorted to his cell, he said to the deputies, "I don't have a problem with any of you guys and I just wanted to put on a show for the Court." Id. at 932.
The prosecutor indicated to the trial court that, in the remaining portion of his rebuttal, he wanted to say, "Now, you've heard his voice." Id. at 934. The defense objected, but the trial court allowed the comment. The jury returned to the courtroom, and the trial court instructed the jury that "any statements made by Mr. Evans are not to be considered as evidence. You are to disregard any statement or comments that were previously *384 made by Mr. Evans." Id. At the end of his rebuttal argument, the prosecutor said, "Now you've heard his voice," and played a portion of the recorded wire transmission. Id. at 935. The defense did not request an admonishment or move for mistrial.
Specifically, Evans claims that the prosecutor's statement constitutes prosecutorial misconduct because it was an improper reference to his right to remain silent guaranteed by the Fifth Amendment of the United States Constitution.[3] We cannot agree.
If an appellant properly preserves the issue of prosecutorial misconduct for appeal the reviewing court first determines whether misconduct occurred, and if so whether it had a probable persuasive effect on the jury. Although often phrased in terms of grave peril, a claim of improper argument to the jury is measured by the probable persuasive effect of any misconduct on the jury's decision and whether there were repeated instances of misconduct which would evidence a deliberate attempt to improperly prejudice the defendant.
Ritchie v. State, 809 N.E.2d 258, 268-69 (Ind.2004) (citations and quotation marks omitted).
Initially, we note that the context in which Evans raises this issue is inappropriate. We do not see how the prosecutor's statement may be described as misconduct when the trial court granted the prosecutor permission to make the statement. Rather, the proper context in which to frame the issue would be in terms of trial court error: namely, that the trial court erred in allowing the prosecutor to make the statement.
Even assuming that the issue was properly framed in terms of prosecutorial misconduct, Evans failed to request an admonishment or move for mistrial. He has therefore waived this issue. See Flowers v. State, 738 N.E.2d 1051, 1058 (Ind. 2000) (stating that to preserve an issue regarding the propriety of a closing argument for appeal, a defendant must request an admonishment, and if further relief is desired, defendant must move for mistrial).
Waiver notwithstanding, Evans's argument must fail. Generally, when a prosecutor makes a comment that the jury could reasonably interpret as an invitation to draw an adverse inference from the defendant's decision not to testify, the defendant's Fifth Amendment privilege against self-incrimination is violated. Haycraft v. State, 760 N.E.2d 203, 208 (Ind.Ct.App.2001), trans. denied (2002). Evans contends that if the jury obeyed the trial court's admonishment, the only inference to be drawn from the prosecutor's comment is an improper inference of his guilt from his silence at trial. We disagree. Contrary to Evans's assertion that the trial court admonished the jury not to consider the sound of Evans's voice, the trial court's admonishment instructed the jury to ignore the substance of Evans's comments. Notwithstanding Evans's argument that the identity of the male voices on the recording was of significant importance, the trial court would not have allowed the prosecutor to say, "Now you've heard his voice," if the jury were not permitted to consider the sound of Evans's voice.[4]
*385 We will not reverse if the prosecutor's comment, in its totality, focuses on evidence other than the defendant's failure to testify. Id. "Prosecutors are entitled to respond to allegations and inferences raised by the defense even if the prosecutor's response would otherwise be objectionable." Dumas v. State, 803 N.E.2d 1113, 1118 (Ind.2004). Here, the prosecutor's statement was in no sense directed toward Evans's decision not to testify, but rather was specifically focused on the fact that Evans had voluntarily spoken in front of the jury. The prosecutor's statement was in direct response to defense counsel's argument that the voice on the recording was actually Neely's voice, as well as to Evans's voluntary outburst. We think it would be grossly unfair to allow Evans to sabotage his own trial by making such an outburst. Accordingly, we conclude that the prosecutor's comment does not constitute a violation of Evans's Fifth Amendment right to remain silent. See Lyles v. State, 834 N.E.2d 1035, 1047 (Ind.Ct.App. 2005) (concluding that prosecutor's statement made in response to defense counsel's closing argument and suggesting that defendant's videotaped statement did not deserve same weight and credibility as testimony of State's sworn witnesses was not a comment on defendant's decision not to testify), trans. denied.
II. Mistrial
Evans next contends that the trial court abused it discretion in denying his motion for mistrial. The relevant facts follow. Keedy testified for the State. The prosecutor asked Keedy to describe what the police had directed her to do while she was in the car with Evans. Keedy replied, "I was supposed to get in his car, like planned, and me and [Evans] was suppose to go straight from Kroger to Geist. And I I was the only thing I was suppose to do was to get him to talk about the gun. And when he talked about havin' a gun because he was on probation or parole he wasn't allowed to have a gun[.]" Tr. at 586. Defense counsel objected and moved for mistrial. The trial court took the motion under advisement until Keedy had finished testifying. The trial court sustained the objection and offered to strike Keedy's response from the record and instruct the jury as follows: "[T]he Court is going to strike the last answer from the record, and you're not to consider it." Id. at 588. The defense refused the trial court's offer to strike.
After Keedy finished testifying, a conference was held outside the presence of the jury, in which the trial court denied Evans's motion for mistrial. After both parties rested, the trial court admonished the jury that "the evidence that was introduced regarding other alleged criminal activity or prior bad acts, including any allegations of being on probation or parole were not are not to be considered by you as proof of [Evans's] propensity to act in a criminal way." Id. at 832. The trial court repeated this admonishment again in its final instructions.
In resolving whether the trial court erred in denying Evans's motion for mistrial, we note that
A mistrial is an extreme remedy warranted only when no other curative measure will rectify the situation. The determination of whether to grant a mistrial is within the trial court's discretion, and we will reverse only for an abuse of that discretion. An abuse of discretion *386 has occurred if the trial court's decision is clearly against the logic and effect of the facts and circumstances before the trial court. We accord great deference to the trial court's decision, as it is in the best position to gauge the circumstances and the probable impact on the jury. When determining whether a mistrial is warranted, we must consider whether the defendant was placed in a position of grave peril to which he should not have been subjected. The gravity of the peril is determined by the probable persuasive effect of the matter complained of on the jury's decision.
Kirby v. State, 774 N.E.2d 523, 533-34 (Ind.Ct.App.2002) (citations omitted), trans. denied (2003). However, "reversible error is seldom found when the trial court has admonished the jury to disregard a statement made during the proceedings." Bradley v. State, 649 N.E.2d 100, 108 (Ind.1995).
Specifically, Evans asserts that Keedy's comment violated a motion in limine and, because it referred to his criminal history, was highly prejudicial. We disagree.
Evans's trial lasted three days, resulting in a transcript of approximately 1,000 pages. During the entire trial, the sole reference to Evans's criminal past was Keedy's brief reference that he was on probation or parole. Further, the State presented overwhelming evidence of Evans's guilt. Keedy and Neely presented eyewitness testimony, which was corroborated by the circumstantial evidence; the police interrupted the crime while it was being committed, so there was no issue as to Evans's identity or involvement; and the crime was recorded by means of Keedy's wire transmission, which was presented to the jury. Under these circumstances, the probable persuasive effect of Keedy's comment on the jury is insignificant. See Burks v. State, 838 N.E.2d 510, 520 (Ind.Ct.App.2005) (holding that brief reference to other shooting was harmless error in light of overwhelming evidence of defendant's guilt), trans. denied (2006).
Moreover, the trial court twice provided a proper admonishment to the jury. Even where a witness violates a motion in limine, a trial court may determine that a mistrial is not warranted and, instead, admonish the jury to disregard the improper testimony. See Underwood v. State, 644 N.E.2d 108, 111 (Ind.1994) (holding that admonishment, not mistrial, was appropriate where police officer made statement in violation of ruling on motion in limine). Nevertheless, Evans urges that the trial court's admonishment was insufficient to cure the harm because it was given after Keedy had finished testifying and not immediately after the statement was made. However, Evans rejected the trial court's offer to immediately strike Keedy's comment and instruct the jury to disregard it. Evans may not now claim that the trial court's delayed admonishment was insufficient. We conclude that the trial court did not abuse its discretion in denying Evans's motion for mistrial.
III. Motion for Continuance
Evans asserts that the trial court abused its discretion in denying his motion to continue the sentencing hearing. The decision whether to grant a continuance, when the motion is not based upon statutory grounds, lies within the discretion of the trial court and will not be reversed absent a clear showing of an abuse of discretion. Harris v. State, 659 N.E.2d 522, 527 (Ind.1995). The appellant must overcome a strong presumption that the trial court properly exercised its discretion. Warner v. State, 773 N.E.2d 239, 247 (Ind.2002). "Additionally, the defendant must make a specific showing of how he was prejudiced as a result of the trial *387 court's denial of his motion." Harris, 659 N.E.2d at 527.
Here, Evans filed his motion for continuance one day before the sentencing hearing claiming that he did not have sufficient time to review the presentence investigation report. Evans had a team of three attorneys, which had three weeks to prepare for the sentencing hearing. While we acknowledge that the presentence investigation report was not filed until the day before the hearing, we note that other than his criminal history, which is a matter of public record, Evans provided the vast majority of information in the report. We also note that at the sentencing hearing, Evans indicated to the trial court that he was ready to proceed and had had an opportunity to read over the report, and he never indicated that there was any information in the report that came as a surprise to him.
Additionally, Evans's motion for continuance states, "That given [Evans's] demeanor, during the trial, and in the aftermath of the same, it now appears, that he would benefit from the type of assistance that a Sentencing Consultant might provide, including the compilation of mitigation evidence that might assist the court in arriving at an appropriate sentence." Appellant's App. at 255. We think the statement that a sentencing consultant might provide mitigation evidence is speculative and vague. Evans provided no indication as to whether the likelihood that mitigation evidence would be provided was significant, and he did not identify, even generally, what kind of mitigation evidence a sentencing consultant might provide. Evans himself admits, "Evans's circumstances did not allow for a detailed presentation of exactly what specific evidence of his particular mitigation might have been given the very limited time." Appellant's Br. at 13.
Nevertheless, on appeal Evans contends that he "was prejudiced when the court refused to allow an extension of time to allow his counsel to investigate and flesh out the possible mitigating factor of his declining mental health." Appellant's Br. at 13. In addressing this contention, we think that Anderson v. State, 695 N.E.2d 156 (Ind.Ct.App.1998), is instructive. In Anderson, the defendant appealed the denial of his motion to continue his sentencing hearing. Anderson's motion was based on a statement that counsel wanted to investigate his medical records concerning his treatment for schizophrenia. We concluded that Anderson had failed to establish prejudice, stating that Anderson had not produced evidence that actual records existed and did not demonstrate what those records would prove. Id. at 158.
Here, the record demonstrates that Evans did not have a history of mental illness. We recognize that the presentence investigation report shows that Evans reported that since his arrest, he had experienced anxiety and might be in need of mental health evaluation and treatment. However, he also stated that his mental and emotional health was "good," indicating that any mental health concerns he had were minor. PSI at 12. Even if Evans had begun experiencing significant mental health issues subsequent to his arrest, "mental illness is a mitigating factor to be used in certain circumstances, such as when the evidence demonstrates longstanding mental health issues or when the jury finds that a defendant is mentally ill." Ousley v. State, 807 N.E.2d 758, 762 (Ind. Ct.App.2004). Evans has not established any longstanding mental health issues, and the jury did not find him mentally ill.
Furthermore, a defendant's mental illness is afforded mitigating weight in *388 circumstances that establish a nexus between the mental illness and the offense for which the defendant is being sentenced. Corralez v. State, 815 N.E.2d 1023, 1026 (Ind.Ct.App.2004). Evans has not demonstrated any such nexus, and therefore, any mental illness that might have been discovered would not be a significant mitigating factor. Accordingly, we conclude that the trial court did not abuse its discretion in denying Evans's motion for continuance.
Affirmed.
BAKER, J., and VAIDIK, J., concur.
NOTES
[1] Ind.Code §§ 35-41-5-1, 35-42-1-1.
[2] Ind.Code § 35-44-3-3.
[3] Evans also refers to Article 1, Section 14 of the Indiana Constitution. However, he makes no argument based on that section. Consequently, this issue is deemed waived. See Haviland v. State, 677 N.E.2d 509, 513 n. 2 (Ind.1997) (stating that defendant's Article 1, Section 14 argument was waived because he failed to make a separate argument resting on that section). We therefore analyze only Evans's Fifth Amendment claim.
[4] In fact, the identity of the male voices was not as significant as Evans contends. The jury was provided with an instruction on accomplice liability. The record establishes that there was sufficient evidence to convict Evans as an accomplice even if Neely was the one who actually strangled Keedy. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2294398/ | 118 Cal. Rptr. 2d 862 (2002)
97 Cal. App. 4th 1094
John SZETELA, Plaintiff and Appellant,
v.
DISCOVER BANK, Defendant and Respondent.
No. G029323.
Court of Appeal, Fourth District, Division Three.
April 22, 2002.
Rehearing Denied May 16, 2002.
Review Denied July 31, 2002.
*863 Strange & Carpenter, Brian R. Strange, Gretchen Carpenter; Law Offices *864 of Barry L. Kramer and Barry L. Kramer, Los Angeles, for Plaintiff and Appellant.
Gibson, Dunn & Crutcher, Joel A. Feuer and Benjamin P. Broderick, Los Angeles, for Defendant and Respondent.
OPINION
MOORE, J.
In this putative class action, plaintiff John Szetela challenges an order granting Discover Bank's (Discover) motion to compel arbitration. Szetela argues the arbitration agreement, to the extent it prohibits class treatment of small individual claims, is unconscionable and unenforceable. We agree and therefore issue a writ of mandate directing the trial court to strike the portion of the arbitration clause prohibiting class or representative actions.
I
FACTS AND PROCEDURAL BACKGROUND
Szetela opened a Discover credit card account in July 1993. The terms of his account were governed by a Cardmember Agreement. In July 1999, Discover sent Szetela a notice inserted inside his billing statement that purported to amend the terms of the Cardmember Agreement to include an arbitration clause.
In relevant part, the amendment states: "ARBITRATION. WE ARE ADDING A NEW SECTION TO READ AS FOLLOWS: [¶] ARBITRATION OF DISPUTES. In the event of any past, present or future claim or dispute (whether based upon contract, tort, statute, common law or equity) between you and us arising from or relating to your Account, any prior account you have had with us, your application, the relationships which result from your Account or the enforceability or scope of this arbitration provision, of the Agreement or of any prior agreement, you or we may elect to resolve the claim or dispute by binding arbitration. [¶] IF EITHER YOU OR WE ELECT ARBITRATION, NEITHER YOU NOR WE SHALL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR TO HAVE A JURY TRIAL ON THAT CLAIM. PRE-HEARING DISCOVERY RIGHTS AND POST-HEARING APPEAL RIGHTS WILL BE LIMITED. NETHER YOU NOR WE SHALL BE ENTITLED TO JOIN OR CONSOLIDATE CLAIMS IN ARBITRATION BY OR AGAINST OTHER CARDMEMBER WITH RESPECT TO OTHER ACCOUNTS, OR ARBITRATE ANY CLAIMS AS A [REPRESENTATIVE OR MEMBER OF A CLASS OR IN A PRIVATE ATTORNEY GENERAL CAPACITY. Even if all parties have opted to litigate a claim in court, you or we may elect arbitration with respect to any claim made by a new party or any new claims later asserted in that lawsuit, and nothing undertaken therein shall constitute a waiver of any rights under this arbitration provision."
If Szetela did not wish to accept the terms of the amendment, his only option was to notify Discover, which would then close his account. If he had selected this option, he would have been permitted to pay his remaining balance under the terms of the Cardmember Agreement prior to the amendment.
Szetela was not the original named plaintiff in this case. In October 2000, James Shea, a New Jersey resident, filed the present action against Discover as a putative class action. Discover filed a motion in New Jersey seeking relief that would effectively bar the California action.[1]*865 In December 2000, a first amended complaint was filed adding Szetela, a California resident, as an additional named plaintiff. The amended complaint asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent or negligent misrepresentation, and deceptive business practices. These claims were based on alleged practices by Discover that resulted in cardholders being improperly charged fees for exceeding their credit limits ("overlimit fees") and incurring other penalties: (1) incorrectly stating the cardholder's "available credit" amount on their monthly statements, and (2) incorrectly calculating cardholders'"minimum payment due" on their monthly statements. Discover's overlimit fee was $29.
Based on the arbitration clause purportedly added to Szetela's Cardholder Agreement in 1999, Discover moved to compel arbitration of Szetela's claim on an individual basis. The court granted the motion, and Szetela eventually prevailed at arbitration, recovering $29, and then filed the present appeal. Discovery was also conducted to locate a new class representative, a person to whom the arbitration clause did not apply. A second amended complaint adding a new class representative was subsequently filed.
II
DISCUSSION
A. Discover's Motion to Dismiss
A threshold issue is whether this court has jurisdiction to hear Szetela's appeal. Discover argues that we do not and has moved to dismiss the appeal on the ground that an order compelling arbitration is not appealable. (See, e.g., Melchor Investment Co. v. Rolm Systems (1992) 3 Cal. App. 4th 587, 591, 4 Cal. Rptr. 2d 343.) Szetela argues that the order to arbitrate signaled the "death knell" of the putative class action and is therefore appealable. The death knell doctrine permits the appellate court to review an order denying a motion to certify a class when it is unlikely the case will proceed as an individual action. (See, e.g., Richmond v. Dart Industries, Inc. (1981) 29 Cal. 3d 462, 470, 174 Cal. Rptr. 515, 629 P.2d 23.)
Both sides raise valid points. Discover argues the death knell doctrine generally applies only in the context of a trial court's denial of a motion to certify a class. Szetela points out that although the court's order does not signal the death knell for the entire class, it does sharply limit the scope of the class to those not facially bound by the "no class action" provision. This alone, however, is not sufficient to create appellate jurisdiction.
Discover suggests the proper procedure is an appeal from an order on a motion to confirm or vacate the arbitrator's award. Yet Szetela, obviously, does not want to confirm the award, and grounds to vacate are extremely limited. (See Code Civ. Proc., § 1286.2.) It is not in Discover's interest to create an appealable order. Therefore, although the order is not appealable under the death knell doctrine, because of the unusual circumstances present here, we exercise our discretion to treat the appeal as a petition for a writ of mandate. (See Olson v. Cory (1983) 35 Cal. 3d 390, 401, 197 Cal. Rptr. 843, 673 P.2d 720; Rogers v. Municipal Court (1988) 197 Cal. App. 3d 1314, 1317, 243 Cal. Rptr. 530.) Unless we do so, this issue will effectively evade appellate review, establishing the lack of an adequate remedy of law necessary for a writ. The essential facts are undisputed and the case has been extensively briefed. The motion to dismiss is denied, and we therefore consider the merits of the case.
B. Szetela's Requests for Judicial Notice
Szetela requests that we take judicial notice of a trial court opinion in a *866 parallel case in New Jersey. As part of the record in the court of another state, we have discretion to take judicial notice of the opinion. (Evid.Code, § 452, subd. (d).) Discover apparently fears that if we take judicial notice of the opinion, we will unquestioningly adopt its findings, which is not the case. Szetela's request is granted; however, the opinion will be given the weight appropriate to an out-of-state trial court decision.
Szetela further requests that we take judicial notice of a document purporting to be Citibank's recently amended credit card agreement. This document includes a no class action provision similar to Discover's amendment. Because this issue is not relevant to our decision in this appeal, we decline to do so. (See People v. Rowland (1992) 4 Cal. 4th 238, 268, fn. 6, 14 Cal. Rptr. 2d 377, 841 P.2d 897.) The request is denied.
C. Enforceability of the Arbitration Clause
The essence of Szetela's argument is that the no class action provision is unconscionable and should not be enforced.[2] Because no material facts are in dispute, we review the enforceability of the arbitration clause de novo. (NORCAL Mutual Ins. Co. v. Newton (2000) 84 Cal. App. 4th 64, 71, 100 Cal. Rptr. 2d 683.)
An agreement to arbitrate is enforceable unless a recognized contract defense, such as unconscionability, exists. (Doctor's Associates, Inc. v. Casarotto (1996) 517 U.S. 681, 686-687, 116 S. Ct. 1652, 134 L. Ed. 2d 902.) As our Supreme Court has noted, "under both federal and California law, arbitration agreements are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. [Citations.]" (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 98, 99 Cal. Rptr. 2d 745, 6 P.3d 669, fn. omitted (hereafter Armendariz).) Unconscionability is one such ground. (Civ.Code, § 1670.5, subd. (a).)
Szetela, as the party opposing arbitration, has the burden of proving the arbitration provision is unconscionable. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal. 4th 951, 972, 64 Cal. Rptr. 2d 843, 938 P.2d 903.) Unconscionability includes both substantive and procedural elements.[3] (Stirlen v. Supercuts, Inc. (1997) 51 Cal. App. 4th 1519, 1531, 60 Cal. Rptr. 2d 138.) Procedural unconscionability addresses the manner in which agreement to the disputed term was sought or obtained, such as unequal bargaining power between the parties and hidden terms included in contracts of adhesion. (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal. App. 4th 1199, 1212-1213, 78 Cal. Rptr. 2d 533.) Substantive unconscionability addresses the impact of the term itself, such as whether the provision is so harsh or oppressive that it should not be enforced. (Ibid.) These elements, however, need not be present to the same degree. "[T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa." *867 (Armendariz, supra, 24 Cal.4th at p. 114, 99 Cal. Rptr. 2d 745, 6 P.3d 669.)
1. Procedural Unconscionability
Discover argues that a contract provision lacks procedural unconscionability unless the opposing party can demonstrate that no meaningful opportunity existed to obtain the offered goods or services from any other provider without the offending contract term. We disagree this is the relevant test for unconscionability. The availability of similar goods or services elsewhere may be relevant to whether the contract is one of adhesion, but even if the clause at issue here is not an adhesion contract, it can still be found unconscionable. Moreover, "in a given case, a contract might be adhesive even if the weaker party could reject the terms and go elsewhere. [Citation.]" (Villa Milano Homeowners Assn. v. II Davorge (2000) 84 Cal. App. 4th 819, 827, 102 Cal. Rptr. 2d 1.) Therefore, whether Szetela could have found another credit card issuer who would not have required his acceptance of a similar clause is not the deciding factor.
Procedural unconscionability focuses on the manner in which the disputed clause is presented to the party in the weaker bargaining position. When the weaker party is presented the clause and told to "take it or leave it" without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present. (See Kinney v. United HealthCare Services, Inc. (1999) 70 Cal. App. 4th 1322, 1329, 83 Cal. Rptr. 2d 348.) These are precisely the facts in the case before us. Szetela received the amendment to the Cardholder Agreement in a bill stuffer, and under the language of the amendment, he was told to "take it or leave it." His only option, if he did not wish to accept the amendment, was to close his account. We agree with Szetela that the oppressive nature in which the amendment was imposed establishes the necessary element of procedural unconscionability.
2. Substantive Unconscionability
Substantive unconscionability addresses the fairness of the term in dispute. Substantive unconscionability "traditionally involves contract terms that are so one-sided as to `shock the conscience,' or that impose harsh or oppressive terms." (24 Hour Fitness, Inc. v. Superior Court, supra, 66 Cal.App.4th at p. 1213, 78 Cal. Rptr. 2d 533.) The manifest one-sidedness of the no class action provision at issue here is blindingly obvious.
Although styled as a mutual prohibition on representative or class actions, it is difficult to envision the circumstances under which the provision might negatively impact Discover, because credit card companies typically do not sue their customers in class action lawsuits. This provision is clearly meant to prevent customers, such as Szetela and those he seeks to represent, from seeking redress for relatively small amounts of money, such as the $29 sought by Szetela. Fully aware that few customers will go to the time and trouble of suing in small claims court, Discover has instead sought to create for itself virtual immunity from class or representative actions despite their potential merit, while suffering no similar detriment to its own rights.
While adhesive arbitration provisions are not per se unconscionable, "there may be arbitration provisions which do give an advantage to one party.... In those cases ... it is not the requirement of arbitration alone which makes the provision unfair but rather the ... manner in which the arbitration is to occur." (Strotz v. Dean Witter Reynolds, Inc. (1990) 223 Cal. App. 3d 208, 216, fn. 7, 272 Cal. Rptr. 680, disapproved on other grounds in Rosenthal v. Great Western Fin. Securities Corp. (1996) *868 14 Cal. 4th 394, 407, 58 Cal. Rptr. 2d 875, 926 P.2d 1061.) It is the manner of arbitration, specifically, prohibiting class or representative actions, we take exception to here. The clause is not only harsh and unfair to Discover customers who might be owed a relatively small sum of money, but it also serves as a disincentive for Discover to avoid the type of conduct that might lead to class action litigation in the first place. By imposing this clause on its customers, Discover has essentially granted itself a license to push the boundaries of good business practices to their furthest limits, fully aware that relatively few, if any, customers will seek legal remedies, and that any remedies obtained will only pertain to that single customer without collateral estoppel effect. The potential for millions of customers to be overcharged small amounts without an effective method of redress cannot be ignored. Therefore, the provision violates fundamental notions of fairness.
While the advantages to Discover are obvious, such a practice contradicts the California Legislature's stated policy of discouraging unfair and unlawful business practices, and of creating a mechanism for a representative to seek relief on behalf of the general public as a private attorney general. (See, e.g., Bus. & Prof.Code, § 17200 et seq.) It provides the customer with no benefit whatsoever; to the contrary, it seriously jeopardizes customers' consumer rights by prohibiting any effective means of litigating Discover's business practices. This is not only substantively unconscionable, it violates public policy by granting Discover a "get out of jail free" card while compromising important consumer rights.
Furthermore, the clause violates public policy in another important way. One of the policy reasons for class actions is to promote judicial economy and streamline the litigation process in appropriate cases. To allow litigants to contract away the court's ability to use a procedural mechanism that benefits the court system as a whole is no more appropriate than contracting away the right to bring motions in limine, seek directed verdicts, or use other procedural devices that allow the courts to operate in an efficient manner.
III
DISPOSITION
Let a writ of mandate issue directing the superior court to vacate its order directing Szetela to arbitrate his claim, and to enter a new order striking the provision prohibiting representative or class actions from the arbitration clause. Szetela shall recover his costs.
WE CONCUR: SILLS, P.J., and RYLAARSDAM, J.
NOTES
[1] Discover lost the motion. The trial court's subsequent opinion is the subject of a request for judicial notice, see post, part II B.
[2] We do not rule on the arbitration clause as a whole, merely that portion of it prohibiting class or representative actions.
[3] Szetela primarily argues California and federal cases in support of his argument regarding unconscionability. Discover states the Discover Cardmember Agreement is governed by Delaware law, but argues that Discover should prevail under either state's law. As Discover has not established the law of another state should apply, we apply California law to our analysis. To the extent Delaware law is more favorable, Discover has waived this argument by failing to brief the choice of law issue. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2331561/ | 292 F. Supp. 2d 1086 (2003)
EQUIP FOR EQUALITY, INC., Plaintiff,
v.
INGALLS MEMORIAL HOSPITAL, Defendant.
No. 03 C 0797.
United States District Court, N.D. Illinois, Eastern Division.
November 25, 2003.
*1087 *1088 *1089 Byron L. Mason, Equip for Equality, Inc., Chicago, IL, for Plaintiff.
David J. Rowland, Alison B. Willard, Seyfarth Shaw, Chicago, IL, for Defendant.
MEMORANDUM OPINION AND ORDER
DENLOW, United States Magistrate Judge.
This case is before the Court on the question of whether and to what extent Plaintiff Equip for Equality, Inc. ("EFE" or "Plaintiff"), is allowed access to Defendant Ingalls Memorial Hospital's ("Ingalls" or "Defendant") inpatient units, which temporarily house persons with mental illnesses, absent either a complaint or probable cause of abuse. EFE has filed a complaint against Ingalls, alleging that Ingalls refused to allow EFE unaccompanied access to the hospital's inpatient facilities, residents, and employees, in violation of both the United States Protection and Advocacy for Individuals with Mental Illness Act ("federal PAIMI Act") and the Illinois Protection and Advocacy for Mentally Ill Persons Act ("Illinois PAMIP Act"). EFE *1090 seeks injuctive and declaratory relief and has filed this motion for summary judgment, which raises the issue stated above.
This controversy never should have escalated to this point. The federal and Illinois statutes state with remarkable clarity that an entity empowered with the authority granted to EFE should be allowed access to a facility such as Ingalls. Although there is some intentional ambiguity in the applicable regulations as a result of the use of the term "reasonable access," this Court is disappointed at the parties' inability to come amicably to a reasonable resolution of the issue. Several sub-issues exist surrounding the meaning of "reasonable access," including whether EFE is entitled to unaccompanied access to both facilities and patients, and whether EFE is entitled to unaccompanied, unannounced access to both facilities and patients. Many of these sub-issues will not be answered definitively by this Court, however, because the parties have not presented an actual case or controversy.
EFE has made a demand for unfettered access, and Ingalls has responded with an absolute denial of access. For the reasons set forth in this opinion, this Court holds: (1) as a matter of law, Ingalls's complete refusal to allow EFE direct physical access to its inpatient units is in violation of both the federal PAIMI Act and the Illinois PAMIP Act; (2) as a matter of law, EFE is entitled to reasonable unaccompanied access to the inpatient units and the outpatient units at Ingalls, as well as to the patients and the programs therein, during, at a minimum, normal working hours and visiting hours; and (3) EFE is not entitled to judgment as a matter of law on the issue of whether it is entitled to unaccompanied and unannounced twenty-four hour access to the inpatient units and the outpatient units at Ingalls, as well as to the patients and the programs therein, absent a complaint or probable cause. The Plaintiff's motion for summary judgment is therefore granted in part and denied in part.
I. BACKGROUND FACTS
A. THE PARTIES
Equip for Equality, Inc., is the governor-designated, federally-funded Protection and Advocacy ("P & A") System for persons with mental illnesses in Illinois. Def. Resp. to Pl.'s LR 56.1(b)(3) Stmt. of Facts ¶ 1 [hereinafter "Def. Resp."]. EFE has federal and state authority to enter into facilities that provide care and treatment to persons with mental illnesses. Id. Ingalls Memorial Hospital is a private hospital located in Harvey, Illinois, and serves psychiatric patients. Def. LR 56.1(b) Stmt. of Facts ¶ 1 [hereinafter "Def. Facts"]; Def. Answer ¶ 3.
B. EFE'S REQUESTS FOR ACCESS TO THE FACILITIES AT INGALLS
On at least three occasions, January 11, February 22, and August 6, 2002, EFE attempted to exercise its authority when it made demands for direct physical access to the psychiatric ward at Ingalls. Def. Resp. ¶¶ 2, 4, 6. EFE desired unaccompanied access to the facilities and the patients in the psychiatric ward at Ingalls in order to inform and educate the staff and the patients of its services and to tour the facilities.[1] Pl.'s Mot. Summ. J., Ex. A [hereinafter Pl.'s Mot.]. The Department of Psychiatry Manager, who was acting at the direction of Ingalls, initially denied *1091 EFE's demands because she believed that EFE lacked legal authority under section 5/2-114 of the Illinois Mental Health Code. Pl.'s Mot., Ex. H, at 55-56, 72-75. Specifically, Ingalls's position was that EFE could not access its facilities unless it met any one of three conditions: (1) it obtained a court order; (2) it was conducting an investigation; or (3) it received a complaint from a patient. Id. at 38. Ingalls, however, permitted EFE representatives to view the outpatient units of the psychiatric ward on September 13, 2002, but refused to grant EFE access to the inpatient units. Def. Facts ¶ 5; Def. Resp. ¶¶ 7, 13. Ingalls made a distinction between the outpatient units and the inpatient units based on confidentiality and privacy concerns. Pl.'s Mot., Ex. H, at 20-21. Ingalls continues to deny EFE access to the inpatient units of the psychiatric ward at the hospital. Def. Resp. ¶ 16.
C. THE INPATIENT AND OUTPATIENT UNITS
Within the psychiatric ward at the Wyman-Gordan Pavilion of Ingalls, there are two inpatient units and several outpatient units. Id. ¶ 8, 9. The outpatient units are unlocked. Id. ¶ 12. The inpatient units, however, are locked, and a key is required to gain access to the units, which are located on the second floor of the pavilion. Id. ¶¶ 10, 11.
The inpatient units are locked at all times and are located on the second floor because those units are reserved for patients who may be schizophrenic, severely depressed, suicidal, homicidal, manic, extremely paranoid, delusionary, combative, or violent. Def. Facts ¶¶ 7, 8. The inpatient units are divided into three program groups, which include the general psychiatric unit with a capacity for twenty patients and the geriatric unit with a capacity for fourteen patients over the age of fifty-five. Id. ¶ 7. These patients receive intensive daily therapy, with a duration of five to ten days. Id. ¶ 9. This intensive daily therapy, referred to as Milicu Therapy, is a highly structured, twenty-four hours per day treatment, requiring a safe, therapeutic environment and continuous care. Id. The methods of therapy include group psychotherapy, reminiscing therapy, social skill development, gender group therapy, medication education, disease education, and relaxation therapy. Id.
The intensive nature of the therapy and the volatile mental state of the patients in the inpatient units require a minimum amount of visiting hours, which Ingalls strictly observes. Id. ¶ 10. Normal visiting hours are no longer than one or two hours, depending on the type of patient, and holiday visiting hours are five-and-a-half hours long; both normal and holiday visiting hours are at set times. Id. ¶¶ 11-12. Visitors are permitted outside those set times only upon admission or an attending physician's order. Id. ¶ 13. Patients must give permission to visitors to enter the inpatient unit, but a treating physician may deny that permission if receiving visitors may be detrimental to a patient's continued recovery. Id. ¶ 10. No patient may receive more than two visitors at once. Id. Strict observation of these restrictions is crucial to the success of the inpatients' treatments because of the brevity and intensity of the treatment plans and the sensitivity of the patients. Id. ¶¶ 14-15.
Those severely mentally ill patients that require inpatient treatments are extremely distrustful of everyone, necessitating an environment where patients feel secure. Id. ¶ 15. Losing a sense of security may result in a patient becoming unresponsive to therapy or violent toward others. Id. ¶ 16. Additionally, even the more stable patients desire privacy with regard to their treatment for mental illness, fearing the *1092 stigma of being considered mentally ill. Id. ¶ 17.
D. INGALLS'S POLICY FOR VISITS BY LAW ENFORCEMENT AND REGULATORY AGENCIES
Because the presence of strangers in the inpatient unit is inevitable, Ingalls has attempted to protect its patients' privacy by instituting procedures to be followed when a law enforcement officer requires entry into the facility. Id. ¶ 19. When a law enforcement officer arrives, the patient area is notified by telephone first, and the Clinical Supervisor or the Director is immediately notified second. Def. Resp. to Mot., Ex. 5. If the patient whom the officer seeks to interview cannot be interviewed in the main lobby, then the officer is escorted to the patient's room. Id. Ingalls considers it vital that professional staff facilitate or intervene when a patient interacts with an officer. Id.; Def. Facts ¶ 19.
In addition to visits by police officers, Ingalls is frequented by other monitoring agencies, such as the Illinois Guardianship and Advocacy Commission, the Illinois Department of Public Health, the Joint Commission on Accreditation of Health Organizations, and the Center for Medicare and Medicaid Services. Def. Facts ¶¶ 23-25. None of these agencies visit Ingalls unaccompanied, unannounced, or outside regular business hours. Id.
EFE now demands "unaccompanied access to the facilities, residents and employees at Ingalls Hospital without advanced notice and at any reasonable time during and after business hours." Compl. at 7.
II. SUMMARY JUDGMENT STANDARD
Summary judgment is proper "if the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c); Sinkler v. Midwest Prop. Mgmt. Ltd. P'ship, 209 F.3d 678, 682-83 (7th Cir.2000). A genuine issue of material fact exists for trial when, in viewing the record and all reasonable inferences drawn from it in a light most favorable to the non-movant, a reasonable jury could return a verdict for the non-movant. Sinkler, 209 F.3d at 683; Eiland v. Trinity Hosp., 150 F.3d 747, 750 (7th Cir.1998).
The movant bears the burden of establishing that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986); Hedberg v. Ind. Bell Tel. Co., 47 F.3d 928, 931 (7th Cir.1995). If the movant meets this burden, the non-movant must set forth specific facts that demonstrate the existence of a genuine issue for trial. Fed.R.Civ.P. 56(c); Celotex, 477 U.S. at 324, 106 S. Ct. 2548. Federal Rule of Civil Procedure 56(c) mandates the entry of summary judgment against a party "who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex, 477 U.S. at 322, 106 S. Ct. 2548. A fragment of evidence in support of the non-movant's position is insufficient to successfully oppose a summary judgment motion; "there must be evidence on which the jury could reasonably find for the [non-movant]." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). This burden must be met by appropriate citations to relevant evidence and cannot be met with conclusory statements or speculation. Brasic v. Heinemann's Inc., 121 F.3d 281, 286 (7th Cir.1997). Weighing evidence, deciding credibility, and inferring reasonable deductions are responsibilities for a jury and not for a judge to decide in making a *1093 summary judgment determination. Anderson, 477 U.S. at 255, 106 S. Ct. 2505.
III. JURISDICTION
This Court has jurisdiction to hear this action pursuant to 28 U.S.C. § 1331 because this action does arise under the federal PAIMI Act. Plaintiff alleges that Defendant is in violation of the act by prohibiting Plaintiff from accessing Defendant's facilities, patients, and employees. Furthermore, Plaintiff has standing in this case because it seeks to establish that Defendant's actions are causing injury to the P & A System itself. Doe v. Stincer, 175 F.3d 879, 884 (11th Cir.1999) (citing Ala. Disabilities Advocacy Program v. J.S. Tarwater Developmental Ctr., 97 F.3d 492 (11th Cir.1996)).
IV. DISCUSSION
This case presents the following issues: (1) whether EFE's access to the inpatient unit at Ingalls requires it to have a court order, to be part of an investigation, or to be in response to a patient complaint; (2) whether allowing EFE unaccompanied and unannounced twenty-four hour access into the inpatient facilities at Ingalls constitutes "reasonable access" under the federal and state statutes that govern P & A systems, where EFE neither has received a patient complaint nor has probable cause that abuse has occurred; and (3) what constitutes "reasonable access." EFE argues that it has the authority to gain unaccompanied and unannounced access to the facilities, residents, and employees of Ingalls at any reasonable time during and after business hours. Compl. at 7. Ingalls now recognizes EFE's right to access its inpatient facilities, but argues that "reasonable access" means that the access must be in the least intrusive manner possible. Def. Resp. to Pl.'s Mot. for Summ. J. at 11 [hereinafter Def. Resp. to Mot.]. The proper resolution of this issue begins with an exploration of the source and purpose of EFE's authority.
A. STATUTORY AND REGULATORY BACKGROUND
1. The Purpose of the P & A System
The P & A system is a creation of three federal statutes: the Protection and Advocacy for Developmental Disabilities Act, 42 U.S.C. § 15043, the Protection and Advocacy for Individuals with Mental Illness Act, 42 U.S.C. § 10801, et seq., and the Protection and Advocacy for Individual Rights Act, 29 U.S.C. § 794c, et seq. Additionally, Congress enacted the Developmental Disabilities Assistance and Bill of Rights ("DDABR") Act, 42 U.S.C. § 6000, et seq., to protect the human and civil rights of those with developmental disabilities because inhumane and despicable conditions had been discovered at New York's Willowbrook State School for persons with developmental disabilities. Ala. Disabilities Advocacy Program v. J.S. Tarwater Developmental Ctr., 97 F.3d 492, 494 (11th Cir.1996); Wisconsin Coalition for Advocacy, Inc. v. Czaplewski, 131 F. Supp. 2d 1039, 1045 (E.D.Wis.2001). Similar concerns were the impetus for the enactment of the federal PAIMI Act of 1986, wherein Congress recognized that "individuals with mental illness are vulnerable to abuse and serious injury." 42 U.S.C. § 10801(a)(1); Czaplewski, 131 F.Supp.2d at 1045. The purpose of the federal PAIMI Act is "to ensure that the rights of individuals with mental illness are protected" and "to assist States to establish and operate a protection and advocacy system for individuals with mental illness which will ... protect and advocate the rights of such individuals through activities to ensure the enforcement of the Constitution and Federal and State statutes...." 42 U.S.C. § 10801(b)(1), (2)(A).
*1094 2. Access Authority Granted by the Federal and State Statutes
The federal PAIMI Act gives "[a] system established in a State ... to protect and advocate the rights of individuals with mental illness ... the authority to ... pursue administrative, legal, and other appropriate remedies to ensure the protection of individuals with mental illness who are receiving care or treatment in the State." Id. § 10805(a)(1)(B). Pursuant to the federal PAIMI Act, a P & A system is "independent of any agency in the State which provides treatment or services (other than advocacy services) to individuals with mental illness" and shall "have access to facilities in the State providing care or treatment." Id. § 10805(a)(2), (3) (emphasis added). "Access" is not defined in the statute.
Congress supplemented the authority granted to a P & A system by the federal PAIMI Act when it enacted the Protection and Advocacy of Individual Rights ("PAIR") Act in 1992. 29 U.S.C. § 794e, which authorizes P & A systems to serve those persons with disabilities who are ineligible for services under pre-existing P & A legislation, including the federal PAIMI Act. Doe v. Stincer, 175 F.3d 879, 883 (11th Cir.1999).
Pursuant to these acts, a state cannot receive federal funds for services to persons with disabilities or mental illnesses unless it has established a P & A system. See, e.g., 42 U.S.C. § 10803. Given this federal mandate, the State of Illinois enacted the Protection and Advocacy for Mentally Ill Persons Act of 1987. 405 ILCS 45/1, et seq. The Illinois PAMIP Act empowered the Governor of Illinois to "designate an agency to administer the protection and advocacy system for mentally ill persons, pursuant to the federal [PAIMI Act]." Id. § 45/1. The Illinois PAMIP Act granted to the P & A system
access to all mental health facilities ... providing care or treatment to mentally ill persons. Such access shall be granted for the purposes of meeting with residents and staff, informing them of services available from the agency, distributing written information about the agency and the rights of persons who are mentally ill, conducting scheduled and unscheduled visits, and performing other activities designed to protect the rights of mentally ill persons.
Id. § 45/3. Pursuant to these provisions, Protection and Advocacy, Inc., a not-for-profit corporation, was granted the authority to protect and advocate on behalf of the mentally ill residing in Illinois. Protection & Advocacy, Inc. v. Murphy, No. 90 C 569, 1992 WL 59100, at *1, 9-10 (N.D.Ill. Mar. 16, 1992). EFE has succeeded Protection and Advocacy, Inc., in this role.
3. Access Authority Granted by the United States Code of Federal Regulations
The authority of any P & A system, including EFE, is also governed by Chapter I of Title 42 of the Code of Federal Regulations ("CFR"), adopted by the Department of Health and Human Services. A P & A system has three primary functions: to investigate, to educate, and to monitor. See Iowa Protection & Advocacy Services, Inc. v. Gerard Treatment Programs, L.L.C., 152 F. Supp. 2d 1150, 1169 (N.D.Iowa 2001).
a. Access Authority for Investigatory Purposes
In order to investigate incidents of abuse or neglect when a P & A either receives a complaint or has probable cause to believe that such incidents have occurred, the CFR grants a P & A system the authority to have "reasonable unaccompanied access" to residents and employees of a facility. 42 C.F.R. *1095 § 51.42(b)(1)-(2). The scope of access granted to a P & A system for the purpose of executing its investigative function has been interpreted as being broad. See, e.g., Gerard Treatment Programs, L.L.C., 152 F.Supp.2d at 1159 (noting that a P & A system determines when probable cause exists, and access cannot be denied because a facility disagrees with the determination); J.S. Tarwater Developmental Ctr., 97 F.3d at 497 (noting the "broad remedial framework" of the federal PAIMI Act). This issue is not involved in this case because EFE does not seek access based on a complaint or because it has probable cause.
More specifically, not at issue in this case are instances where a P & A system requests access as a result of an investigation, a reported incident, a complaint, the existence of probable cause of abuse, or the existence of imminent danger of serious abuse or neglect. This Court recognizes that a P & A system has broad access to patients and facilities under those circumstances, but it is not necessary to decide the limits of that access, if any. Additionally, access to records is not at issue in this case. Access to records is governed by 42 C.F.R. § 51.41, and the issue of access to records is not currently before the court.
b. Access Authority for Non-Investigatory Purposes
The focus of this case is to what extent a P & A system should be permitted access to a facility that treats mentally ill persons and the patients therein when circumstances that trigger an investigation are not present. The scope of access granted to a P & A system for the purpose of executing its educational and monitoring functions is governed by the statutes and the regulations.
A P & A system is charged with educating patients and caretakers about the rights and needs of individuals with mental illnesses. See 42 C.F.R. § 51.42(c)(1). The system also must monitor compliance with respect to patients' rights and safety. Id. § 51.42(c)(3). Although a P & A system is entitled to the full panoply of access, the extent of that access under each one of these circumstances must be reasonable. Id. § 51.42(c).
Title 42 of the CFR grants a P & A system the following access to facilities and residents:
(a) Access to facilities and residents shall be extended to all authorized agents of a P & A system.
(b) A P & A system shall have reasonable unaccompanied access to public and private facilities and programs in the State which render [sic] care or treatment for individuals with mental illness, and to all areas of the facility which are used by residents or are accessible to residents....
. . . . .
(c) In addition to access as prescribed in paragraph (b) of this section, a P & A system shall have reasonable unaccompanied access to facilities including all areas which are used by residents, are accessible to residents, and to programs and their residents at reasonable times, which at a minimum shall include normal working hours and visiting hours.... P & A activities shall be conducted so as to minimize interference with facility programs, respect residents' privacy interests, and honor a resident's request to terminate an interview. This access is for the purpose of:
(1) Providing information and training on, and referral to programs addressing the needs of individuals with mental illness, and information and training about individual rights and the protection and advocacy services available from the P & *1096 A system, including the name, address, and telephone number of the P & A system.
(2) Monitoring compliance with respect to the rights and safety of residents; and
(3) Inspecting, viewing and photographing all areas of the facility which are used by residents or are accessible to residents.
(d) Unaccompanied access to residents shall include the opportunity to meet and communicate privately with individuals regularly, both formally and informally, by telephone, mail and in person. Residents include minors or adults who have legal guardians or conservators.
(e) The right of access specified in paragraph (c) of this section shall apply despite the existence of any State or local laws or regulations which restrict informal access to minors and adults with legal guardians or conservators. The system shall make every effort to ensure that the parents of minors or guardians of individuals in the care of a facility are informed that the system will be monitoring activities at the facility and may in the course of such monitoring have access to the minor or adult with a legal guardian.
42 C.F.R. § 51.42(a)-(e) (emphasis added). The CFR also restricts EFE by requiring that it keep information confidential:
(a) Records maintained by the P & A system are the property of the P & A system which must protect them from loss, damage, tampering or use by unauthorized individuals. The P & A system must:
(1) Except as provided elsewhere in this section, keep confidential all records and information, including information contained in any automated electronic database pertaining to:
(i) Clients to the same extent as is required under Federal or State laws for a provider of mental health services;
(2) Have written policies governing access to, storage of, duplication and release of information from client records....
42 C.F.R. § 51.45(a)(1)-(2) (emphasis added). Therefore, a P & A system never should be prohibited from accessing a facility because of concerns about patient privacy.
B. ACCESS, GENERALLY
Although neither the statute nor the regulations define "access," the statutory and regulatory language clearly and unambiguously gives a P & A system the authority to access the facilities and the residents of a hospital. A P & A system is granted access to the facilities and the residents of a hospital under § 10805(a)(3) of the PAIMI Act, § 45/3(B) of the Illinois PAMIP Act, and 42 CFR § 51.42(a). These sections do not qualify the term "access." This omission by the bodies that promulgated the statutes and regulations is telling: A facility, such as Ingalls, cannot deny a P & A system, such as EFE, access to its facilities and residents, especially when that access is accompanied access.
The regulations set forth the minimum requirements for access and mandate that unaccompanied access be reasonable. Pursuant to the regulations, EFE has the right of reasonable access to Ingalls's facilities at reasonable times when EFE seeks to monitor compliance regarding patients' rights and safety, to inspect, view, and photograph a facility's patient areas, and to educate or inform staff and patients of its services. Unaccompanied access, at a minimum, must include normal working and visiting hours. At oral argument, Ingalls appears to now *1097 accept these basic precepts. The issue in this case, therefore, becomes whether the scope of the access requested by EFE is "reasonable access" at "reasonable times."
C. CASE LAW INTERPRETATION OF "REASONABLE ACCESS" AT "REASONABLE TIMES"
Although Ingalls refused to permit EFE access to its inpatient units because it believed EFE lacked legal authority to enter, Ingalls now raises practical concerns as its objections to EFE's demand for unannounced and unaccompanied access to the inpatient units at Ingalls. These practical concerns are important and must be balanced against EFE's right of access in order to determine what is "reasonable access," even though Ingalls's initial reasons completely lacked legal foundation and this Court finds that Ingalls has back-pedaled into its current objections to granting EFE full access. Indeed, the term "unaccompanied access" is modified by the term "reasonable" in the regulations, and the regulations require EFE's activities to minimize interference with the programs at Ingalls and to respect the patients' privacy interests. 42 C.F.R. § 51.42(c). Because there are no cases in this Circuit to assist this Court's decision as to what constitutes "reasonable access" to patients, programs, and facilities, this Court must look for guidance to the few other districts that have addressed this issue. Generally, those courts have found restrictions on access to patients to be more reasonable than restrictions on access to facilities.
In Robbins v. Budke, 739 F. Supp. 1479 (D.N.M.1990), the court balanced a P & A's right to access a medical center with the effect of that access upon the patients' care and therapeutic treatment, and it found that a hospital cannot require advance notice and accompanied tours of its facilities. In Robbins, the Protection and Advocacy System of New Mexico ("NMP & A") requested a permanent injunction against the Las Vegas Medical Center ("LVMC") after LVMC refused to permit NMP & A unlimited twenty-four hour access to its facilities and patients. Id. at 1480-82. To protect its autonomy and its patients' privacy, LVMC required NMP & A to either receive its written authorization or have a complaint before accessing its patients or facilities; it required NMP & A to identify a patient by name and show authorization before meeting that patient; and it required patients to sign request forms before speaking with NMP & A. Id. at 1482, 1484, 1486. LVMC further limited NMP & A's access to its patients by requiring "reasonable advanced notice," restricting access to certain patients for "good cause," and allowing visits only during regular business hours with LVMC staff present in a location determined by LVMC. Id. at 1482.
The court in Robbins found that the policies and practices of LVMC violated NMP & A's statutory right of access and thwarted the purpose of the federal PAIMI Act because they negatively affected NMP & A's daily communications with the patients. Id. at 1485, 1487. The court reasoned that mentally ill patients are unable to recognize a violation of their rights, unwilling to complain to a LVMC staff member, unwilling to initiate contact with a complete stranger, and incapable of understanding that a P & A system is their resource or that they have access to a P & A's address or phone number. Id. at 1487. A P & A system must be allowed to informally educate all mentally ill patients and should be permitted to informally discuss issues with patients and answer patients' questions. Id.
Although the mentally ill warrant special consideration, the court found that unlimited twenty-four hour access to LVMC was unnecessary to accomplish the purpose of *1098 the federal PAIMI Act. Id. (citing Doe v. Gallinot, 657 F.2d 1017, 1022-23 n. 7 (9th Cir.1981), for the proposition that the mentally ill warrant special consideration). Additionally, the court found that twenty-four hour notice to speak with a patient is reasonable, absent the absolute necessity for a sooner meeting. Id. On the other hand, LVMC's requirement that tours of the facility be announced and accompanied "seriously hindered" NMP & A's ability to even observe the facilities. Id.
Finally, the court found that LVMC had not shown that NMP & A's unlimited access was harmful to the patients and that LVMC's concern for the patients' privacy was unwarranted because the federal PAIMI Act requires a P & A system to maintain the confidentiality of patients' records to the same extent as required by the care provider. Id. at 1488. As a result, the court ordered LVMC to permit NMP & A to "visit any building, residential unit or facility during regular business hours for informal visits with clients or for observation or monitoring purposes." Id. at 1489.
Similarly, in Michigan Protection & Advocacy Service, Inc. v. Miller, 849 F. Supp. 1202, 1204, 1209 (W.D.Mich.1994), the court granted summary judgment in favor of a P & A system after examining the federal statutes "in conjunction with the practical factors affecting access" to facilities for mentally ill minors. In Miller, the Michigan Protection and Advocacy Service, Inc. ("MPAS"), claimed that the Michigan Department of Social Services ("DSS") violated the federal PAIMI Act by failing to provide reasonable access to its facilities. Id. at 1204. To protect visitor's safety, to avoid disrupting educational and rehabilitative programs, and to protect patients' privacy, DSS permitted access only if a minor was a MPAS client or if MPAS had received a complaint regarding a minor. Id. MPAS demanded greater access but did not specify to what extent it sought access.
After thoroughly examining the authority granted to MPAS under the federal statutes, the court considered the practical concerns affecting access to the DSS facilities. Id. at 1206-08. The court found that the policy denying MPAS full access defeated the purpose of the federal PAIMI Act. Id. at 1207. Nonetheless, the court looked for evidence of "substantial interference" with DSS programs, potential violations of patients' privacy rights, and threats to visitor's safety, stating that DSS's "practical concerns are important and must be considered in shaping the parameters of access to DSS facilities." Id. at 1208.
The court, however, found no evidence that the access requested by MPAS would "substantially interfere" with DSS programs. Id. Implying that twenty-four hour access could "substantially interfere" with the programs, the court noted that MPAS was willing to schedule interviews with DSS residents in order to minimize interference with the patients' educational and rehabilitative programs. Id. Finally, the court found no evidence that greater access by MPAS would threaten the safety of visitors to DSS facilities. Id. Although noting that some restrictions were warranted to ensure visitors' safety, the court concluded that the current limitations on access were not the only methods to ensure safety. Id. Consequently, the court granted summary judgment in favor of MPAS, but it refused to decide the appropriate level of access to which MPAS was entitled under the federal acts and referred the matter to two Special Masters. Id. at 1209-10 (citing Fed.R.Civ.P. 53).
Consistent with the decisions in Robbins and Miller, in Pennsylvania Protection & Advocacy, Inc. v. Royer-Greaves School for the Blind, No. 98-3995, 1999 WL *1099 179797, at *11-12 (E.D.Pa. Mar. 24, 1999), the court granted summary judgment in favor of a P & A system to the extent that it may have unannounced access to facilities and granted summary judgment in favor of the defendant school to the extent that advance notice for access to patients was reasonable. In Royer-Greaves, Pennsylvania Protection & Advocacy, Inc. ("PP & A"), because of a suspicion of systemic neglect based upon several complaints and deficient reports, made one scheduled and one unscheduled visit to the facilities at the Royer-Greaves School for the Blind ("RG"), a non-profit entity that provided special education to multi-handicapped, mentally challenged blind students. Id. at *1. PP & A attempted two more unannounced site visits, requesting access to residents, facilities, and records, but RG refused these requests and insisted that PP & A first make an appointment. Id. *2. PP & A sued under the DDABR Act, which uses the same language as the federal PAIMI Act to grant P & A systems the authority to access facilities, seeking "unlimited access to RG during working and visiting hours without prior notice or appointment." Id. at *2-3. The court held that requiring PP & A to make an appointment twenty-four hours in advance of meeting with individual students was an appropriate restriction and that granting PP & A unannounced access to RG's facilities was reasonable. Id. at *11.
With regard to residents of a facility, the court acknowledged that a P & A system clearly has the right to "unaccompanied access to all residents of a facility at reasonable times, which at a minimum shall include normal working hours and visiting hours," but found that restrictions on access that avoid disruption of a patient's routine "inherently seem more reasonable than general access to a facility where there is reason to believe abuse or neglect is ongoing." Id. at *6. The court concluded that, given the students' disability and their important daily routine, it was reasonable for PP & A to make an appointment before seeing residents. Id. at *6. On the other hand, with regard to the facilities, the court concluded that requiring advanced notice of site visits was unreasonable because doing so would seriously hinder PP & A's ability to monitor the conditions to which the patients were subject. Id. at *6. Thus, PP & A could tour the facilities without prior notice. Id.
V. APPLICATION TO THE CASE AT BAR
EFE is entitled to access to the patients and the facilities at Ingalls for the purpose of performing its monitoring and educating functions, despite the lack of a court order, an investigation, or a complaint. The purposes of both the federal PAIMI Act and the Illinois PAMIP Act were thwarted in this case when Ingalls refused to grant EFE any access whatsoever to the inpatient units. Such inaction clearly violates both acts. EFE does not need a complaint or probable cause to enter into a facility or to talk to patients; its services include education and referral, as well as legal representation. The inaction of Ingalls in this case has reduced the authority of EFE to such a degree that it can offer the inpatients at Ingalls only a fraction of the services to which they are entitled under the acts. Cf. Miss. Protection & Advocacy Sys., Inc. v. Cotten, 929 F.2d 1054, 1059 (5th Cir.1991). Regardless, an appropriate balance must be met in this case, and this court finds that such a balance is reached more easily if distinctions are made between the right of access to facilities versus the right of access to patients, as well as between the right of access for monitoring purposes versus the right of access for educating purposes. Given these distinctions, the parties should be able to create their own protocol to reach the correct balance between EFE's *1100 right of access and Ingalls's concern for its patients' well-being.
A. RIGHT OF ACCESS TO FACILITIES VERSUS RIGHT OF ACCESS TO PATIENTS
It is appropriate to require more strict requirements for access to individual patients than to the facilities themselves. See Cotten, 929 F.2d at 1057, 1059 (affirming time and place restrictions on access as a means to minimize interference with programs); Royer-Greaves, 1999 WL 179797, at *6 (finding that "reasonable access includes general facility access without notice, and patient access with twenty-four hour notice"). For example, unaccompanied and unannounced access to facilities is reasonable, but such access does not necessarily constitute reasonable access to patients. Moreover, twenty-four hour access to facilities may be reasonable under strict conditions, but twenty-four hour access to patients generally is not reasonable.
Requiring some amount of notice and accompanied access to specific patients may be reasonable, and it is here that medical judgment plays its greatest role. The courts in Robbins, Miller, and Royer-Greaves appropriately balanced the practical concerns of the caretakers with the right to access of a P & A system because the practical concerns of the medical professionals who care for the patients a P & A system seeks to interview must be weighed in order to minimize interference with patients' treatment programs, to respect patients' privacy interests, and to provide security for everyone involved.
Moreover, there is no requirement in the regulations that patient visits be unannounced, and even though the Illinois PAMIP Act permits "unscheduled visits" it does not specifically state that those visits include meetings with patients. Furthermore, there is no specific regulation that either permits or prohibits a P & A system to photograph patients
In this case, EFE should be allowed unannounced and unaccompanied access to the inpatient units at Ingalls only where such visits will not substantially interfere with the treatment of the patients, who are extremely unstable, sometimes volatile, sensitive to the slightest change in their environment, and subject to intensive, highly structured, continuous care for days at a time. Ingalls's practical concerns, unlike those of the Miller defendant, are supported by its stringent preexisting policies regarding police and visitor contact with the patients. Thus, EFE ordinarily should not seek unannounced and unaccompanied twenty-four hour access to the inpatients at Ingalls, unless such access becomes necessary to accomplish its functions of monitoring or educating.
B. RIGHT OF ACCESS FOR MONITORING PURPOSES VERSUS RIGHT OF ACCESS FOR EDUCATING PURPOSES
A P & A system must be given the leeway to discover problems or potential problems at a facility and to raise its level of scrutiny to that of an investigator if necessary. Indeed, this Court shares many of the same concern as the Robbins court, especially that requiring tours of a facility to be announced and accompanied would seriously hinder a P & A system's ability to monitor the facility for compliance with the rights and safety of the patients and would thwart the purpose of the federal and state acts.
What is reasonable for the purpose of monitoring, however, may not be reasonable for the purpose of educating. In determining what is reasonable access for the function being exercised by a P & A system, the purpose of that *1101 function and its effect on the patients and their programs must strike an appropriate balance. For example, when a P & A system is exercising its monitoring function, it is reasonable for it to be more intrusive and invasive than when it is exercising its educational function. There is no absolute necessity for a P & A system to arrive unannounced in order to educate the patients and the staff on the patients' needs and rights. It is reasonable, therefore, to permit more limited access for the purpose of educating than for the purpose of monitoring, although a P & A system, at a minimum, always must have unaccompanied access at reasonable times during normal working hours and visiting hours to patients, programs, and facilities and all areas therein that are used by or accessible to residents.
1. Monitoring
When a P & A system is exercising its monitoring function, reasonable access includes unannounced access. When exercising this function, a P & A system may inspect, view, and photograph those areas to which it has access. Photographing patients under strict guidelines seems reasonable if a P & A system were exercising its monitoring function.
2. Educating
When a P & A system is exercising its educating function, reasonable access does not include unannounced access. Giving prior notice before accessing facilities and exercising this function is reasonable.
Under the state statute, a P & A system should be permitted to meet with a facility's staff and to make its literature available, either by posting it at designated areas or by placing it in conspicuous locations for patients to collect at their will. A P & A system also should be permitted unaccompanied access to patients and programs in order to educate patients of their rights and needs and to refer them to the services provided by the P & A system. Private meetings with patients are important to the success of the P & A system because it gives patients the opportunity to be candid about their experiences at the facility.
Although the educating function of a P & A system is an extremely important function, it is the function with the least amount of urgency and requires the least amount of surprise to be effective. Therefore, when exercising this function, deference should be given to the caretakers' medical judgments and security concerns.
C. THE PARTIES' DEVELOPMENT OF PROTOCOL
The difficulty in this case is determining the specific scope of access to which EFE is entitled, given Ingalls's concern that EFE's unaccompanied presence in the inpatient unit would be detrimental to the quality of care received by the patients at the hospital and would violate the patient's privacy rights under Illinois law. See Def. Facts ¶¶ 3, 5. To that end, this Court takes very favorable notice of the actions taken by the district court in Mississippi Protection & Advocacy System, Inc. v. Cotten, No. J87-0503(L), 1989 WL 224953 (S.D.Miss. Aug. 4, 1989).
In Cotten, the district court found the defendants' visitation policy to have violated the Developmental Disabilities Act by imposing a litany of unreasonable restrictions upon a P & A system's right to access its facilities and patients. Id. at *9. As a result, the district court entered the following order:
Defendants shall submit within thirty days a proposed order outlining a revised policy for [plaintiff's] access to [the facility]. Such policy should provide for regular and frequent opportunities for [plaintiff] to visit [the facility] and speak *1102 with residents in private on an informal basis. While it is not required that [plaintiff] have access to all parts of the facility at all times, provision must be made for reasonable and frequent access to all residents. Only in this way can [plaintiff] provide [the facility's] residents with meaningful information about their rights and the services available to them. The policy should also provide that if an incident of abuse and neglect is reported to [plaintiff] or if [plaintiff] has probable cause to believe it has occurred, [plaintiff] will have reasonable and prompt access to the ... facility and to all potential witnesses of the abuse or neglect.
Id. at *9. When the defendants failed to comply with the order, the district court entered a permanent injunction that relieved the plaintiff of most of the restriction imposed by the defendants. Miss. Protection & Advocacy System, Inc. v. Cotten, 929 F.2d 1054, 1057 (5th Cir.1991).
This Court likewise orders EFE and Ingalls to meet and prepare a protocol with respect to situations in which EFE requests access but lacks a court order, a complaint, or an investigation. Furthermore, this Court strongly encourages EFE to develop a standard protocol that will govern to what extent it will request initial access to a facility and to distribute the protocol to facilities within Illinois. In the end, the parties in this case have the same interests in mindthe best interests of the patientsand should work together to serve those common interests. Those common interests are best served by adhering to the principles as set forth in this opinion.
VI. CONCLUSION
For the foregoing reasons, this Court holds that as a matter of law, Ingalls's complete refusal to allow EFE to access its inpatient units is in violation of both the federal PAIMI Act and the Illinois PAMIP Act. As a matter of law, EFE is entitled to reasonable unaccompanied access to the inpatient units and the outpatient units at Ingalls, as well as the patients and programs therein, during, at a minimum, normal working hours and visiting hours. EFE is not entitled to judgment as a matter of law on the issue of whether it is entitled to unaccompanied and unannounced twenty-four hour access to the inpatient units and the outpatient units at Ingalls, as well as the patients and programs therein, absent a complaint or probable cause. The Plaintiff's motion for summary judgment is therefore granted in part and denied in part. The parties are required to meet and to develop a protocol consistent with this opinion for presentation within thirty-five (35) days. Declaratory judgment, therefore, is entered against Ingalls, and Ingalls is hereby permanently enjoined from denying EFE reasonable access to its inpatient units located at the Wyman Gordon Pavilion as set forth in this opinion. This Court retains jurisdiction to enforce the injunction.
NOTES
[1] The Court notes that the impetus for EFE's requests may have been a Human Rights Authority investigation into an alleged restraint violation. See Pl.'s Mot., Ex. H, at 63-69. Regardless, EFE did not express that it desired access in order to exercise its investigative function. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2623083/ | 175 P.3d 333 (2007)
2008-NMCA-004
STATE of New Mexico, Plaintiff-Appellant,
v.
Edward McNEAL, Defendant-Appellee.
No. 26,158.
Court of Appeals of New Mexico.
November 19, 2007.
*334 Gary K. King, Attorney General, Santa Fe, NM, James W. Grayson, Assistant Attorney General, Albuquerque, NM, for Appellant.
John Bigelow, Chief Public Defender, Vicki W. Zelle, Assistant Appellate Defender, Santa Fe, NM, for Appellee.
OPINION
BUSTAMANTE, Judge.
{1} This matter comes before the Court on the State's interlocutory appeal from an order granting in part Defendant Edward McNeal's motion to suppress statements and physical evidence. See NMSA 1978, § 39-3-3(B)(2) (1972) (permitting the State to take an interlocutory appeal from an order granting a defendant's motion to suppress). In the district court, Defendant moved to suppress three types of evidence relevant to this appeal: (1) a duffel bag and its contents, (2) a shaving kit and its contents, and (3) statements he and his daughter made to the police. The district court denied his motion as to the duffel bag and granted it as to the shaving kit and the statements, believing these to be the fruit of a violation of Defendant's rights pursuant to Miranda v. Arizona, 384 U.S. 436, 86 S. Ct. 1602, 16 L. Ed. 2d 694 (1966). The State appeals from that portion of the order suppressing the shaving kit and the statements.
{2} In support of the district court's order, Defendant offers several alternative grounds for affirmance, including an argument that the evidence was properly suppressed since it is the fruit of the illegal search of his duffel bag. As noted above, the district court already rejected the argument that the search of the duffel bag was illegal. The State argues that because under Section 39-3-3, Defendant has no right at this stage in the proceedings to appeal the denial of his motion as to the duffel bag, Defendant cannot rely on this argument as a means to affirm the suppression of the shaving kit and the statements. As we may affirm the district court if it is right for any reason, we affirm because the search of the duffel bag violated Defendant's Fourth Amendment rights and hold that the contents of the shaving kit and the statements were rightly suppressed as the fruits of that violation.
BACKGROUND
{3} Defendant was a passenger on a Greyhound bus that had stopped in Albuquerque for servicing and to pick up additional passengers. As Defendant and the other continuing passengers waited for the Albuquerque passengers to board, two Drug Enforcement Administration agents, James Flores and Mark Hyland, got on the bus. The agents were assigned to a full-time interdiction group that regularly boarded Greyhound buses to investigate narcotics trafficking. The agents had no information that there were any drugs on this particular bus; nor did they have any information that would lead them to suspect that any of its passengers were trafficking in drugs. Their intent was to engage in consensual encounters with the passengers by asking them to identify their bags and, in some cases, for consent to search the bags for narcotics, weapons, and large sums of cash.
{4} Agents Flores and Hyland walked to the back of the bus. Agent Hyland stood near the restroom, facing the front of the bus. Agent Flores began to walk from the back of the bus towards the front, asking passengers to identify their bags. When Agent Flores spoke to passengers, he typically said "This is [the] police, . . . can you identify any baggage that you may have on the bus?" or "Do you have any carry-on on the bus?" or "Police, can you identify any carry-on luggage?" Agent Flores testified that because the encounter was consensual, it was his understanding that the people on the bus had the right not to respond to his inquiries.
{5} At the end of Agent Flores's walk toward the front of the bus, there was a single bag that had not been identified by *335 any passenger. It was a Phoenix Suns duffel bag that was in the overhead bin one or two seats in front of Defendant. Agent Flores could not remember whether he simply grabbed the bag and removed it from the bus, or whether he asked people in the immediate area if it belonged to them. No one protested or otherwise attempted to claim the bag as Agent Flores removed it from the bus. Outside, Agent Flores opened the bag and found five ounces of crack cocaine, a Denver Broncos knit cap, a cell phone charger, and an electric razor charger, among other things.
{6} When Agent Flores got back on the bus, he noticed that Defendant, who was sitting close to where the bag had been, was wearing a Denver Broncos baseball cap. Based on Defendant's proximity to the former location of the duffel bag and the matching hats, Agent Flores asked if Defendant had a cell phone. Defendant said he did and produced the phone, which matched the charger found in the duffel bag. Agent Flores then asked Defendant to step off the bus. As Defendant and Agent Flores were leaving the bus, Agent Flores asked where Defendant was traveling from and to see Defendant's ticket. Defendant said he had been visiting his daughter in Phoenix, Arizona, and showed Agent Flores his ticket, which was under a name that was not his. Agent Flores asked for Defendant's daughter's phone number so he could verify Defendant's story about where he had been.
{7} Now off of the bus, Agent Flores asked Agent William Dorian, a narcotics agent with the New Mexico State Police who was also at the scene, to watch Defendant and the duffel bag while he called Defendant's daughter. As Agent Flores was speaking with Defendant's daughter, Agent Dorian asked if Defendant had any other luggage, and Defendant told him he had a shaving kit on the bus. Together, Agent Dorian and Defendant got back on the bus and retrieved Defendant's shaving kit. Defendant consented to a search of the kit, and Agent Dorian found an electric razor that matched the charger in the duffel bag. Agent Dorian told Defendant to step off the bus, and Agent Hyland, who had remained on the bus during these events, followed. Defendant's daughter provided information that was contrary to what Defendant had told the agents about his travels. Based on these facts, Defendant was formally arrested.
{8} Prior to trial, Defendant moved to suppress the duffel bag and its contents, arguing that the bag was searched without a warrant in violation of his rights under the Fourth Amendment to the United States Constitution and under article II, section 10 of the New Mexico Constitution. He moved to suppress his statements to the police on the ground that he was not apprised of his Miranda rights when he was seized, and to suppress his daughter's statements and the shaving kit and its contents as the fruits of the Miranda violation. The district court denied the motion as to the Phoenix Suns duffel bag, concluding that Defendant had abandoned the bag, such that the agents could lawfully search it. The district court granted the motion as to Defendant's statements, his daughter's statements, and the shaving kit and its contents. The State appeals from the order suppressing Defendant's statements, his daughter's statements, and the shaving kit and its contents, arguing that the district court applied the wrong legal standard, since a seizure for Fourth Amendment purposes does not necessarily give rise to a defendant's Fifth Amendment right to Miranda warnings.
DISCUSSION
Standard of Review
{9} We review a suppression ruling to determine whether the district court correctly applied the law to the facts, viewing them in the manner most favorable to the prevailing party. State v. Harbison, 2007-NMSC-016, ¶ 8, 141 N.M. 392, 156 P.3d 30. Factual determinations are subject to a substantial evidence standard of review and application of law to the facts is subject to de novo review. Id.
The District Court's Suppression Order
{10} The State argues that the district court erred both in its determination that Miranda warnings were required once Defendant was told to step off of the bus and in its determination that the failure to provide *336 such warnings required suppression not only of Defendant's statements, but of the fruits of those statements as well. We believe that the district court erred in concluding that, because Defendant was seized without moreby the police when he was asked to step off the bus, he was entitled to Miranda warnings during the period between the request to leave the bus and Defendant's formal arrest. Miranda warnings are only required when a person is subject to an interrogation while in police custody. State v. Munoz, 1998-NMSC-048, ¶¶ 39-40, 126 N.M. 535, 972 P.2d 847. Custody is defined as either (1) a formal arrest, or (2) a "restraint on freedom of movement of the degree associated with a formal arrest." Yarborough v. Alvarado, 541 U.S. 652, 663, 124 S. Ct. 2140, 158 L. Ed. 2d 938 (2004) (internal quotation marks and citation omitted). Although a person is seized for Fourth Amendment purposes whenever an officer, "by means of physical force or show of authority, has in some way restrained the liberty of a citizen," Terry v. Ohio, 392 U.S. 1, 19 n. 16, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968), not all Fourth Amendment seizures rise to the level of "custody" for Fifth Amendment purposes, Berkemer v. McCarty, 468 U.S. 420, 436-42, 104 S. Ct. 3138, 82 L. Ed. 2d 317 (1984)(holding that questions asked during a traffic stop did not amount to custodial interrogation even though the defendant was seized for Fourth Amendment purposes and was not free to leave). See State v. Wilson, 2007-NMCA-111, ¶¶ 20-21, 142 N.M. 737, 169 P.3d 1184. Defendant cites no casesand we have found noneholding that the type and manner of questioning he was subjected to constitute a custodial interrogation. Therefore, we agree with the State that the district court applied the wrong legal standard when it concluded that. Defendant was entitled to Miranda warnings because Defendant was seized when he was taken from the bus.
We May Affirm the District Court if It Is Right for Any Reason
{11} Defendant argues that even if the district court based its decision on a flawed legal analysis, this Court should uphold the order suppressing the shaving kit and the statements if it was right for any reason. See State v. Gallegos, 2007-NMSC-007, ¶ 26, 141 N.M. 185, 152 P.3d 828 (stating that an appellate court will affirm a district court's decision if it is right for any reason, so long as it is not unfair to the appellant). Defendant argues that the initial encounter with the agents on the bus was not consensual and that Defendant was seized without reasonable suspicion once Agent Flores made it clear (by taking the unclaimed bag) that passengers had to choose between cooperating with his request to identify their luggage and having their luggage seized; that the search of the duffel bag violated his right to be free of unreasonable searches and seizures because his silence in the face of police questioning did not constitute abandonment of his bag; that the agents did not have reasonable suspicion to single him out for questioning after they opened the duffel bag just because he was near where the bag had been and was wearing a Denver Broncos cap; that when Agent Flores reboarded the bus to question him about his cell phone, the questioning was coercive such that his consent to produce his phone was involuntarily given; that his detention ripened into a de facto arrest without probable cause when he was asked to get off the bus; that his consent to search the shaving kit was involuntary; and that he was in fact in custody for Miranda purposes when he was questioned outside of the bus.
{12} Defendant's first two arguments in support of affirmance challenge the warrantless search of the duffel bag and would have this Court uphold the district court's order suppressing the shaving kit and the statements made by Defendant and his daughter as the fruits of the illegal search. However, as the State notes, the district court already ruled that the search of the duffel bag was valid, and Defendant does not have the right to appeal that ruling at this point in the proceedings. The New Mexico statute governing appeals from the district court in criminal cases permits the State to take an interlocutory appeal "from a decision or order of a district court suppressing or excluding evidence . . . if the district attorney certifies to the district court that the appeal is not *337 taken for purpose of delay and that the evidence is a substantial proof of a fact material in the proceeding." § 39-3-3(B)(2). No such right is given to a defendant who wishes to take an interlocutory appeal from an order denying a motion to suppress. See § 39-3-3(A). As the State notes, because Defendant has no right to appeal an order denying his motion to suppress until after a final disposition of his case, he had no right to a cross-appeal after the State appealed that portion of the order granting Defendant's motion. See, e.g., United States v. Valle Cruz, 452 F.3d 698, 705 (8th Cir.2006) (holding that under federal statute allowing government to appeal from an order granting a defendant's motion to suppress evidence, the defendant has no right to cross-appeal). Nevertheless, we cannot agree with the State's claim that because Defendant could not appeal or cross-appeal from the district court's order denying his motion to suppress, it necessarily follows that he cannot rely on the illegality of the search of the duffel bag as the basis for upholding the district court's order regarding the shaving kit and the statements.
{13} A defendant may raise any argument fairly presented by the record in support of a district court's suppression order. See, e.g., id. (holding that even where a defendant has no right to appeal from that portion of an order denying his motion to suppress, when the government appeals the portion that granted the motion, a defendant may raise any arguments for affirmance that are supported by the record); People v. Johnson, 208 Ill. 2d 118, 281 Ill. Dec. 38, 803 N.E.2d 442, 448-54 (2003) (same under Illinois law); State v. Rush, 174 Md.App. 259, 921 A.2d 334, 353-54 (Ct.Spec.App.2007) (same under Maryland law). Furthermore, this Court has permitted the State to rely on an argumentexpressly rejected by the district court that certain evidence below should not have been suppressed, in order to support its claim that the district court should be affirmed. See State v. Harris, 116 N.M. 234, 236-37, 861 P.2d 275, 277-78 (Ct. App.1993) (applying the right for any reason rule to permit the state to argue that the district court's refusal to suppress certain evidence should be affirmed because other evidence that the district court suppressed should have been admitted). Therefore, because Defendant expressly raised the argument below, we determine that he may properly rely on a claim that the duffel bag was illegally searched as the basis for urging this Court to affirm the suppression of the shaving kit and the statements made by Defendant and his daughter.
The Shaving Kit and the Statements Are the Fruits of the Illegal Search of the Duffel Bag
{14} The Fourth Amendment to the United States Constitution protects the "right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures." U.S. Const. amend. IV. Defendant argues that the conduct of the agents in getting on the bus and requiring passengers to respond to questions about their baggage amounted to either a temporary investigative seizure of his person without reasonable suspicion or, if he was not seized and was free to ignore Agent Flores's inquiries, then his refusal to respond to Agent Flores cannot be deemed an abandonment of his reasonable expectation of privacy in his bag. We agree that the conduct of the agents in this case violated Defendant's Fourth Amendment rights because Defendant's silence in the face of Agent Flores's inquiries cannot be deemed an abandonment of his privacy interest in his bag, and that the evidence suppressed by the district court was properly excluded as the fruit of the Fourth Amendment violation.
{15} As the Supreme Court has made clear, when the police are without reasonable suspicion to detain a passenger on a bus or to seize his luggage, the passenger is wholly at liberty to ignore police requests to answer questions or otherwise cooperate with the officers' drug interdiction efforts. See Florida v. Bostick, 501 U.S. 429, 435, 111 S. Ct. 2382, 115 L. Ed. 2d 389 (1991); see also Florida v. Royer, 460 U.S. 491, 497-98, 103 S. Ct. 1319, 75 L. Ed. 2d 229 (1983) (plurality opinion) (stating that when a person is approached by the police as part of drug interdiction efforts at an airport, the person "need not answer any question put to him; indeed, *338 he may decline to listen to the questions at all and may go on his way. . . . [h]e may not be detained even momentarily without reasonable, objective grounds for doing so; and his refusal to listen or answer does not, without more, furnish those grounds" (citations omitted)). This appears to be just what Defendant did in this case.
{16} The evidence at the hearing on Defendant's motion to suppress indicated that Agents Flores and Hyland got on the bus intending to have what the agents deemed to be a consensual encounter with the passengers. Agent Flores acknowledged that because he had no factual information that would support a reasonable suspicion that the bus or any of its passengers were carrying narcotics, the people on the bus had the right not to respond to his inquiries. Agent Flores did not testify as to whether Defendant answered him when he asked Defendant to identify his bags, or if so, what Defendant's answer was. Agent Hyland testified that he did not hear Defendant respond to Agent Flores's inquiries. Several courts have held that a refusal to comply with an officer's direction to identify bags on a bus does not constitute abandonment of the bags. See Stanberry v. State, 343 Md. 720, 684 A.2d 823, 832-35 (1996) (holding that police officers' belief that bag on a bus was abandoned based on silence in the face of their inquiries about its ownership was unreasonable where all passengers on the bus had a right to refuse to answer any questions about the bag); see also United States v. Garzon, 119 F.3d 1446, 1452-53 (10th Cir.1997) (holding that a defendant did not abandon the bags he left on the bus when all bus passengers were asked to take their bags off the bus and defendant got off with one of his bags, but left two of his bags on the bus); United States v. Cuevas-Ceja, 58 F. Supp. 2d 1175, 1190 (D.Or.1999) (holding that a defendant did not abandon her bag when she did not claim it when directed to do so by officers).
{17} We are aware that some courts have indicated that refusing to claim a bag when directed to do so by law enforcement constitutes abandonment, see, e.g., United States v. Fulani, 368 F.3d 351, 354 (3d Cir.2004) (stating that silence in the face of bus-wide questioning regarding ownership of a bag constitutes abandonment); Garzon, 119 F.3d at 1452 (noting in dictum that the failure to respond to a direct question from a police officer might be construed as a disclaimer of ownership). We believe that such a conclusion is in conflict not only with the Supreme Court's statements regarding a person's rights when interacting with a police officer who has no reason to believe that he has done anything illegal, but also with the general rule that abandonment for Fourth Amendment purposes must be shown by "clear, unequivocal and decisive evidence," see State v. Celusniak, 2004-NMCA-070, ¶ 26, 135 N.M. 728, 93 P.3d 10 (internal quotation marks and citation omitted).
{18} Courts have found unequivocal evidence of abandonment when a person expressly states that he is not the owner of a bag. See, e.g., United States v. Ojeda-Ramos, 455 F.3d 1178, 1187 (10th Cir.2006); see also State v. Villanueva, 110 N.M. 359, 365, 796 P.2d 252, 258 (Ct.App.1990) (holding that a defendant had no reasonable expectation of privacy in a bag when he expressly denied having any luggage on the bus). We have no such evidence here. Although both Agent Flores and Agent Hyland testified that Agent Flores asked everyone on the bus about his or her luggage, neither agent testified as to Defendant's response. Where the State presented no evidence that Defendant expressly disclaimed ownership of the duffel bag, and where Defendant had a constitutional right to refuse to respond at all, we find unreasonable the agents' conclusion that the duffel bag was abandoned.
{19} Because the contents of the shaving kit and the statements made by Defendant and his daughter were the fruits of the unlawful search of the bag, we affirm the district court's order suppressing this evidence. See Wong Sun v. United States, 371 U.S. 471, 484-88, 83 S. Ct. 407, 9 L. Ed. 2d 441 (1963) (holding that both statements and physical evidence can be suppressed as the fruit of a Fourth Amendment violation); State v. Monteleone, 2005-NMCA-129, ¶ 16, 138 N.M. 544, 123 P.3d 777 (holding that consent to search is the fruit of a Fourth Amendment violation if there is no break in *339 the causal chain between the illegality and the consent). As we affirm on this basis, we need not address Defendants remaining arguments in support of the order below.
CONCLUSION
{20} We hold that Defendant retained a reasonable expectation of privacy in his duffel bag and that the warrantless search of the bag violated his Fourth Amendment rights. Defendant's consent to search his shaving kit and the items found in the kit were the tainted fruits of the illegal search, as were the statements Defendant and his daughter made to the police. Consequently, we affirm the district court's order suppressing the shaving kit and the statements. Because Defendant had no right to appeal from the district court's denial of his motion to suppress the duffel bag and its contents, we do not reverse the district court's order as to that evidence. See Johnson, 208 Ill. 2d 118, 281 Ill. Dec. 38, 803 N.E.2d 442, 454-56 (holding that the court of appeals erred when it reversed an interlocutory suppression ruling that the defendant had no right to appeal). Instead, Defendant may renew his motion to suppress in the district court, which is bound by this Court's decision regarding the legality of the seizure and search of the duffel bag.
{21} IT IS SO ORDERED.
WE CONCUR: LYNN PICKARD and MICHAEL E. VIGIL, Judges. | 01-03-2023 | 11-01-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1385668/ | 178 Ga. App. 652 (1986)
344 S.E.2d 474
MACK
v.
SMITH et al.
71622.
Court of Appeals of Georgia.
Decided April 7, 1986.
Ronald M. Mack, pro se.
Marcus B. Calhoun, Jr., for appellees.
POPE, Judge.
Plaintiff/appellant Ronald M. Mack brought this action for damages against defendants/appellees Earl L. Smith and S & T Cordage Company. The basis of plaintiff's suit was the alleged violation of unspecified state and federal securities laws and fraud. Pursuant to OCGA § 9-11-12 (b) (6) defendants timely filed a pre-answer motion to dismiss. At the first scheduled hearing on the motion, plaintiff objected to proceeding on the ground that counsel for defendants had not filed an entry of appearance pursuant to Uniform Superior Court (USC) Rule 4.2. Plaintiff argued that defendants' motion was not a "pleading" which would suffice under the rule as an alternative to filing an entry of appearance form. The trial court directed counsel for defendants to file an entry of appearance form instanter and adjourned the hearing until the next day. On that day the trial court entertained defendants' motion to dismiss over plaintiff's objection that same was premature, having been filed prior to the entry of appearance, and subsequently ordered it be granted. Plaintiff brings this appeal pro se from the entry of that order.
1. We find as a matter of law, common practice, and common sense that defendant's pre-answer motion in this case is a "pleading" within the contemplation of USC Rule 4.2. This "pleading" contained all the information required by the rule to constitute an entry of appearance. See generally OCGA § 9-11-7 (b) (2). We thus find plaintiff's first two enumerations of error asserting non-compliance with the rule to be entirely devoid of merit.
2. The record affirmatively discloses that defendants' motion was in full compliance with statutory notice and time requirements. See OCGA §§ 9-11-6 (d) and 9-11-12 (b) and (d). Also, plaintiff has shown no prejudice in the trial court's entering its order before the expiration of the 30-day period allowed by USC Rule 6.2 for the filing of his brief in response to the motion. See Cel-Ko Bldrs. &c. v. BX Corp., 136 Ga. App. 777 (1) (222 SE2d 94) (1975). In any event, the record indicates that both parties appeared before the court and argued the motion without objection as to time. No complaint may now be made as to the timeliness of the hearing. See Connell v. Connell, 119 Ga. App. 485 (4) (167 SE2d 686) (1969).
3. We find plaintiff's argument that the trial court committed error by holding an oral hearing without a written request therefore pursuant to USC Rule 6.3 to be entirely specious. The notice of the motion to plaintiff indicated that it would be brought "for hearing" before the judge. In any event, as in the preceding division of this opinion, in the absence of an objection on this ground in the court below, this argument provides no basis for reversal on appeal.
*653 4. As to the merits of plaintiff's complaint, we adopt the holding of the trial court which found that "assuming for purposes of the Motion that all allegations of such Complaint as amended were true; and it appearing from the complaint as amended that Plaintiff made no purchase of the securities or investment contracts offered to him by Defendants, and that he therefore lacks standing to sue under OCGA § 10-5-14 (a) and it further appearing from the Complaint as amended that Plaintiff has [pled] no special damages and that said Complaint as amended discloses no invasion of Plaintiff's person or property by the Defendants which is legally sufficient to sustain an award of general or nominal damages, and that Plaintiff has therefore failed to state a claim for common law fraud upon which relief can be granted." As to plaintiff's fraud claim, see generally Foster v. Sikes, 202 Ga. 122 (42 SE2d 441) (1947). Plaintiff's lack of purchase of the securities or investment contracts here also deprives him of standing under federal securities laws. Blue Chips Stamps v. Manor Drug Stores, 421 U.S. 723 (95 S.E. 1917, 44 LE2d 539) (1975). On the basis of the record in the case at bar, the holdings of this court in Ackley v. Strickland, 173 Ga. App. 784 (328 SE2d 549) (1985), and Bradley v. Godwin, 152 Ga. App. 782 (3) (264 SE2d 262) (1979), do not require a result different from that reached by the trial court.
5. We find no reasonable basis for plaintiff to have anticipated reversal for any reason assigned by him on appeal. We thus find this appeal to be frivolous and impose a penalty of $500 upon plaintiff in favor of defendants pursuant to Court of Appeals Rule 26 (b). The trial court is directed to enter a judgment accordingly. See Blount v. Moore, 175 Ga. App. 288, 292 (333 SE2d 167) (1985); Sundance, Inc. v. Guy, 174 Ga. App. 792 (3) (331 SE2d 102) (1985); Payne v. Dixie Elec. Co., 174 Ga. App. 610, 611 (330 SE2d 749) (1985).
Judgment affirmed with penalty. McMurray, P. J., and Carley, J., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1534263/ | 415 B.R. 77 (2009)
In re LEHMAN BROTHERS HOLDINGS, INC., et al., Debtor.
Bay Harbour Management, L.C., et al., Appellants,
v.
Lehman Brothers Holdings Inc., et al., Appellees.
Nos. 08 Civ. 8869(DLC), 08 Civ. 8914(DLC).
United States District Court, S.D. New York.
March 13, 2009.
*78 David S. Rosner, Andrew K. Glenn, Ronald R. Rossi, Kasowitz, Benson, Torres & Friedman LLP, New York, NY, for Appellants.
Lindsee P. Granfield, Lisa M. Schweitzer, Cleary Gottlieb Steen & Hamilton LLP, New York, NY, for Appellee Barclays.
Harvey R. Miller, Michelle J. Meises, Weil, Gotshal & Manges LLP, New York, NY, for Appellee Lehman Brothers Holdings Inc.
James B. Kobak, Jr., David W. Wiltenburg, Sarah L. Cave, Jeffrey S. Margolin, Hughes Hubbard & Reed LLP, New York, NY, for Appellee James Giddens, SIPA Trustee.
OPINION & ORDER
DENISE COTE, District Judge.
This bankruptcy appeal arises out of the financial collapse of Lehman Brothers in 2008, when it was the fourth largest independent investment banking and financial services enterprise in the United States. Barclays Capital, Inc. ("Barclays") purchased certain divisions of Lehman Brothers within days of Lehman Brothers declaring bankruptcy on September 15, 2008. Bay Harbour Management, L.C., Bay Harbour Master, Ltd., Trophy Hunter Investments, Ltd., BHCO Master, Ltd., MSS Distressed & Opportunities 2, and Institutional *79 Benchmarks (collectively, "Appellants") appeal from the order approving the sale of Lehman's North American registered broker-dealer subsidiary Lehman Brothers International ("LBI") to Barclays "free and clear of liens and other interests" ("Sale Order"),[1] entered on September 20 by United States Bankruptcy Judge for the Southern District of New York James Peck. For the following reasons, the Sale Order is affirmed.
BACKGROUND
The debtors in this action are Lehman Brothers Holdings Inc. ("LBHI") and LB 745 LLC ("LB 745") (collectively, "Debtors"). LBHI is the parent corporation of the numerous subsidiaries and affiliates that constituted the global Lehman enterprise. Appellants are investment funds that maintained prime brokerage accounts with LBI and Lehman Brothers Inc. (Europe) ("LBIE"), Lehman's major European investment banking and capital markets subsidiary.[2]
Appellants challenge the Sale Order that governs Barclays's purchase of LBI's investment banking and capital markets operations and supporting infrastructure, including the Lehman headquarters building in Manhattan. Appellants speculate that they may have been harmed by an alleged transfer of funds that may have benefited Barclays. On this basis, they seek to revise a crucial term of the sale.[3] They contend that the bankruptcy court's expedited review of the proposed sale was so grievously flawed that it (1) deprived Appellants of their due process right to learn whether Barclays was a good faith purchaser of LBI and (2) did not provide an adequate basis for the bankruptcy court itself to conclude that the sale to Barclays should be approved free and clear of liabilities due to Barclays's status as a good faith purchaser. Appellants assert these rights even though any claims they may have to any transferred funds are entirely derivative of LBIE's claims, and LBIE supported the sale. The chronology of Lehman's bankruptcy and the relevant proceedings before the bankruptcy court are summarized here.
Lehman's Collapse and Bankruptcy Filing
After over 150 years as a leader in financial services, Lehman crumbled during a period of extraordinary distress in the U.S. financial markets. As Lehman faced constraints on its ability to borrow, it was forced to tap its own cash reserves to fund transactions and had difficulty operating its businesses. Lehman tried to save itself, first by searching for a buyer and then by asking for federal bailout funds. Neither course of action worked. On September 15, 2008, LBHI filed for bankruptcy; LB 745 followed suit the next day. Sale Procedures Hearing
By 7:00 a.m. on September 15, Barclays had already begun negotiating a purchase *80 of LBI. The following day, Barclays and LBHI executed an Asset Purchase Agreement setting out the terms of Barclays's proposed purchase of LBI's investment banking and capital markets businesses and supporting infrastructure for approximately $1.7 billion. On September 17, the Debtors filed with the bankruptcy court a motion to schedule an expedited sale hearing.
The bankruptcy court held a hearing on September 17 to consider the sale procedures. Debtors emphasized that time was of the essence because LBI was a "wasting asset." While Appellants objected, the Securities and Exchange Commission ("SEC"), the Federal Reserve Bank of New York ("Federal Reserve"),[4] and SIPC supported expedited review. At the hearing, LBHI's Chief Operating Officer Herbert McDade testified that if a sale were not approved by September 19, Lehman would likely disappear as a going concern. Although Fed. R. Bankr.P.2002(a)(2) prescribes a twenty-day notice period, the bankruptcy court found cause to shorten the notice period to two days. The court found that the Debtors' estates would suffer "immediate and irreparable harm" if preliminary relief were not granted "on an expedited basis."
In approving the expedited schedule, the bankruptcy court explicitly considered due process issues. It heard arguments that financial markets participants had known for months that Lehman's assets were for sale. It also took judicial notice of the fact that interested parties and spectators filled two courtrooms and overflow rooms for the hearing: "there's no question that parties-in-interest and parties who are just plain interested know about today's hearing." Acknowledging that the proposed sale was "an absolutely extraordinary transaction with extraordinary importance to the capital markets globally," the bankruptcy court scheduled the sale hearing for two days later, September 19. Given the circumstances, the bankruptcy court said that emailing, faxing, and overnight mailing of the notice of the motion and sale hearing to a number of specified entities would constitute "good and sufficient notice." The parties do not dispute that such notice was effected.
The court allowed interested parties to file written objections or make oral objections to the proposed sale any time up to the conclusion of the sale hearing. Over the next two days Debtors' counsel made themselves available to answer questions about the proposed sale on a twenty-four hour basis. At 3:00 p.m. on September 18, they hosted a conference for the purpose of soliciting questions. At no time before the sale hearing did Appellants attempt to take any discovery from Barclays.
Sale Hearing
On the afternoon of Friday, September 19, interested parties and spectators again filled Judge Peck's courtroom and two overflow courtrooms for the sale hearing, which lasted until early the next morning. Debtors offered testimony about the sale's urgency. LBHI COO McDade testified that the "state of affairs at Lehman Brothers Holdings Inc. and LBI is critical." If the sale did not close that day or over the weekend, according to McDade, "the effect on the broker-dealers business and on Lehman Holdings would be devastating."[5] Broker-dealer customers were threatening to take their business elsewhere. He *81 warned that a failure to consummate this sale might "ignite a panic in the financial condition" of the country.
Debtors also offered the testimony of Barry Ridings, head of capital markets at Lazard Frères & Co., who was retained by Lehman to provide advice about the sale. Ridings echoed McDade. He emphasized that time was of the essence, that no other party had shown interest in purchasing LBI, and that nothing would be left of Lehman if the sale were not approved quickly.
At the hearing, Debtors also explained the history of the sale process and course of negotiations. They noted that Lehman had looked for a purchaser months before filing for bankruptcy, but to no avail. Both McDade and Ridings testified that the terms of the post-bankruptcy sale of LBI had been negotiated "aggressively" and "at arm's length." In addition, Ridings testified that the transaction "served the best interest of the creditors, the public and the nation." According to the terms of the sale, Barclays assumed billions of dollars in liabilities, and paid over $1 billion in cash to the Debtors. In addition, customer accounts would be saved from being frozen indefinitely and 9,000 jobs would be saved for at least ninety days. The Federal Reserve, the SEC, and SIPC supported the sale, and the Official Creditors' Committee did not object to it.
Appellants attended and participated in this hearing. Parties were permitted to lodge objections and to clarify the terms of sale. Appellants' attorneys cross-examined McDadeother attorneys cross-examined Ridingson their understanding of the terms of the sale. Although Appellants now claim that it was difficult to hear the sale hearing proceedings, Appellants did not raise this concern during the hearing.
The Appellants objected to the sale on the ground that questions about the fate of so-called "Defalcated Funds" purportedly owed to LBIE precluded a finding that Barclays was a good faith purchaser. This issue had its genesis in the disclosure made by the Joint Administrators of LBIE on September 19.
The Joint Administrators of LBIE had taken over LBIE's operations pursuant to British insolvency laws and filed papers advising the bankruptcy court that a "preliminary investigation" had "revealed evidence of substantial transfers of securities out of LBIE which merit close investigation." Clients had been transferring their securities from Lehman to other prime brokers. Those securities that had been transferred from LBIE to LBI had already been transferred to a Lehman entity located in Luxembourg, and possibly from there to a new prime broker. As a result of the transfers of securities out of LBIE, it appeared that LBIE was owed $8 billion. These missing funds were referred to as the "Defalcated Funds."
As noted, on the basis of the Defalcated Funds issue, Appellants objected to the sale. Appellants claimed that it was possible that some of the assets being sold to Barclays derived from the Defalcated Funds. They speculated that the transfer of the Defalcated Funds might have been manipulated to prop up LBI for sale, or to fund Debtors' operations; or perhaps Barclays otherwise benefited from the transfer, or even caused the transfer. Appellants argued that these concerns cast doubt on whether Barclays was a purchaser in good faith. In addition, Appellants argued that the bankruptcy court would violate due process if it found that Barclays was a good faith purchaser without allowing additional time for discovery on the Defalcated Funds issue. Appellants' objection, however, stopped short of alleging *82 that Barclays actually knew about, benefited from, or was involved with the transfer. In fact, the objection said: "Bay Harbour is not alleging that [Barclays] was [involved in the transfer of Defalcated Funds]. It is alleging that neither [Bay Harbour] nor this Court knows."
Although Appellants' claim, if any, to these Defalcated Funds was merely derivative of any LBIE claim, the LBIE Joint Administrators did not file any objection to the sale on the basis of the Defalcated Funds. Indeed, they supported the sale. Counsel to the Joint Administrators noted that because "no cash was being transferred to the purchaser" the issue of the cash owed to LBIE was "probably not an issue for the purchaser."
The bankruptcy court directly addressed the Defalcated Funds. It agreed with the Joint Administrators' counsel that the allegations about LBIE's cash being wrongly possessed by LBI were not relevant to the sale because no cash was being transferred to Barclays under the proposed sale. Judge Peck said: "I'm satisfied that given the fact that Barclays is not taking cash and the only thing that came into the debtor from Europe was cash that in practical terms we should be safe."
Ultimately, the court rejected Appellants' objection and approved the sale. It reiterated that "this is really not a question of due process being denied." The court emphasized that the proposed sale was "the only available transaction;" and it called the idea of delaying approval of the sale with hope that a better transaction would come along "preposterous." The consequences of not approving the transaction, according to the court, "could prove to be truly disastrous," and the "harm to the debtor, its estates, the customers, creditors, generally, the national economy and the global economy could prove to be incalculable." By the end of the hearing, the court felt that everything it heard "was indicative of arm's length, good faith, aggressive negotiations" and that it had "heard ample evidence ... that would support good faith findings."
Sale Order
On the basis of these conclusions about the sale procedure, the bankruptcy court entered the Sale Order on September 20, 2008.[6] The Sale Order found that "good cause exists to shorten the applicable notice periods," that "due, proper, timely, adequate and sufficient notice" of the motion and hearing had been provided, and that a "reasonable opportunity to object and to be heard" had been given to all interested persons and entities.
Again, the court emphasized that if it did not approve the sale on an expedited basis, the Debtors' estates would suffer "immediate and irreparable harm." This was the case, in part, because "[n]o other person or entity or group of entities, other than [Barclays], has offered to purchase the Purchased Assets for an amount that would give greater economic value to the Debtors' estates." As such, the sale was "necessary and appropriate to maximize the value of the Debtors' estates," and thereby served the "best interests of the Debtors, their estates, their creditors and other parties in interest."
The Sale Order deemed Barclays a purchaser in good faith. The court noted that the purchase agreement was "negotiated, proposed, and entered into by the Sellers and the Purchaser without collusion, in good faith and from arm's-length bargaining positions." The order explicitly noted that Barclays was "a good faith Purchaser of the Purchased Assets within the meaning of Bankruptcy Code section 363(m)." *83 As such, the order conveyed the assets to Barclays "free and clear of all Liens, claims ..., encumbrances, obligations, liabilities, contractual commitments, rights of first refusal or interests of any kind or nature whatsoever." The bankruptcy court noted the importance of this provision to Barclays:
The Purchaser asserts that it would not have entered into the Purchase Agreement and would not consummate the transactions contemplated thereby ... if the sale of the Purchased Assets ... to the Purchaser ... was not free and clear of all Interests of any kind or nature whatsoever, or if the Purchaser would, or in the future could, be liable for any of the Interests.
The Sale Order instructed parties wishing to appeal the order to pursue a stay of the Sale Order. It warned that "[a]ny party objecting to this Order must exercise due diligence in filing an appeal and pursuing a stay, or risk its appeal being foreclosed as moot." Before the sale was consummated, Appellants filed a notice of appeal on September 21 and amended it the next day. Appellants did not, however, seek a stay of the Sale Order. The sale closed September 22. After that closing, over 135,000 LBI customer accounts were transferred to Barclays or other institutions and more than a hundred billion dollars of customer property followed. Based on the bankruptcy court's authorization of the sale, the Trustee in the SIPA proceeding mailed over 900,000 claim forms.
Appellants now bring this appeal. They argue the bankruptcy court erred by: (1) finding that Barclays was a good faith purchaser pursuant to Section 363 of the Bankruptcy Code; (2) concluding that the sale complied with the Fifth Amendment's Due Process Clause; and (3) approving a sale free and clear of liabilities to Barclays.
In their reply brief Appellants clarify they are "not seeking to unwind the sale." They ask this Court instead to revise the terms of the sale by reversing the Bankruptcy Court's good faith purchaser finding, which would mean Barclays did not take LBI's assets free and clear of all interests.
DISCUSSION
District courts are vested with appellate jurisdiction over bankruptcy court rulings pursuant to 28 U.S.C. § 158(a), and may "affirm, modify, or reverse a bankruptcy judge's judgment, order or decree." Fed R. Bankr.P. 8013. On appeal, the legal conclusions of the bankruptcy court are reviewed de novo, but the findings of fact are reversed only when they are "clearly erroneous." Id.; AppliedTheory Corp. v. Halifax Fund, L.P. (In re AppliedTheory Corp.), 493 F.3d 82, 85 (2d Cir.2007). While the bankruptcy court's findings of fact are not conclusive on appeal, "the party that seeks to overturn them bears a heavy burden." H&C Dev. Group, Inc. v. Miner (In re Miner), 229 B.R. 561, 565 (2d Cir. BAP 1999). The reviewing court must be left with a "definite and firm conviction" that a mistake has been made. Ortega v. Duncan, 333 F.3d 102, 107 (2d Cir.2003) (citation omitted). Mixed questions of law and fact are reviewed "either de novo or under the clearly erroneous standard depending on whether the question is predominantly legal or factual." Italian Colors Rest. v. Am. Express Travel Related Servs. Co. (In re Am. Express Merchants' Litig.), 554 F.3d 300, 316 n. 11 (2d Cir.2009) (citation omitted).
I. Purchaser in Good Faith Status
Although the Bankruptcy Code does not define "good faith purchaser," the Second Circuit has adopted the traditional equitable definition: "one who purchases *84 the assets for value, in good faith and without notice of adverse claims." Licensing by Paolo, Inc. v. Sinatra (In re Gucci), 126 F.3d 380, 390 (2d Cir.1997) (citation omitted) ("Gucci II"). To determine a purchaser's good faith, courts look to "the integrity of his conduct during the course of the sale proceedings; where there is a lack of such integrity, a good faith finding may not be made." Id. Good faith is absent where a purchaser engaged in "fraud, collusion between the purchaser and other bidders or the trustee, or an attempt to take grossly unfair advantage of other bidders." Id. (citation omitted). The "goodfaith purchaser" determination "is a mixed question of law and fact." Id. (citation omitted). Thus, this Opinion must review the issue of whether the bankruptcy court applied the correct legal standard de novo; and it must review the court's factual determinations under the clearly erroneous standard.
Appellants do not take issue with the bankruptcy court's choice of legal standard; rather, they argue that the court erred in making its factual determination that Barclays satisfied the definition of a purchaser in good faith. They assert that "the Court had no evidentiary basis to support its conclusion that Barclays purchased the assets without knowledge that some or all of the Defalcated Funds were being conveyed to them or had been used to prop up LBI in contemplation of its Sale." They object to the fact that the bankruptcy court "foreclosed any factual investigation into Barclays's conduct and then issued findings based on [the court's] own speculation that Barclays was not complicit in or a beneficiary of the misappropriation of the Defalcated Funds."
The court, however, did not base its determination of Barclays's good faith on speculation. It based its conclusion on evidence presented at the sale hearing, which was sufficient to support its finding. As such, Appellants have failed to carry their heavy burden to show that the finding was clearly erroneous. The court relied on the testimony of both McDade and Ridings to support its good faith findings. Cross-examination of these witnesses failed to unearth evidence of fraud, collusion, or any impropriety. After hearing testimony at the sale hearing, Judge Peck said "I try to listen with great care to the evidence that's being put into the record to support findings ... and everything that I heard was indicative of arm's length, good faith, aggressive negotiations."
Despite the fact that Appellants' objection was based on speculation rather than evidence, the court carefully considered Appellants' claims about the Defalcated Funds. Judge Peck ultimately found that the claims regarding the Defalcated Funds were irrelevant to Barclays's good faith status. Noting that Debtors proposed to transfer to Barclays only securities and other property, and not cash, the Court determined that it was "safe" to approve the sale. Appellants' speculation is insufficient to show that the court's conclusion was clearly erroneous. The bankruptcy court's determination of Barclays's good faith status is therefore affirmed.
II. Statutory Mootness
Appellees argue that Section 363(m) of the Bankruptcy Code limits appellate jurisdiction to the issue of Barclays's status as a good faith purchaser. Under Section 363(m),
The reversal or modification on appeal of an authorization under subsection (b)... of this section of a sale ... of property does not affect the validity of a sale... under such authorization to an entity that purchased ... such property in good faith ... unless such authorization *85 and such sale ... were stayed pending appeal.
11 U.S.C. § 363(m) (emphasis supplied). Pursuant to this section, "appellate jurisdiction over an unstayed sale order issued by a bankruptcy court is statutorily limited to the narrow issue of whether the property was sold to a good faith purchaser." Licensing by Paolo, Inc. v. Sinatra (In re Gucci), 105 F.3d 837, 839 (2d Cir.1997) ("Gucci I").
Limiting appellate jurisdiction over unstayed sale orders to the issue of good faith "furthers the policy of finality in bankruptcy sales and assists the bankruptcy court to secure the best price for the debtor's assets." Kabro Assocs. of W. Islip, LLC v. Colony Hill Assocs. (In re Colony Hill Assocs.), 111 F.3d 269, 272 (2d Cir.1997) (citation omitted). "[W]ithout this assurance of finality, purchasers could demand a large discount for investing in a property that is laden with the risk of endless litigation as to who has rights to estate property." Gucci II, 126 F.3d at 387.
Despite the fact that the Sale Order explicitly cautioned any party wishing to appeal the order to pursue a stay or "risk its appeal being foreclosed as moot," Appellants failed to seek a stay. The sale then closed on September 22, 2008. As a result, the only issue this Court may consider on appeal is whether the bankruptcy court committed reversible error in finding that Barclays was a good faith purchaser. As discussed above, the bankruptcy court did not commit reversible error in determining Barclays's good faith status.
Appellants seek to escape the limitations imposed by Section 363(m) by arguing in their reply brief that they do not challenge the sale, but only the terms of the sale, which delivered the LBI assets to Barclays free and clear of liens. This is a specious distinction. As the bankruptcy court found, Barclays demanded that the sale be free and clear of liens, and without that term no sale would have occurred. The bankruptcy court's approval of the sale on these terms was unremarkable and utterly consistent with its duty to maximize the value of the Debtors' estate with the benefit of the finality provided by Section 363(m).
Consequently, statutory mootness forecloses Appellants' arguments beyond the issue of Barclays's good faith. Appellants having sought no relief that stops short of challenging the validity of the entire sale, see Gucci I, 105 F.3d at 839-40 & n. 1, Appellants' request for relief is moot under Section 363(m).[7]
*86 CONCLUSION
The bankruptcy court's September 20, 2008 Sale Order and Incorporation Order are affirmed. The appeal is dismissed.
SO ORDERED:
NOTES
[1] Appellants also appeal from a September 20 derivative order of the bankruptcy court incorporating the Sale Order, which was entered in adversary proceedings in the Lehman bankruptcy cases filed under the Security Investor Protection Act ("SIPA") against LBI. At the request of the Securities Investor Protection Corporation ("SIPC"), on September 19 the U.S. District Court for the Southern District of New York entered an order placing LBI in liquidation under SIPA. The district court then transferred the SIPA proceeding to the bankruptcy court.
[2] A prime broker is a broker who offers professional services specifically aimed at large institutional customers, such as hedge funds and money managers.
[3] Appellants did not clarify until their reply brief that they were not challenging on appeal the sale to Barclays but only that term of the sale which gave Barclays the assets free and clear of liens.
[4] The Federal Reserve explained that only one or two entities met both the regulatory and financial qualifications to bid successfully for LBI.
[5] Debtors explained inter alia that in just the past week, the value of assets to be transferred to Barclays had declined from roughly $70 billion to less than $50 billion.
[6] The Court concurrently issued an order approving the sale in the SIPA proceeding.
[7] Even if this Court were to consider the remaining merits of the appeal, Appellants would lose. First, since Appellants failed to obtain a stay and allowed a comprehensive change in circumstances to take place, the appeal is equitably moot. Frito-Lay, Inc. v. LTV Steel Co. (In re Chateaugay Corp.), 10 F.3d 944, 952-53 (2d Cir.1993); Official Comm. Of Unsecured Creditors of LTV Aerospace and Def. Co. v. Official Comm. Of Unsecured Creditors of LTV Steel Co. (In re Chateaugay Corp.), 988 F.2d 322, 325 (2d Cir. 1993); see also Deutsche Bank AG v. Metromedia Fiber Network, Inc. (In re Metromedia Fiber Network, Inc.), 416 F.3d 136, 144 (2d Cir.2005).
Second, Judge Peck appropriately considered and resolved due process interests throughout the sale process. Judge Peck correctly determined that Appellants had sufficient notice and opportunity to be heard. Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314, 70 S. Ct. 652, 94 L. Ed. 865 (1950); Brody v. Village of Port Chester, 434 F.3d 121, 127 (2d Cir.2005).
Finally, the bankruptcy court found that LBI's assets could be sold free and clear under 11 U.S.C. § 363. Appellants' challenge of this provision relies entirely on the premise that the bankruptcy court committed reversible error in determining the good faith issue, and argument this Opinion has rejected. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1451575/ | (2008)
JENNIFER D., as Parent of TRAVIS D., Plaintiff,
v.
NEW YORK CITY DEPARTMENT OF EDUCATION, Defendant.
No. 06 Civ. 15489(JGK).
United States District Court, S.D. New York.
March 31, 2008.
OPINION AND ORDER
JOHN G. KOELTL, District Judge.
The plaintiff, Jennifer D., brings this action on behalf of her son Travis D. ("Travis") pursuant to the Individuals with Disabilities in Education Act ("IDEA"), 20 U.S.C. §§ 1400 et seq., against the New York City Department of Education (the "DOE"). The plaintiff is appealing from an order of the State Review Officer ("SRO"), that declined to award her tuition reimbursement for her unilateral placement of Travis in the Legacy Program at Xaverian High School (the "Legacy Program") for the 2006-07 school year. The SRO's decision reversed the decision of an Impartial Hearing Officer ("IHO") who had granted reimbursement to the plaintiff. The parties have cross-moved for summary judgment. The Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and 20 U.S.C. § 1415(i)(2)(A).
I
Under the IDEA, "states receiving federal funds are required to provide `all children with disabilities' a `free appropriate public education.'" Gagliardo v. Arlington Centr. Sch. Dist, 489 F.3d 105, 107 (2d Cir.2007) [hereinafter Gagliardo II] (quoting 20 U.S.C. § 1412(a)(1)(A)); see also Walczak v. Florida Union Free Sch. Dist, 142 F.3d 119, 122 (2d Cir.1998). A free appropriate public education must provide "special education and related services tailored to meet the unique needs of a particular child, and be `reasonably calculated to enable the child to receive educational benefits.'" Walczak, 142 F.3d at 122 (quoting Bd. of Educ. v. Rowley, 458 U.S. 176, 207, 102 S.Ct. 3034, 73 L.Ed.2d 690 (1982) (internal quotation marks and citation omitted)). Because the IDEA expresses a "strong preference for children with disabilities to be educated, `to the maximum extent appropriate,' together with their non-disabled peers, special education and related services must be provided in the least restrictive setting consistent with a child's needs." Id. (internal citation omitted); see also Grim v. Rhinebeck Central Sch. Dist, 346 F.3d 377, 379 (2d.Cir.2003).
These services are administered through a written individualized education program ("IEP"), which must be updated at least annually. Walczak, 142 F.3d at 122; see also 20 U.S.C. § 1414(d). In New York, the responsibility for developing appropriate IEPs has been assigned to local Committees on Special Education (`CSE'). Id. at 123. "In developing a particular child's IEP, a CSE is required to consider four factors: (1) academic achievement and learning characteristics, (2) social development, (3) physical development, and (4) managerial or behavioral needs." Gagliardo II, 489 F.3d at 107-08 (2d Cir.2007) (citing N.Y. Comp.Codes R. & Regs, [hereinafter "N.Y.C.C.R.R."] tit. 8, § 200.1(ww)(3)(i)).
Parents in New York who wish to challenge the IEP as insufficient under the IDEA may request an impartial due process hearing before an IHO appointed by the local board of education. Id. (citing 20 U.S.C. § 1415(f) and N.Y. Educ. Law § 4404(1)). A party may appeal the decision of the IHO to an SRO, and the SRO's decision may be challenged in either state or federal court. Id. (citing 20 U.S.C. § 1415(g), 1415(i)(2)(A) and N.Y. Educ. Law 4404(2)).
II
The administrative record and the additional evidence submitted by the plaintiff reveal the following factual and procedural background.[1]
Travis D. ("Travis") has been classified as a student with a disability in need of special education services since he was in first grade. Travis was born three months premature and was diagnosed with Attention Deficit Hyperactivity Disorder (ADHD) at about four years of age.[2] He was later evaluated by the DOE and was reportedly found to have developmental delays.
Prior to the school year in question, Travis attended community schools, a special education school, and a state-approved non-public school. He was also home schooled for one semester. The record reflects that Travis experienced behavioral difficulties at all of these placements. For his sixth grade year Travis was placed in a special class in a community school, Hudde Junior High School, where he came in first in the science fair and his self-esteem improved. Travis attended a different community school, Roy H. Mann Junior High School ("IS 78"), for seventh and eighth grades, after the plaintiff asked the CSE to move Travis to a school where he could participate in gym and other school activities and not be educated in the basement. Travis was placed in a 12:1:1 class with twelve students, one teacher, and one paraprofessional. Travis reportedly struggled academically and socially during his first year at IS 78.
In 2005-06, Travis was in eighth grade and was again placed in a special education class with a 12:1:1 staffing ratio at IS 78. At the time he was classified as "Emotionally Disturbed" and was provided speech therapy and counseling. He displayed poor behavior at the beginning of his eighth grade school year at IS 78. His special education teacher, Russell Markus, documented numerous behavioral incidents from September 9, 2005 through December 1, 2005, including disrupting class, the use of foul and other inappropriate language, and other inappropriate behavior. (Def.'s Ex. 10.)[3] In November 2005, Travis was assigned a 1:1 behavior paraprofessional.
On or about December 1, 2005, just a few weeks after the assignment of the paraprofessional, Mr. Markus submitted a Type 3 Recommendation, which is a referral to the School Based Support Team to reevaluate Travis's IEP.[4] The Type 3 Recommendation stated that Travis's behavior had deteriorated to the point where it was interfering with instruction and that Travis lacked respect for authority. (Def.'s Ex. 9.) On Travis's first quarter report card, his conduct was rated as needing improvement in English, Social Studies, and Math, and as unsatisfactory in Science (Pl's Ex. F.). The comments indicated that Travis did not show self-control, did not stay on task, and included a request for a parent-teacher conference. (Hr'g Tr. 111.)
Travis's behavior improved notably during the second quarter of the school year following the assignment of the paraprofessional.[5] In particular, Mr. Markus noted a lessening in impulsivity and outbursts. This improvement in behavior is reflected in Travis's second quarter report card, issued in February 2006, where his conduct was rated as satisfactory in English, Social Studies, and Science, and needing improvement in Math. (Pl's Ex. F). Furthermore, while the comments section of the report card indicates that Travis remained "[f]ar below standards" academically in English and Math, other comments reflect that he was "[p]repared for class" in English and was "[a]pproaching standards" with satisfactory effort in Social Studies. (Id.) Travis's improved conduct is also reflected in letters submitted by the plaintiff from Mr. Markus, Edward Isaacs, the school psychologist at IS 78, and Aladino Lopez, the paraprofessional assigned to Travis in November 2005. (Pl's Ex. G). Mr. Markus reported "a definite improvement in behavior" and the paraprofessional reported that Travis's "behavior is improving dramatically." (Id.)
In connection with the reevaluation of Travis's IEP, Mr. Isaacs performed a social history and psychoeducational evaluation on January 12, 2006. (Def.'s Exs. 7, 8.) The resulting report described Travis as highly impulsive, socially immature, and extremely disruptive in class, and noted that he had difficulty obeying school rules and authority figures. (Def.'s Ex. 7 at 1, Ex. 8 at 1-4.) Mr. Isaac's found Travis to be generally delayed academically, and noted that Travis did very little class work or homework, and that his cognitive skills were in the Low Average Range (Def.'s Ex. 8 at 2, 4.)
The CSE convened on January 31, 2006 to review Travis's IEP. The CSE team was duly constituted and was attended by the plaintiff, a representative of the school district, a general education teacher, a special education teacher, a school psychologist, a parent member, and a counselor. At that meeting, a new IEP was developed for Travis (the "IEP"). (Def.'s Ex. 6.) The IEP changed Travis's classification from "Emotionally Disturbed" to "Other Health Impairment," and recommended that Travis be placed in a 12:1:1 special class in a specialized school attended only by disabled students (a "District 75 school"). (Id. at 2.) It also included related service recommendations for once weekly individual counseling, once weekly group counseling, twice weekly group speech language therapy, and an individual behavior management paraprofessional for 100 minutes per day. (Id. at 10.) The IEP indicated that Travis's individual speech therapy and 1:1 paraprofessional were to be terminated. (Id. at 2.) The IEP noted that Travis's academics were generally delayed, that his behavior seriously interfered with classroom instruction and required additional adult support, and recommended a small class environment to address his social, emotional, and behavioral problems. (Id. at 3-4.) The IEP also included annual goals and short-term objectives, including that Travis would control his impulsivity and develop self control. (Id. at 6.)
In the winter of 2005, Travis expressed interest in attending Xaverian, which he had learned about from teammates on his ice hockey team. (Hr'g Tr. 46.) After learning that Xaverian had a special education program, the plaintiff met with Dr. Carol Trasborg, Xaverian's Director of Admissions for Special Education, about the Ryken Education Center at Xaverian (the "Ryken Center"). The Ryken Center is a 12:1:1 program designed for students with multiple special education needs as a result of, among other things, speech impairments, Asberger's Syndrome, processing issues, or learning disabilities.
Dr. Trasborg said that she would consider admitting Travis to the Ryken Center if his grades and conduct improved. In February of 2006, the plaintiff met with Dorene Willis, a secretary for the Region 6 CSE whose work includes assisting with nonpublic school referrals, about her desire to place Travis in Ryken. Ms. Willis consulted with her superiors about the plaintiffs financial situation and subsequently the district issued a "Nickerson letter" to the plaintiff to cover the funding of a private school.[6] (Def.'s Ex. 3.) Ms. Willis also contacted the Ryken Center to confirm its interest in accepting Travis. There is some dispute in the record as to whether the plaintiff was provided with a list of state-approved programs at this time or during the resolution session, which was held in May 2006. (Hr'g Tr. 15; Def.'s Ex. 5.)
Due to health problems, the plaintiff did not deliver Travis's second quarter report card to Dr. Trasborg for several weeks. By this time, there were no available seats in the Ryken Center. Based on his second quarter report card, the letters reflecting Travis's improved behavior, and her interactions with Travis, Dr. Trasborg offered Travis a seat in the Legacy Program, the other special education program offered by Xaverian. The Legacy Program is a 15:1 program designed for college-bound learning disabled students with other minor emotional issues. The students are mainstreamed for lunch, gym, and homeroom, and are taught by the same teachers as the regular high school classes. The plaintiff was unable to use the Nickerson letter issued by the district to fund the tuition for the Legacy Program, because the Legacy Program is not a state-approved program. (Hr'g Tr. 107.)
On May 18, 2006, the defendant issued a Final Notice of Recommendation ("FNR"), offering a placement to Travis in a 12:1:1 class at Jim Thorpe High School ("PS 370"), a District 75 school, for the 2006-07 school year. (Def.'s Ex. 2.) The FNR also included the individual and group counseling services recommended in the January 31, 2006 IEP. PS 370 is a special high school geared to students with emotional disturbance issues and has no general education students. Each class has a paraprofessional along with a crisis intervention teacher and a full staff of related service providers. The school uses a behavior modification program called the "Power of Choice," where students earn points for good behavior. The school offers inclusion programs at community high schools for students who demonstrate a sustained change in behavior sufficient to warrant a modification to their IEP. (Hr'g Tr. 220-22.) Also on May 18, 2006, Travis's parents completed a registration form for Xaverian and the plaintiff entered into a contract with Xaverian for Travis's enrollment in the Legacy Program for the 2006-07 school year. (PL's Exs. B, C.)
The plaintiff submitted an amended request for an impartial hearing dated May 25, 2006, in which she challenged the IEP's recommended placement of Travis in a District 75 school and a 12:1:1 staffing ratio.[7] (PL's Ex. E.)
At the hearing before the IHO, the plaintiff called five witnesses and introduced seven documents. The defendant called three witnesses and introduced ten documents. The IHO issued a twelve-page opinion in which she granted the plaintiffs request for reimbursement. The IHO found that the plaintiff carried her burden to show that the IEP was inappropriate on the grounds that the placement recommendation did not meet the IDEA's requirement that Travis be educated in the least restrictive environment. (IHO decision at 11.) The IHO also found that the plaintiff established that the unilateral placement in the Legacy Program was likely to confer educational benefit and was therefore appropriate.[8] (Id.) Lastly, the IHO found that equitable considerations did not weigh against reimbursement. (Id. at 12.)
The defendant appealed from the decision of the IHO to a SRO. The SRO sustained the defendant's appeal on the grounds that the plaintiff had failed to establish by a preponderance of the evidence that the IEP's proposed placement of Travis was inappropriate. (SRO decision at 8.) In particular, the SRO found:
the plaintiff has failed to allege or prove that [the] recommended program was not designed to confer educational benefit. [The plaintiff's] testimony at the impartial hearing suggesting that the student tends to imitate the behavior of those around him, that he would not be motivated in a District 75 school like P.S. 370, and that he had been picked on in previous specialized school placements, was insufficient to establish ... that [the] recommended program was inadequate to meet the student's special education needs.
(Id. (record citations omitted).) The SRO did not make any findings with respect to whether the plaintiffs placement of Travis in the Legacy Program at Xaverian was appropriate or whether equitable considerations weighed against reimbursement for the plaintiff.
Following the decision by the SRO, the plaintiff filed this reimbursement action pursuant to 20 U.S.C. 1415(i)(2). The plaintiff has submitted three affidavits from educational professionals at Xaverian as additional evidence pursuant to 20 U.S.C. § 1415(i)(2)(C)(ii).[9] Sherry Drazner, school psychologist in the Legacy Program and Travis's counselor, states that Travis's focus, impulse control, and selfesteem improved during his ninth grade year in the Legacy Program. Reports of Travis's misbehavior ceased after the first few months and Travis is expected to graduate with a Regent's diploma and go on to college if he desires. (Drazner Aff. ¶ 15.) John Joseph Jordan, Travis's Global Studies Instructor, attests to Travis's improved behavior and academic success, estimates Travis's grade average at approximately 80 and expects that Travis could be mainstreamed in history by junior year if not sooner. (Jordan Aff. ¶¶ 6, 8.) The plaintiff also submits the affidavit of Travis's Life Science instructor, Frank De-Lassio, who states that Travis's behavior was not problematic after an initial adjustment period, and that Travis completes his homework assignments on time and participates meaningfully in class. (DeLassio Aff. ¶¶ 8-9.) Both Mr. Jordan and Mr. DeLassio highlight test taking as one area where Travis has room to improve. (Jordan Aff. ¶ 8, DeLassio Aff. ¶ 7).
III
Parents who believe that their child's IEP fails to meet the requirements of the IDEA may, at their own financial risk, enroll the child in a private school and seek retroactive reimbursement of tuition from the state. See Sch. Comm. of Burlington v. Dep't of Educ., 471 U.S. 359, 370, 105 S.Ct. 1996, 85 L.Ed.2d 385 (1985). The Supreme Court has established a two-part test to determine whether a party is entitled to reimbursement: "(1) was the IEF proposed by the school district inappropriate; [and] (2) was the private placement appropriate to the child's needs." Gagliardo II, 489 F.3d at 111-12 (citing Burlington, 471 U.S. at 370, 105 S.Ct. 1996). The burden rests with the party seeking relief, which in this case is the plaintiff. See Schaffer v. Weast, 546 U.S. 49, 56, 126 S.Ct. 528, 163 L.Ed.2d 387 (2005). If the two-part Burlington test is satisfied, the Court has discretion to consider relevant equitable factors in fashioning relief. Gagliardo II, 489 F.3d at 112 (citing Florence County Sch. Dist. Four v. Carter, 510 U.S. 7, 16, 114 S.Ct. 361, 126 L.Ed.2d 284 (1993)).
Under the IDEA, a district court independently reviews the administrative record, along with any additional evidence presented by the parties, and must determine by a preponderance of the evidence whether the IDEA's provisions have been met.[10]Grim, 346 F.3d at 380; see also Mrs. B. v. Milford Bd. of Educ, 103 F.3d 1114, 1120 (2d Cir.1997). This independent review, however, is not "an invitation to the courts to substitute their own notions of sound educational policy for those of the school authorities which they review." Rowley, 458 U.S. at 206, 102 S.Ct. 3034. The Court of Appeals for the Second Circuit has explained that "federal courts reviewing administrative decisions must give `due weight' to these proceedings, mindful that the judiciary generally `lack[s] the specialized knowledge and experience necessary to resolve persistent difficult questions of educational policy.'" Gagliardo II, 489 F.3d at 113 (quoting Rowley, 458 U.S. at 206, 102 S.Ct. 3034); see also Cerra v. Pawling Cent. Sch. Dist, 427 F.3d 186, 191 (2d Cir.2005). Deference to the decision in the administrative record is particularly appropriate when the administrative officers' review has been thorough and careful, and when the Court's decision is based solely on the administrative record. See Walczak, 142 F.3d at 129; Frank G. v. Bd. of Educ, 459 F.3d 356, 367 (2d Cir.2006). Where the findings of the IHO and SRO conflict, the findings of the IHO may be afforded diminished weight. See Gagliardo II, 489 F.3d at 113 n. 2 (citing Karl v. Bd. of Educ, 736 F.2d 873, 877 (2d Cir.1984) and Heather S. v. State, 125 F.3d 1045, 1053 (7th Cir.1997)).
A
In deciding whether the challenged IEP satisfies the requirements of the IDEA, two issues are relevant: (1) whether the state complied with the procedural requirements of the statute, and (2) whether the challenged IEP was "reasonably calculated to enable the child to receive educational benefits." Rowley, 458 U.S. at 206-07, 102 S.Ct. 3034. In this case, the plaintiff does not allege a failure to comply with IDEA's procedural requirements. Rather, the plaintiff challenges the IEP on the substantive grounds that it did not provide Travis with a free appropriate public education in the least restrictive environment.
With respect to the sufficiency of the IEP, the reviewing court "must examine the record for `objective evidence' that indicates `whether the child is likely to make progress or regress under the proposed plan.'" Gagliardo II, 489 F.3d at 113 (quoting Walczak, 142 F.3d at 130). The parties agree that in determining whether the IEP placement was inappropriate, the Court should consider the evidence relevant to establish the state of facts as they existed at the time the challenged IEP was developed, namely, January 31, 2006.
The Court of Appeals for the Second Circuit has not articulated a separate test to be used to evaluate whether an IEP complies with the mainstreaming requirement of the IDEA. Other Courts of Appeals have noted that the two-part test established in Rowley is not directly aimed at resolving the question of whether the IDEA's mainstreaming requirement has been satisfied. See Mavis v. Sobol, 839 F.Supp. 968, 982 (N.D.N.Y.1994) (collecting cases from the Third, Fifth, Eighth, and Eleventh Circuits).[11] In response, other Courts of Appeals have fashioned separate tests to be used in cases where the challenge to the IEP is that it fails to satisfy the Least Restrictive Environment ("LRE") requirement and have suggested a non-exhaustive list of factors which are relevant to the determination of whether a particular IEP mainstreams a disabled child to the maximum extent appropriate given his needs.[12]See generally P. ex rel. Mr. P. v. Newington Bd. of Educ, 512 F.Supp.2d 89, 101-102 & n. 2-n. 5 (D.Conn.2007). These cases emphasize that the mainstreaming requirement is a separate substantive standard under the IDEA. See, e.g., id. at 100 ("[I]n addition to the [Free Appropriate Public Education ("FAPE) ] requirement, the Act also requires that the education of disabled children take place in the least restrictive environment (LRE).").
It is unnecessary to adopt a separate test in connection with the mainstreaming requirement in this case. The Court of Appeals for the Second Circuit has not specifically addressed the issue or adopted a separate test. Id. at 101. Under Rowley, this Court is required to engage in an analysis of whether the IEP satisfies the substantive standards of the IDEA. The Court in Rowley noted that the IDEA "requires participating States to educate handicapped children with nonhandicapped children whenever possible." Rowley, 458 U.S. at 202, 102 S.Ct. 3034. The Court of Appeals for the Second Circuit has explained that the IDEA expresses a "strong preference for children with disabilities to be educated `to the maximum extent appropriate,' together with their non-disabled peers, special education and related services must be provided in the least restrictive setting consistent with a child's needs." Walczak, 142 F.3d at 122 (internal citation omitted). The case law, in conjunction with the relevant provisions of the IDEA and the federal and state regulations promulgated thereunder, provide sufficient guidance to determine whether the LRE requirement has been satisfied without recourse to a separate test.
The IDEA requires states to establish procedures to assure that,
"[t]o the maximum extent appropriate, children with disabilities, ... are educated with children who are not disabled, and special classes, separate schooling, or other removal of children with disabilities from the regular educational environment occurs only when the nature or severity of the disability of a child is such that education in regular classes with the use of supplementary aids and services cannot be achieved satisfactorily." 20 U.S.C. § 1412(a)(5)(A).
This requirement is embodied in both federal and state regulations. See N.Y.C.C.R.R. tit. 8, § 200.1(cc); 34 C.F.R §§ 300.114-300.118. Under the New York regulations:
[t]he placement of an individual student with a disability in the least restrictive environment shall: (1) provide the special education needed by the student; (2) provide for education of the student to the maximum extent appropriate to the needs of the student with other students who do not have disabilities; and (3) be as close as possible to the student's home.
N.Y.C.C.R.R. tit. 8, § 200.1(cc). Whether the IEP was appropriate in this case turns on whether placement in a District 75 school satisfied this requirement.
As an initial matter, a review of the administrative record reveals that the SRO did not make any specific findings with respect to whether the IEP and subsequent final placement afforded Travis an education in the "least restrictive environment." The SRO found that the plaintiff failed to sustain her burden of demonstrating the inappropriateness of the IEP on the grounds that the plaintiff "failed to allege or prove that petitioner's recommended program was not designed to confer educational benefit." (SRO decision at 8.) The SRO went on to find that the plaintiffs evidence was "insufficient to establish by a preponderance of the evidence that [the IEP] was inadequate to meet the student's special education needs." (Id.) It is plain that this analysis did not address the LRE requirement, but instead focused on the requirement that the IEP provide a free appropriate public education.
The defendant argues that the SRO mentioned this requirement when it set out the relevant standards and therefore made an implicit finding that the LRE requirement was satisfied when it found that the plaintiff had failed to establish that the IEP was inappropriate. However, even if such an implicit finding could be gleaned from the decision of the SRO, it is undisputed that the SRO's decision does not enumerate the relevant factors or engage in an analysis of whether the IEP provided for a placement in the least restrictive environment. Because the SRO did not make any findings on this issue, the decision of the SRO is not entitled to deference with respect to whether the recommended placement in a special school with a 12:1:1 staffing ratio, and the subsequent offer of placement at PS 370 satisfied this requirement. Gagliardo v. Arlington Cent. Sch. Dist, 418 F.Supp.2d 559, 562 ("[W]here there are no administrative findings on an issue germane to the court's determination, deference would be inappropriate."), rev'd on other grounds, 489 F.3d 105.
In contrast, the IHO specifically found that "based on the evidence ... without exploring further the opportunity of maintaining the student in a community school, the placement recommendation does not meet the requirement of least restrictive." (IHO decision at 11.) The Court agrees with the IHO that in view of Travis's improved behavior following the assignment of a paraprofessional in November 2005, the plaintiff has carried her burden to establish that the 12:1:1 placement in a District 75 school did not satisfy the least restrictive environment requirement under the IDEA. Mr. Markus, Travis's teacher who had submitted the Type 3 Recommendation, testified before the IHO that Travis's behavior had improved and indeed he believed that Travis could be educated in a structured 15:1 environment based on consequences, which is a significantly less restrictive environment than the IEP's recommendation that Travis be placed in a 12:1:1 class in a special school. (Hr'g Tr. 203-04, 210-11.) Travis's improved behavior was also supported by his second quarter report card, issued shortly after January 31, 2006, and based on conduct in the relevant period, which reflected substantial progress. Dr. Trasborg also testified that she believed Travis could succeed in the less restrictive environment of the 15:1 Legacy class at Xaverian, based in part on Travis's improvement between December 2005 and February 2006 as reflected in his report card. (Hr'g Tr. 102-03, 108-09, 114, 119-121.)
Travis's improved behavior in the period from November 2005 through the development of the January 2006 IEP strongly supports the conclusion that he was capable of being educated in a community school, a less restrictive environment than a District 75 school, if he was afforded special education services. Cf. Warton v. New Fairfield Bd. of Educ, 217 F.Supp.2d 261, 277 (D.Conn.2002) (finding the mainstreaming requirement was not satisfied when, among other things, the record did not support the conclusion that the student "would present [behavioral] difficulties if provided with an adequate level of supplementary aids and related services.") The IHO's finding that the IEP failed to reflect that Travis could have been maintained in a less restrictive environment with the provision of supplementary aids, related services, and a detailed behavior plan is supported by the record. See A.S. ex rel. S. v. Norwalk Bd. of Educ, 183 F.Supp.2d 534, 542-45 (D.Conn.2002).
This conclusion is strengthened by the fact that the Nickerson letter issued to the plaintiff included less restrictive environments than PS 370, including the Ryken Center at Xaverian. Dorene Willis testified at the IHO hearing that when a Nickerson letter is issued, the parent is provided with "a list of schools ... that matches the child's disability." (Hr'g Tr. 244). While there is some dispute as to when the plaintiff was provided with this list, there is no question that the Ryken Center was included on the list along with other schools that had a general education population. And while it appears that the Ryken Center does not accept Nickerson letters, the record indicates that at the DOE issued the Nickerson letter to the plaintiff so that she could place Travis in the Ryken Center. (Hr'g Tr. 240.)
In the Ryken Center, Travis would have been taught in a self-contained class for only disabled children, but would have done so in a school attended by both disabled and non-disabled students. This environment would have been similarly restrictive to Travis's placement at IS 78, and certainly less restrictive than the placement at a District 75 school. See 34 C.F.R. 300.115(b)(1) (a special class in a community school is less restrictive than a school exclusively for disabled students). The appropriateness of the IEP placement is therefore undermined by its subsequent issuance of a Nickerson letter to the plaintiff along with a list of state-approved programs, some of which were less restrictive than the IEP's recommended placement.
The testimony of the defendant's witnesses is less persuasive on the issue of least restrictive environment. The defendant relies mostly on the testimony of Mr. Isaacs and his reports following the social history and psychoeducational assessments he conducted on January 12, 2006. At the hearing, Mr. Isaacs testified that a community school setting was not appropriate for Travis due to his social, emotional, and behavioral difficulties.[13] (Hr'g Tr. 180-181, 199.) Mr. Markus testified to Travis's behavioral problems at the beginning of the year leading up to his submission of the Type 3 Recommendation to reevaluate the IEP. However, Mr. Markus also testified, as noted above, that Travis's behavior had "come a long way" following the assignment of his paraprofessional, and that he believed that in the right program Travis could be educated in a setting less restrictive than 12:1:1. (Hr'g Tr. 203-204, 210-211.) Mr. Markus also drafted a letter in February attesting to Travis's improved behavior, which echoed similar letters written by Mr. Isaacs and Mr. Lopez. (PL's Ex. G.) Finally, Robin Glaser, administrative coordinator at PS 370, testified that PS 370 could meet Travis's academic and behavioral needs. However, her testimony does not address whether PS 370 was the least restrictive environment appropriate for Travis's needs. She did testify that she did not believe that a 15:1 environment would be appropriate for Travis. However, she did not testify with respect to whether Travis could be maintained in a less restrictive environment than PS 370, such as a special class in a community school. (Hr'g Tr. 225-26.) Furthermore, her testimony was based on her review of the IEP, the January 12 psychoeducational assessment, and some of the anecdotals recorded by Mr. Markus through December 1, 2005, and does not address the relevance of Travis's second quarter report card or the letters submitted by the plaintiff with respect to the LRE determination. (Hr'g Tr. 223-25.)
In sum, the objective evidence establishes by a preponderance of the evidence that the IEP was inappropriate because it failed to mainstream Travis to the maximum extent appropriate, and therefore failed to meet the IDEA's requirement that a disabled student's free appropriate public education be provided in the least restrictive environment. The IEP provided for a 12:1:1 class in a special school. It did not provide, for example, for Travis to be educated in a special class in a community school. The primary proffered basis for removing Travis to a special school is that Travis' behavior disrupted the classroom and negatively impacted his academics. While Travis admittedly had behavioral problems at the beginning of the 2005-06 school year, these problems were substantially lessened in the period between the assignment of his paraprofessional and the reevaluation of his IEP. This and the other evidence in the record discussed above demonstrates that Travis did not need to be removed from the community school environment because he was capable of being educated in a school that also educated non-disabled students. See also Walczak, 142 F.3d at 122 ("Only when the nature and severity of a child's disability is such that education in regular classes with the use of supplementary aids and services cannot be achieved satisfactorily should a child be segregated." (internal quotation marks omitted)). The IEP placement failed to account for the fact that Travis's improved behavior indicated that a placement in a special school, segregated from his non-disabled peers, would not provide Travis with a free appropriate public education in the least restrictive environment consistent with his needs.
B
The plaintiff bears the burden to prove not only that the IEP was inappropriate, but also that the unilateral private placement was appropriate. Gagliardo II, 489 F.3d at 112 (citing M.S. ex rel. S.S. v. Bd. of Educ, 231 F.3d 96, 104 (2d Cir.2000)). In determining whether parents have met this burden, the considerations are similar to those employed indetermining whether the school district's placement was appropriate. Frank G., 459 F.3d at 364. While evidence of a student's success at the unilateral placement is relevant to the court's review, such evidence is not sufficient by itself to establish that the placement was appropriate. Gagliardo II, 489 F.3d at 115 (citing Berger v. Medina City Sch. Dist, 348 F.3d 513, 522 (6th Cir.2003) and Rafferty v. Cranston Pub. Sch. Comm., 315 F.3d 21, 26-27 (1st Cir. 2002)). Courts consider the "totality of the circumstances" and parents "need only demonstrate that the placement provides educational instruction specially designed to meet the unique needs of a handicapped child, supported by such services as are necessary to permit the child to benefit from instruction." Frank G., 459 F.3d at 364-65 (internal quotation marks omitted).
The plaintiff has satisfied her burden of showing that Travis's placement in the Legacy Program was appropriate. The IHO noted that "[a]n appropriate placement must be able to address the student's ADHD and moderate academic delays, especially in decoding, and also his low self-esteem and poor impulse control...." (IHO decision at 9.) Therefore, in order to satisfy the second prong of the Burlington analysis, there must be objective evidence that the Legacy Program was specifically designed to meet these needs.
First, the plaintiff has submitted evidence that Travis has progressed substantially following his placement in the Legacy Program. As discussed above, the affidavits submitted by the educational professionals at Xaverian, which were not part of the administrative record, contain numerous statements attesting to Travis's academic, behavioral, and emotional progress during his ninth grade year.
While evidence of Travis's progress is not sufficient by itself, there is additional objective evidence that the Legacy Program was an appropriate placement for Travis. Dr. Trasborg testified that based on Travis's improved conduct reflected on his second quarter report card and the motivation he displayed in her interactions with him, she believed that the Legacy Program was designed to meet Travis's academic and behavioral needs. (Hr'g Tr. 98-99, 100, 101-103, 113-114.) She testified that the 15:1 classes in the Legacy Program are "very structured" and that Travis would be provided with all of the services mandated on his IEP, with assessments and modifications as required for his disabilities. (Hr'g Tr. 95, 103.)
At the hearing, Mr. Markus testified that "[i]f the structure is based on consequences and they have a strict environment then I believe Travis could be educated in [a 15:1 environment]." (Hr'g Tr. 210.) Mr. Markus explained that, depending on the particular program, a 15:1 environment could potentially meet Travis's needs because Travis's difficulties in his placement at IS 78 had "more to do with the environment and the culture of the school than it does the culture of the specific classroom." (Id. at 210-211.) As the IHO noted, Mr. Markus had the opportunity to interact with Travis on a daily basis, unlike the other professional witnesses at the hearing, and therefore would have particular insight into the type of program appropriate for Travis. Lastly, Ms. Drazner states in her affidavit that the students in the Legacy Program have similar emotional and behavioral issues as Travis and that Travis is not significantly more or less disabled. (Drazner Aff. ¶ 14.) Mr. Markus' testimony and Ms. Drazner's affidavit provide persuasive evidence that the Legacy Program provided Travis with support and services that were specially designed to meet his needs.
In response, the defendant proffers the testimony of Mr. Isaacs who testified that he did not believe that Travis could function in a 15:1 environment because he required additional adult supervision as a result of his behavioral problems and emotional problems, which predominated over his academic difficulties. (Hr'g Tr. 185-186.) The defendant also points to Mr. Isaac's psychoeducational assessment and Travis's history of behavioral problems at prior placements. Ms. Glaser also testified that she thought a 15:1 class may not be sufficiently supportive, but as noted above it appears that she based this opinion on Mr. Markus' anecdotals reporting Travis's behavior through December 1, 2005, prior to Travis's behavioral improvement, (Hr'g Tr. 225-26.)
Reviewing the record as a whole, the plaintiff has carried her burden to establish that the Legacy Program was specially designed to meet Travis's needs because it provided a sufficiently structured environment with specific services mandated in his IEP to address Travis's learning disabilities and behavioral problems. Frank G., 459 F.3d at 367 ("[The student's] progress, viewed together with ... the program offered at [the unilateral placement], is sufficient to support" the determination that the unilateral placement was appropriate.) The Court has considered Mr. Isaac's contrary opinion, but finds that the preponderance of the evidence supports the determination that the Legacy Program was appropriate. The cases cited by the defendant merely restate the principle that evidence of progress, standing alone, is not sufficient to establish that the unilateral placement was appropriate.[14]See, e.g., Gagliardo II, 489 F.3d at 115; Thies v. New York City Bd. of Educ, No. 07 Civ.2000, 2008 WL 344728, at *3 (S.D.N.Y. Feb. 4, 2008). However, as discussed above, the plaintiff relies not only on the evidence of Travis's progress, which is substantial, but also on the testimony of several special education professionals that the Legacy program was designed to meet Travis's particular needs.
The IHO did express some reservation about the 15:1 staffing ratio of the Legacy Program, but nevertheless determined that it was appropriate. (IHO decision at 11.) The Court has given due weight to the findings of the IHO, and agrees with its determination that the unilateral placement satisfies the requirements under the IDEA.
Lastly, the defendant's attempt to defeat the plaintiffs claim by asserting that the motive behind the placement at Xaverian was due to the availability of ice hockey is without merit. The availability of ice hockey at PS 370 or Xaverian is not a relevant consideration in this case. The defendant is correct that "courts should not disturb a state's denial of IDEA reimbursement where ... the chief benefits of the chosen school are the kind of educational and environmental advantages and amenities that might be preferred by parents of any child, disabled or not." Gagliardo II, 489 F.3d at 115; see also Thies, 2008 WL 344728, at *3. However, as outlined above, the Legacy Program was an appropriate placement because it was specially designed to meet Travis's needs, irrespective of his ability to participate in ice hockey while attending Xaverian. The defendant cites to no cases in support of the proposition that a plaintiff should be denied reimbursement for an otherwise appropriate placement due to the fact that the placement also afforded the student additional benefits beyond those required by the IDEA. The Court has not considered the availability of ice hockey in its determination of whether the IEP placement was inappropriate or whether the placement in the Legacy Program was appropriate under the IDEA.[15]
C
The Court agrees with the findings of the IHO that the equitable considerations do not weigh against tuition reimbursement in this case.[16] The IEP was developed on January 31, 2006. The plaintiff cooperated with the defendant both prior to and during the development of the challenged IEP. It appears that the plaintiff was ill during February and into March. (Hr'g Tr. 52-53.) Once she was informed that the Ryken Center was fully enrolled, she began to pursue a seat for Travis in the Legacy Program. She received the FNR on May 18, 2006. The FNR stated that the recommended changes to the IEP would be made if the plaintiff did not contact Ms. Willis by June 2, 2006. (Def.'s Ex. 2.) It went on to state: "If you request a[n] ... Impartial Hearing before this date the recommended changes will not be put into effect. ..." (Id.) Therefore, it appears that the plaintiffs request for an impartial hearing, which was initially made at the end of April, was timely. In light of this evidence, the period of time between the development of the IEP and the request for the impartial hearing is not so significant as to warrant denial of reimbursement, particularly in light of the plaintiffs historical cooperation with the CSE in Travis's placements.
The defendant also points to the fact that the plaintiff entered into a contract with Xaverian on the same day the FNR was issued. However, this does not provide a persuasive reason to deny reimbursement. The IEP was developed at the end of January, 2006, and the plaintiff worked with the CSE to find an alternative placement for Travis prior to entering into a contract with Xaverian. There is evidence in the record that the plaintiff visited PS 370 on two occasions, visited at least one of the other schools on the state-approved list, and inquired into the availability of several others.
Finally, the defendant argues that the IHO improperly allowed the plaintiff to amend the hearing request on the first day of the hearing, and that this improper amendment is an equitable factor weighing against reimbursement. However, whether the IHO was correct to allow the amendment is not relevant to the determination of whether the plaintiff acted reasonably, which is the determination the Court must make in connection with the equitable consideration prong. See Frank G, 459 F.3d at 363-64.[17] Moreover, the SRO did not rely on a finding of improper amendment. In sum, the defendant's assertions do not suggest that the plaintiff acted with the requisite level of unreasonableness or misconduct such that reimbursement should be denied on equitable grounds.
CONCLUSION
The Court has considered all of the arguments raised by the parties. To the extent not specifically addressed above, the arguments are either moot or without merit. For the reasons discussed above, the DOE's motion for summary judgment (Docket No. 13) is denied and the plaintiffs motion for summary judgment (Docket No. 10) is granted. The defendant is ordered to reimburse the plaintiff for the cost of Travis's tuition for his ninth grade year in the Legacy Program at Xaverian. The Clerk the Court is directed to enter judgment for the plaintiff and to close this case.
SO ORDERED.
NOTES
[1] A district court reviewing administrative decisions under the IDEA should consider the administrative record as well as any "additional evidence at the request of a party." 20 U.S.C. § 1415(i)(2)(C)(ii).
[2] Travis has reportedly also been diagnosed with Oppositional Defiant Disorder ("ODD"), Tourette's Syndrome, and Asberger's Syndrome, although the plaintiff asserts that the Asberger's diagnosis was mistakenly made when Travis was six years old and was removed from his IEP two years later, and that the Tourette's diagnosis was mistakenly made based on side effects of medication prescribed for Travis's ADHD. In any event, the only medical conditions reflected on Travis's January 31, 2006 IEP are ADHD and allergies. (Def.'s Ex. 6 at 1.)
[3] Citations to exhibits refer to those documents submitted by the parties to the IHO and reviewed by the SRO.
[4] The plaintiff testified that Travis's IEP was reevaluated as a result of a letter she wrote in November 2005 rather than the Type 3 Recommendation submitted by Mr. Markus. (Hr'g Tr. 76-77.)
[5] The parties' dispute whether Travis's improvement in behavior was sustained through the end of the 2005-06 school year. However, the parties agree that in determining whether the IEP was appropriate, the Court should consider the evidence that was available to the CSE at the time the January 31, 2006 IEP was developed. (See PL's letters dated March 11, 2008 and March 13, 2008; Def.'s letters dated March 11, 2008 and March 13, 2008.) Therefore, in deciding whether the IEP was appropriate, the Court has not considered testimony relating to Travis's behavior beyond the second quarter of the 2005-06 school year.
[6] A Nickerson letter is a letter issued by the DOE that authorizes the parent of a disabled child to place the child in an appropriate special education program in a state-approved private school at public expense. See A.T. v. New York State Educ. Dep't, No. 98 CV 4166, 1998 WL 765371, at *1 n. 2 (E.D.N.Y.Aug.4, 1998) (citing Jose P. v. Ambach, 669 F.2d 865 (2d Cir. 1982)); see also SRO decision at 9 n. 2.
[7] The plaintiff initially requested a due process hearing challenging the IEP on April 28, 2006. In her request, the plaintiff indicated she wished "to appeal from the failure of [the CSE] to approve [Travis's] attendance at The Legacy Program in Xaverian High School." (Def.'s Ex. 1.) On the first day of the impartial hearing, the IHO stated that she could not order the student's placement at a program that was not approved by the state, and granted the plaintiff's request to amend her hearing request to seek the cost of Travis's tuition pursuant to Burlington. (Hr'g Tr. 11-12.)
[8] The defendant argues that the IHO's determination that the placement was appropriate was impressibly based on the availability of ice hockey at Xaverian. As addressed later in this Opinion, the Court agrees with the defendant that the availability of ice hockey is not a relevant consideration under the IDEA. However, the IHO's decision also includes a detailed discussion of the testimony of Dr. Isaacs, Mr. Markus, and Dr. Trasborg in reaching its conclusion that the Legacy Program was likely to provide educational benefit to Travis. As explained below, the plaintiff has carried her burden to prove that the placement in the Legacy Program at Xaverian was appropriate based on permissible considerations.
[9] Additional evidence submitted pursuant to 20 U.S.C. § 1415(i)(2)(C)(ii) may include "evidence concerning relevant events occurring subsequent to the administrative hearing." Town of Burlington v. Dep't of Educ, 736 F.2d 773, 790 (1st Cir. 1984), aff'd, 471 U.S. 359, 105 S.Ct. 1996, 85 L.Ed.2d 385 (1985). Evidence of the student's progress at the unilateral placement is relevant to the determination of whether the parents' unilateral placement was appropriate. See Gagliardo II, 489 F.3d at 115; Frank G. v. Bd. of Educ, 459 F.3d 356, 366-67 (2d Cir.2006).
[10] Courts have noted that "[s]ummary judgment appears to be the most pragmatic procedural mechanism in the Federal Rules for resolving IDEA actions," but that "[t]he inquiry... is not directed to discerning whether there are disputed issues of fact, but rather, whether the administrative record, together with any additional evidence, establishes that there has been compliance with IDEA's processes and that the child's educational needs have been appropriately addressed." Wall v. Mattituck-Cutchogue Sch. Dist., 945 F.Supp. 501, 508 (E.D.N.Y.1996); see also Antonaccio v. Bd. of Educ. of Arlington Centr. Sch. Dist., 281 F.Supp.2d 710, 714 (S.D.N.Y.2003).
[11] For example, in Roncker v. Walter, 700 F.2d 1058 (6th Cir. 1983), the Court of Appeals for the Sixth Circuit stated:
[T]his case involves the mainstreaming provision of the Act while Rowley involved a choice between two methods for educating a deaf student. In the latter case, the dispute is simply one of methodology and the Supreme Court has emphatically stated that such questions should be left to the states. In the present case, the question is not one of methodology but rather involves a determination of whether the school district has satisfied the Act's requirement that handicapped children be educated alongside nonhandicapped children to the maximum extent appropriate. ... Since Congress has decided that mainstreaming is appropriate, the states must accept that decision if they desire federal funds.
700 F.2d at 1062 (internal citation omitted).
[12] In Daniel R.R. v. State Bd. of Educ, 874 F.2d 1036 (5th Cir. 1989), the Court of Appeals for the Fifth Circuit set out a two-part test and provided a non-exhaustive list of factors relevant to the mainstreaming issue. Daniel R.R., 874 F.2d at 1048-49. It appears that this test has been adopted by the Third and Eleventh Circuits. See, e.g., Oberti v. Bd. of Educ. of the Borough of Clementon, 995 F.2d 1204, 1215 (3d Cir.1993); Greer v. Rome City School District, 950 F.2d 688, 696-97 (11th Cir.1991). The Daniel R.R./Oberti test was more recently approved and adopted by three cases in the District of Connecticut, and one in the Northern District of New York. P. ex rel. Mr. P. v. Newington Bd. of Educ, 512 F.Supp.2d 89, 101 (D.Conn.2007); A.S. ex rel. S. v. Norwalk Bd. of Educ, 183 F.Supp.2d 534, 540-41 (D.Conn.2002); Warton v. New Fairfield Bd. of Educ, 217 F.Supp.2d 261, 273-78 (D.Conn.2002); Mavis, 839 F.Supp. 968. Other Circuit Courts employ the test developed by the Sixth Circuit in Roncker. The Ninth Circuit has adopted a four-factor balancing test. Sacramento City Unified Sch. Dist. v. Rachel H., 14 F.3d 1398, 1404 (9th Cir. 1994).
[13] In response, the plaintiff points to Mr. Isaacs letter which states, in reference to the Ryken Center, which is less restrictive than District 75 placement, that "it would seem that [the Ryken Center] would address Travis's needs." (PL's Ex. G.) Mr. Isaacs also testified at the impartial hearing that he wrote the letter solely to appease the plaintiff after repeated requests and purposefully drafted it in vague terms. (Hr'g Tr. 183-184, 190-191).
[14] The defendant relies heavily on the recent decision in Gagliardo II in support of its argument that the plaintiff's placement was not appropriate. In Gagliardo II, the Court of Appeals for the Second Circuit reversed the district court's judgment that had granted reimbursement, finding that the district court erred in concluding that the unilateral placement at issue was appropriate. However, in that case the court was addressing an administrative record where "the IHO, confronted with the same evidence, found that [the unilateral placement] was not an appropriate placement," and the SRO had affirmed the IHO decision. Gagliardo II, 489 F.3d at 113. The court found that the district court had improperly afforded the IHO's findings no weight, particularly in light of the fact that the SRO noted that the IHO's findings were supported by the record. Id. at 114 n. 2. The court found that the IHO's finding was reasoned and supported by the record and therefore reversed the district court's judgment ordering reimbursement. Id. at 114. In contrast, in this case the IHO found that the unilateral placement was appropriate, and the SRO made no findings on this issue. This Court has given due weight to the findings of the state administrative officers, and based on its review of the record agrees with the determination of the IHO that the placement in the Legacy Program was appropriate. Therefore, unlike in Gagliardo II, this Court does not reach a different conclusion from the state administrative officers on the issue of whether the private placement was appropriate.
[15] While there are federal regulations with respect to the provision of nonacademic and extracurricular services to disabled children, see, e.g., 34 C.F.R. §§ 300.107, 300.117, the plaintiff has not challenged the January 31; 2006 IEP on this basis.
[16] As noted above, the SRO did not make any findings with respect to equitable considerations.
[17] The relevant statute states that "[a] party may amend its due process complaint notice" if "the hearing officer grants permission, except that the hearing officer may only grant such permission at any time not later than 5 days before a due process hearing occurs." 20 U.S.C. § 1415(c)(2)(E). The first day of the hearing was May 24, 2006. On that date, the IHO granted leave to amend. The plaintiff sent her amended hearing request on May 25, 2006. The hearing was adjourned until June 9, 2006, more than five days after the amendment. Therefore, it would be inequitable to rely on the IHO's decision to grant leave to amend in view of the ample time the defendant had to prepare for the hearing after the amendment. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1541352/ | 75 B.R. 944 (1987)
In re the WHITE MOTOR CREDIT CORP., et al., Debtors.
VOLVO WHITE TRUCK CORPORATION, Plaintiff,
v.
CHAMBERSBURG BEVERAGE, INC., et al., Defendants.
Bankruptcy Nos. B80-03360, B80-03361, B80-03362, B80-03364, B80-03365, Adv. No. B87-0081.
United States Bankruptcy Court, N.D. Ohio, E.D.
July 22, 1987.
*945 *946 Edward R. Brown, Arter & Hadden, Cleveland, Ohio, for plaintiff.
G. Christopher Meyer, John C. Parks, E. Thomas Moroney, Jr., Squire, Sanders & Dempsey, Cleveland, Ohio, for Grigsby.
Brian A. Bash, Kahn, Kleinman, Yanowitz & Arnson, Co., L.P.A., Cleveland, Ohio, for Chambersburg, Gillespies & C. Earl Brown.
John T. Grigsby, Jr., Boca Raton, Fla., Disposition Assets Trustee.
James Thomas, II, Thomas & Thomas, James Nealon, II, James Goldsmith, Caldwell, Clouser & Krearns, Harrisburg, Pa., for defendants.
MEMORANDUM OF DECISION
WILLIAM J. O'NEILL, Bankruptcy Judge.
Before the court is the complaint of Volvo White Truck Corporation for declaratory and injunctive relief. Defendants Chambersburg Beverage, Inc., Steven M. and Bobbie H. Gillespie, and C. Earl Brown, Inc. filed motions to dismiss. John T. Grigsby, Jr., Disposition Assets Trustee of the White Motor Reorganization Trust, intervened as a party-defendant. Due to prompt scheduling of this matter, the parties agreed that Volvo's motion for preliminary relief is unnecessary.
On August 20, 1981, this Court entered an order authorizing sale of White Motor assets to Volvo. Defendants subsequently filed actions in state court alleging Volvo's successor liability. At issue, therefore, is the intent of the order of sale and its effect on the state court actions. Relevant facts are as follows:
The two cases in question were filed on August 22, 1983, and are currently pending in Pennsylvania State Court. They allege that Volvo is successor in liability to the reorganized debtor, White Motor Corp. These suits arise from an accident on September 3, 1981, in which Steven Gillespie, a Chambersburg employee, was injured while driving a truck manufactured by White Motor. Gillespies seek judgment of $15,671.50 in special damages and in excess of $10,000.00 in other damages and costs against White Motor, Volvo and Brown. Chambersburg sued White Motor, Volvo and Brown to recover $26,000.00 for property loss, $236,431.34 in indemnity and contribution, plus punitive damages in excess of $10,000.00. Brown, a White Motor distributor, filed cross-claims against Volvo for indemnity in both actions.
On September 4, 1980, White Motor filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code. On June 9, 1981, during the reorganization proceedings, A.B. Volvo, Volvo's parent corporation, agreed to purchase substantially all of White Motor's remaining truck business *947 assets. By memorandum order of August 13, 1981, the Court determined the sale was appropriate outside the context of a plan of reorganization. The August 20, 1981 order approved the purchase agreement "in all respects".
Orders were entered giving notice of the hearing to approve the purchase agreement. By order of July 27, 1981, known claimants, shareholders, debenture holders and persons requesting notice were mailed notice of the hearing. Additionally, copies of the notice were published in "The Wall Street Journal" (national edition) and in "The New York Times". Defendants received no actual notice of the hearing since the accident from which their actions arose had not yet occurred and Defendants were unknown.
The purchase agreement involved the sale of truck assets, and by its terms, Volvo assumed specific obligations. The agreement provided, however, that "Volvo will not under any circumstances assume any liabilities of White (i) for personal injury or property damage because of alleged negligence or breach of warranty or under any other theory of product liability or (ii) to pay damages (other than the purchase price of goods or services provided to White) by reason of any breach of any obligations or any other acts or omissions of White." Purchase Agreement, Article II, Section 2.02. Despite this provision, thirty-five lawsuits were filed against Volvo in nineteen states, twenty of which are still pending. These suits allege successor liability resulting from Volvo's purchase of the White Motor truck assets.
The purchase price of the truck assets was based on book value to be reflected in a closing date statement, less adjustments for assumed liabilities and start-up costs. The closing statement was never prepared, however, and a supplemental agreement of June 15, 1983 was negotiated instead. This agreement provides, inter alia, for Volvo's delivering a Product Liability Indemnification Agreement whereby Volvo assumed White's product liability for accidents occurring May 1, 1983 through December 31, 1992, involving vehicles assembled prior to September 1, 1981. The supplemental agreement was approved by court order of June 29, 1983.
White Motor's modified plan of reorganization was confirmed on November 18, 1983. Through its terms, the Disposition Assets Trust was created to effect plan distributions. By order of August 1, 1983, this Court scheduled hearing for approval of the disclosure statement and fixed August 30, 1983 as the last day to file any and all claims against White Motor which had not been previously barred. Having received this notice, on August 25, 1983 Chambersburg and Gillespie filed claims for amounts requested in their state court actions. If liability is established in the state proceedings, these claims will be paid under the plan. On confirmation, White Motor was discharged "from any debt that arose before the confirmation date . . ." Plan of Reorganization, Article VI, Section 6.1.
I. JURISDICTION
Volvo seeks determination that the order approving the purchase agreement transferred assets free and clear of Defendants' claims asserted in state court. Injunctive relief is also sought. Defendants seek dismissal of Volvo's complaint based on lack of subject matter jurisdiction. Alternatively, abstention is requested.
This Court is empowered to "issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title". 11 U.S.C. § 105(a). Included, is authority to interpret and clarify prior orders. "That a federal court of equity has jurisdiction of a bill ancillary to an original case or proceeding in the same court, whether at law or in equity, to secure or preserve the fruits and advantages of a judgment or decree rendered therein, is well settled." Local Loan Co. v. Hunt, 292 U.S. 234, 239, 54 S.Ct. 695, 697, 78 L.Ed. 1230 (1934). This ancillary jurisdiction to interpret and enforce prior orders includes purchasers' actions for declaratory and injunctive relief to enforce orders of sale. Whitehead and Kales Co. v. Dempster, (In re Wiltse Bros. Corp.), 361 F.2d *948 295 (6th Cir.1966). This Court's jurisdiction to approve the purchase agreement is undisputed. Therefore, the Court has jurisdiction over this ancillary adversary proceeding seeking effectuation of that order. Moreover, jurisdiction may be exercised irrespective of an independent jurisdictional basis. Local Loan. As a proceeding ancillary to an order of sale, defined as a core proceeding under Section 157(b)(2)(N) of Title 28, the proceeding at bar is within the court's core jurisdiction. Canadian Shield Financial Corp. v. Estate of Deutscher, (In re Vincent), 68 B.R. 865 (Bankr.M.D. Tenn.1987).
The interests of justice and comity favor resolution of the within cause by this Court. This determination, hopefully, will avoid duplicative litigation in various forums and should avoid inconsistent rulings. Abstention under Section 1334(c)(1) of Title 28 is, therefore, inappropriate. Citibank, N.A. v. White Motor Corp., 761 F.2d 270 (6th Cir.1985).
II. SALES FREE AND CLEAR
The court's authority to sell free and clear of Defendants' claims, and the effect of the White Motor sale are in dispute. A summary of the respective arguments may be helpful at this juncture.
Volvo maintains the sale of White's assets was free and clear of Defendants' state court claims because federal bankruptcy law precludes imposition of successor liability on purchasers in bankruptcy sales. Under this theory, the non-existence of Defendants' claims on the date of sale is immaterial. Alternatively, it is argued that as a matter of federal law the claims did in fact exist on the sale date irrespective of their status under state tort law. Although the Trustee is a party-defendant, his arguments interpreting the sale and applicable law support Volvo's. Defendants argue that the court had no authority to sell free and clear of their claims which were not in existence on the sale date. Further, they argue the sale by its terms was not free and clear of their claims for successor liability.
A. LEGAL BASIS
Section 363(f) provides for sales "free and clear of any interest in such property of an entity other than the estate . . ." 11 U.S.C. § 363(f). This section authorizes sales free and clear of specific interests in the property being sold; liens, for example. See H.Rep. No. 595, 95th Cong., 1st Sess. 345 (1977), U.S.Code Cong & Admin.News 1978, p. 5787. General unsecured claimants including tort claimants, have no specific interest in a debtor's property. Therefore, section 363 is inapplicable for sales free and clear of such claims. See Rubinstein v. Alaska Pacific Consortium (In re New England Fish Co.), 19 B.R. 323 (Bankr.W.D.Wash.1982). But see American Living Systems v. Bonapfel (In re All American of Ashburn Inc.), 56 B.R. 186 (Bankr.N.D.Ga.1986).
Absence of specific statutory authority to sell free and clear poses no impediment. This authority is implicit in the court's general equitable powers and in its duty to distribute debtor's assets and determine controversies thereto. Van Huffel v. Harkelrode, 284 U.S. 225, 52 S.Ct. 115, 76 L.Ed. 256 (1931). Authority to conduct such sales is within the court's equitable powers when necessary to carry out the provisions of Title 11. 11 U.S.C. § 105(a). The sale in question was in fact conducted under the equitable provisions of Section 105. See Memorandum order of August 13, 1981 reported at 14 B.R. 584, wherein the court determined Section 363 was inappropriate for the sale of substantially all of a debtor's operating assets.
The court's power to sell free and clear is limited by its authority to affect claims. Schweitzer v. Consolidated Rail Corp., 65 B.R. 794 (E.D.Pa.1986). Its equitable power to sell free and clear must be interpreted consistent with its power to discharge claims under a plan of reorganization. Section 1141 of the Code delineates the effects of confirmation. Section 1141(a) setsforth those who are bound by plan confirmation. Section 1141(c) states that after confirmation "the property dealt with by the plan is free and clear of all *949 claims and interests of creditors, equity security holders and of general partners in the debtor." Section 1141(d) "discharges the debtor from any debt that arose before the date of such confirmation." A sale conducted through the court's equitable powers can provide the debtor the same degree of relief effected by a sale in a plan of reorganization and, therefore, can affect claims arising prior to confirmation. Mooney Aircraft, Inc. v. Foster, 730 F.2d 367 (5th Cir.1984), cited by Defendants, is not at variance with this proposition. In Mooney, the court noted a sale free and clear was ineffective against claims non-existent on the date of sale. The court, however, was concerned with a liquidation sale under Chapter VII of the Bankruptcy Act of July 1, 1898 whereby a court had jurisdiction to discharge pre-petition claims. Mooney clearly was neither addressing the issue of claims under the current code nor a court's authority to effect a discharge in a Chapter 11 reorganization.
In the within cause, the accident giving rise to Defendants' state actions occurred after the sale was authorized. The parties dispute the statutory limitations of tort claims under the Bankruptcy Code. Volvo cites authority suggesting federal law controls the existence of claims and that a tort claim for bankruptcy purposes exists when the negligent or injurious act occurs, not when the injury is sustained. See Roach v. Edge, 60 B.R. 690 (Bankr.M.D.Tenn.1986). Defendants maintain no claim exists under tort law until there is an identifiable injury. Hence, Defendants argue no claim for bankruptcy purposes exists until there is a legal relationship between the tort-feasor and the tort victim and, thus, there is no claim until a tort has occurred. See Schweitzer v. Consolidated Rail Corp., 758 F.2d 936 (3d Cir.1985). As noted, the issue regarding the status of unaccrued tort claims is unsettled. Bibler, The Status of Unaccrued Tort Claims In Chapter 11 Bankruptcy Proceedings, 61 The American Bankruptcy Law Journal 145 (Spring, 1987). If resolution of the issue were deemed necessary herein, this Court favors limited construction of tort claims based on state law concepts. Non-existence of Defendants' claims on the date of sale, however, is irrelevant because the pertinent consideration previously noted is whether the claims are within the scope of White Motor's reorganization.
Under either of the above definitions, the tort claims arose prior to plan confirmation and are within the scope of Debtor's discharge. Defendant Brown's claims are based on indemnity and contribution and, obviously, differ from the tort claims. Similar controversy exists regarding when these claims arise for bankruptcy purposes. Recent case law suggests Brown's claims arose, at the latest, when the primary action which might result in the right to indemnity is commenced. Avellino and Bienes v. M. Frenville Co., Inc., 744 F.2d 332 (3d Cir.1984), cert. denied, 469 U.S. 1160, 105 S.Ct. 911, 83 L.Ed.2d 925 (1985). In the present cause, the primary action was commenced pre-confirmation on August 22, 1983. Brown's claims, therefore, arose pre-confirmation.
For reasons setforth above, the sale was free and clear of all Defendants' claims. To the extent these claims are properly asserted, they will be addressed and considered in accordance with the plan of reorganization.
B. NOTICE
Defendants challenge the adequacy of their notice of the hearing of sale. "An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Central Hanover Bank and Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950). As previously discussed, Defendants had no specific interest in the property being sold. Moreover, they had no known claims against White Motor on the date of sale. To the extent Defendants were parties in interest to the sale, notice in publications of national circulation was reasonably calculated to inform them of *950 the pendency of sale and thus complied with requirements of due process.
III. PRE-EMPTION
A) Volvo asseverates that federal bankruptcy law pre-empts state law's imposing successor liability on purchasers of estate assets. The parties argue the relative merits of successor liability, but the issue to be decided is whether state successor liability law is pre-empted by federal law to the extent the claims underlying the successor's liability have been discharged under a plan of reorganization.
Federal pre-emption of state law must be explicit or compelled due to an unavoidable conflict between the federal and state law. Penn Terra Ltd. v. Department of Environmental Resources, 733 F.2d 267 (3d Cir.1984). Where it is contended that federal law confers a power not limitable by state law, the Supremacy Clause requires determining whether the state law frustrates the full objective of the federal legislation. U.S. Const, Art. VI, cl. 2. The purposes of the federal and state law must be construed to determine whether they are constitutionally in conflict. Perez v. Campbell, 402 U.S. 637, 91 S.Ct. 1704, 29 L.Ed.2d 233 (1971).
Traditional concepts of corporate successor non-liability have been held inapplicable in product liability cases. See generally 2 Dooley, Modern Tort Law, § 32.64.25 (1983). Under various theories purchasers of corporate assets have been held liable for injuries caused by units manufactured and distributed by their predecessors. Pennsylvania law, the law of the state where Defendants' actions are pending, is discussed for illustration. Pennsylvania law of successor liability has been authoritatively construed in Dawejko v. Jorgensen Steel Co., 434 A.2d 106, 290 Pa.Super. 15, (Pa.Super.Ct.1981). In Dawejko the court adopted the product-line exception to the general rule of non-liability under which a purchaser of corporate assets who undertakes essentially the same manufacturing operation as the seller is strictly liable for injuries caused by units manufactured and distributed by its predecessor. Volvo was held liable under this theory in Conway v. White Trucks, 639 F.Supp. 160 (M.D.Pa.1986). The purpose underlying successor liability is to protect defenseless victims of manufacturer's defects and spread the cost of compensation throughout society. Dawejko. Successor liability is imposed in part as a burden attaching to the manufacturer's good will enjoyed by the successor. Dawejko. Dawejko adopted the reasoning of Ramirez v. Amsted Industries, Inc., 431 A.2d 811, 86 N.J. 332 (N.J.Sup.Ct.1981) which noted that the true worth of assets must reflect this potential liability. In sum, successor liability is employed to prevent avoiding product liability by a sale of assets.
A primary purpose of the Bankruptcy Code is to grant debtors "a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt." Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934). The specific purpose of Chapter 11 reorganization is to give the debtor "a breathing spell so that it can adjust and compromise its debts." State of Ohio v. Mansfield Tire and Rubber Co., 660 F.2d 1108, 1113 (6th Cir.1981). As stated, supra, section 1141 setsforth the effects of confirmation of a plan of reorganization. A debtor's fresh start is effected by the discharge of all debts arising prior to confirmation. 11 U.S.C. § 1141(d). Moreover, Section 1141(c) states that after confirmation, "the property dealt with by the plan is free and clear of all claims and interests of creditors . . ." Plan confirmation, therefore, adjusts and discharges corporate debt and frees the debtor's property therefrom. Reorganization is a vehicle to finalize resolution of debt.
The liability which state law imposes through successor liability is that of the manufacturer. The federal purpose of final resolution and discharge of corporate debt is clearly compromised by imposing successor liability on purchasers of assets when the underlying liability has been discharged under a plan of reorganization. Moreover, successor liability is precluded *951 by Section 1141(c) which specifically frees debtor's property from creditors' claims. Successor liability in these circumstances has, therefore, been pre-empted by the Bankruptcy Code.
The effects of successor liability in the context of a corporate reorganization preclude its imposition. The successor liability specter would chill and deleteriously affect sales of corporate assets, forcing debtors to accept less on sales to compensate for this potential liability. This negative effect on sales would only benefit product liability claimants, thereby subverting specific statutory priorities established by the Bankruptcy Code. See 11 U.S.C. §§ 507 and 1129(a)(9). This result precludes successor liability imposition. See Forde v. Kee-Lox Manufacturing Co., 437 F.Supp. 631 (W.D.N.Y.1977), aff'd on other grounds, 584 F.2d 4 (2d Cir.1978); American Living Systems v. Bonapfel (In re All American of Ashburn, Inc.), 56 B.R. 186 (Bankr.N.D.Ga. 1986); and Rubinstein v. Alaska Pacific Consortium (In re New England Fish Co.), 19 B.R. 323 (Bankr.W.D.Wash.1982).
Defendants' arguments concerning administrative priority status of post-petition claims and a successor in liability's entitlement to subrogation are unfounded. Post-petition claims based on pre-petition activity are not intrinsically administrative expenses. Elevating product liability claims in priority through successor liability subverts the Code established priorities. Moreover, the issue to be decided is whether a successor can be held liable in light of the purposes of the Code. To state that a successor held liable would be entitled to subrogation merely circumvents that issue.
B) Article II, Section 2.02 of the parties' purchase agreement states Volvo will not assume "any liabilities of White (i) for personal injury or property damage because of alleged negligence or breach of warranty or under any other theory of product liability . . ." The terms of the order approving this agreement are unambiguous regarding preclusion of successor liability. The order of sale approved the parties' agreement "in all respects". Successor liability's preclusion by the language in the purchase agreement is further corroborated by Volvo's subsequent assumption of a portion of the liability in the supplemental agreement.
IV. EQUITABLE ESTOPPEL AND WAIVER
Equitable estoppel and waiver premised on Volvo's delay in raising the preclusive effect of the order of sale have been asserted. Circumstances negate their application. Estoppel is an equitable doctrine invoked to avoid injustice. Detrimental reliance is a necessary element. Thus, a party claiming estoppel must have reasonably relied on its adversary's conduct and changed positions to its detriment. Heckler v. Community Health Services, 467 U.S. 51, 104 S.Ct. 2218, 81 L.Ed.2d 42 (1984). The record reflects no detrimental reliance by Defendants. Volvo denied liability in the Pennsylvania cases and Defendants' actions in response have not been to their detriment. Waiver ordinarily defined as "an intentional relinquishment or abandonment of a known right or privilege" is equally inapplicable. Johnson v. Zerbst, 304 U.S. 458, 464, 58 S.Ct. 1019, 1023, 82 L.Ed. 1461 (1938). Mere reference to Volvo's delay in asserting effect of the sale does not constitute proof of intent to waive that right.
CONCLUSION
1) This Court has subject matter jurisdiction of Volvo's complaint for declaratory and injunctive relief. Abstention under Section 1334(c)(1) of Title 28 is inappropriate under the circumstances. Defendants' motions to dismiss are, therefore, denied.
2) The August 20, 1981 order approving the sale of White Motor's truck assets to Volvo, by its terms, precludes imposition of successor liability on Volvo, since the claims underlying this liability are discharged in White Motor's confirmed plan of reorganization. Defendants, therefore, are permanently enjoined from continuing any action against Volvo resulting from the September 3, 1981 accident, in state court or elsewhere. Defendants are specifically enjoined from continued prosecution of *952 their pending state court actions against Volvo relating to that accident. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1601441/ | 445 F.Supp. 1203 (1978)
TOWNSHIP OF LONG BEACH, Plaintiff,
v.
CITY OF NEW YORK et al., Defendants.
Civ. No. 76-1930.
United States District Court, D. New Jersey.
January 24, 1978.
*1204 *1205 *1206 Shackleton, Hazeltine, Zlotkin & Dasti by Richard J. Shackleton, Ship Bottom, N. J., for plaintiff.
Philip R. Kaufman, Spotswood, N. J., W. Bernard Richland, Corp. Counsel, New York City, for defendant City of New York.
Robert J. Del Tufo, U. S. Atty., Trenton, N. J. by Carl R. Woodward, III, Newark, N. J., for defendants Environmental Protection Agency and Russell E. Train, Administrator of the Environmental Protection Agency.
MEMORANDUM
CLARKSON S. FISHER, District Judge.
The controversy here presented is a familiar and continuing problem in the New Jersey shore area. It involves the dumping of garbage and sludge by the City of New York into the Hudson River and the Atlantic Ocean. The alleged result of such acts is the sludge which has settled on the ocean floor and spread in some areas to the beaches and resulted in a massive fish-kill which has occurred off the New Jersey coast line. The Township of Long Beach brings this action for injunctive and declaratory relief against the City of New York (hereinafter City), the Environmental Protection Agency (hereinafter EPA) and the Administrator of the EPA.
Jurisdiction of this Court is invoked pursuant to the Federal Water Pollution Control Act (hereinafter FWPCA), 33 U.S.C. § 1365, and the Marine Protection, Research and Sanctuaries Act of 1972 (hereinafter MPRSA), 33 U.S.C. § 1415. Jurisdiction is also grounded upon the following general jurisdictional provisions: 28 U.S.C. §§ 1331(a), 1332(a)(1) and 1337.
Plaintiff alleges that the City's discharge of waste into the Hudson River and the federal defendants' failure to establish a comprehensive program preventing, reducing or eliminating the pollution of the navigable waters of the Hudson River and the Atlantic Ocean are violative of the FWPCA, 33 U.S.C. § 1251 et seq. It also is contended that the issuance of certain permits by the federal defendants to the City allowing dumping violates the MPRSA, 33 U.S.C. § 1401 et seq., in that the City is allowed to dump material violating applicable water quality standards for the Hudson River and Atlantic Ocean and that such dumping has adversely affected both human health and welfare and marine environmental and ecological systems. It is further stated that the City has not complied with the permits, thereby violating the MPRSA. Plaintiff also charges the City with a violation of Section 13 of the Rivers and Harbors Act of 1899, 33 U.S.C. § 407, in that the City has discharged refuse other than that flowing from streets and sewers and passing therefrom in a liquid state into the Hudson River and the Atlantic Ocean. It is further contended that the City, by its acts, and the federal defendants, by their failure to act, have violated the rights of the citizens of the plaintiff which emanate from the Fifth, Ninth, and Fourteenth Amendments to the United States Constitution and have created and are maintaining a public nuisance.
Motions for dismissal based on various jurisdictional grounds and for failure to state a claim upon which relief can be granted and for summary judgment have been made by the defendants. The federal defendants have also moved for dismissal based upon improper venue,[1] the *1207 City apparently conceding that it waived the right to raise such a defense. See F.R. Civ.P. 12(h).[2]
Although jurisdictional questions normally should be addressed by the Court before the issue of venue, I decline to do so. There is no question that there is a split of authority among the federal courts with respect to many of the jurisdictional and standing issues presented herein. If this action is properly before a federal court in one of the districts of New York, I do not believe that I should decide these questions and thereby pronounce the law of the case in the event that such a court would decide the issues differently. I will, therefore, proceed to address the question of venue.[3]
It first is contended that the general venue statute, 28 U.S.C. § 1391(b),[4] conclusively limits venue to either the Eastern or Southern District of New York. This belief is based on the view that the claim arose in New York and, obviously, the City does not reside in New Jersey. Although admitting that the venue language is permissive, a similar argument is made with respect to the venue provision of the MPRSA, 33 U.S.C. § 1415(g)(3)(A).[5] This argument is rejected. It seems patently obvious that the claim upon which this action is based can be considered to have arisen in New Jersey as that certainly is the place where the effect of the alleged violations have weighed most heavily and it is the situs at which the injury occurred. See generally Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corp., 291 F.Supp. 252 (E.D.Pa.1968).
The venue provision of the FWPCA, 33 U.S.C. § 1365(c)(1), however, causes this Court to pause. That section provides that "[a]ny action respecting a violation by a discharge source of an effluent standard or limitation or an order respecting such standard or limitation may be brought under this section only in the judicial district in which such source is located." Plaintiff argues that this provision does not control the action brought against the federal defendants. Plaintiff points to the provision which allows citizen suits, which reads as follows:
*1208 (a) Except as provided in subsection (b) of this section, any citizen may commence a civil action on his own behalf
(1) against any person . . . who is alleged to be in violation of (A) an effluent standard or limitation under this chapter or (B) an order issued by the Administrator or a State with respect to such a standard or limitation, or
(2) against the Administrator where there is alleged a failure of the Administrator to perform any act or duty under this chapter which is not discretionary with the Administrator.
The district courts shall have jurisdiction, without regard to the amount in controversy or the citizenship of the parties, to enforce such an effluent standard or limitation, or such an order, or to order the Administrator to perform such act or duty, as the case may be, and to apply any appropriate civil penalties under section 1319(d) of this title.
33 U.S.C. § 1365. It is contended that a plain reading of the venue provision establishes that it encompasses only an "action respecting a violation by a discharge source of an effluent standard or limitation or an order respecting such standard or limitation." 33 U.S.C. § 1365(c)(1).
No case law addressing this problem has been found. The Court must agree, however, that the venue provision appears to apply only to the action described in 33 U.S.C. § 1365(a)(1). The venue objection is made on behalf of the federal defendants. The claim against them is based on the action for which provision is made in 33 U.S.C. § 1365(a)(2).
The reason behind the application of the venue provision to the former action is obvious. It would be burdensome to require the violator to defend itself in various forums other than that where the source is located. This reason is not, however, applicable when the suit is against the federal agency and the administrator thereof. I therefore concur with plaintiff's interpretation of the statute and hold that 33 U.S.C. § 1365(c)(1) does not control an action brought pursuant to 33 U.S.C. § 1365(a)(2). Accordingly, I deny the federal defendants' motion for dismissal pursuant to F.R.Civ.P. 12(b)(3) for improper venue.
Defendants contend that this Court lacks subject matter jurisdiction over that portion of this suit which is based on the FWPCA because of plaintiff's failure to comply with 33 U.S.C. § 1365(b), which reads as follows:
(b) No action may be commenced
(1) under subsection (a)(1) of this section
(A) prior to sixty days after the plaintiff has given notice of the alleged violation (i) to the Administrator, (ii) to the State in which the alleged violation occurs, and (iii) to any alleged violator of the standard, limitation, or order, or
(B) if the Administrator or State has commenced and is diligently prosecuting a civil or criminal action in a court of the United States, or a State to require compliance with the standard, limitation, or order, but in any such action in a court of the United States any citizen may intervene as a matter of right.
(2) under subsection (a)(2) of this section prior to sixty days after the plaintiff has given notice of such action to the Administrator,
except that such action may be brought immediately after such notification in the case of an action under this section respecting a violation of sections 1316 and 1317(a) of this title. Notice under this subsection shall be given in such manner as the Administrator shall prescribe by regulation.
Plaintiff states that jurisdiction is conferred upon the Court by 28 U.S.C. § 1331 and 33 U.S.C. § 1365(e). This latter statute, which is part of the FWPCA, provides that "[n]othing in this section shall restrict any right which any person (or class of persons) may have under any statute or common law to seek enforcement of any effluent standard or limitation or to seek any other relief (including relief against the Administrator or a State agency)."
*1209 A number of cases supporting plaintiff's position hold that compliance with the notice provision of the FWPCA is not the exclusive way in which a suit based on alleged violations of the FWPCA can be properly brought before the Court. These cases hold that jurisdiction over the subject matter can be obtained if jurisdiction is alleged to arise under 28 U.S.C. § 1331(a).[6]See Natural Resources Defense Council, Inc. v. Callaway, 524 F.2d 79, 83-84 & n. 4, 94 (2d Cir. 1975); Natural Resources Defense Council, Inc. v. Train, 166 U.S.App. D.C. 312, 510 F.2d 692, 698-703 (1975); Conservation Soc'y of So. Vt., Inc. v. Secretary of Transp., 508 F.2d 927, 938-39 & n. 62 (2d Cir. 1974), cert. granted, judgment vacated & case remanded on other grounds, 423 U.S. 809, 96 S.Ct. 19, 46 L.Ed.2d 29 (1975); Minnesota v. Callaway, 401 F.Supp. 524, 526-27 (D.Minn.1975), rev'd on other grounds sub nom. Minnesota v. Hoffman, 543 F.2d 1198 (8th Cir. 1976), appeal dismissed & cert. denied sub nom. Minnesota v. Alexander, 430 U.S. 977, 97 S.Ct. 1672, 52 L.Ed.2d 373 (1977).[7] It is reasoned that such a result gives effect to 33 U.S.C. § 1365(e).
Defendants rely on Massachusetts v. United States Veterans Administration, 541 F.2d 119 (1st Cir. 1976).[8] Although that case appears to stand for the proposition that the notice provisions of the FWPCA must be complied with in order to confer jurisdiction on this Court to hear a claim based upon the FWPCA, the case is distinguishable. There the court affirmed the dismissal by the district court which was based on failure to comply with the notice requirements. The plaintiff then argued that the court had jurisdiction pursuant to 28 U.S.C. § 1331(a) over its claim sounding in the federal common law of public nuisance. The court found that
[t]here are several significant legal problems with the [plaintiff's] theory any one of which might be dispositive. First, the allegations of nuisance embodied in the complaint are founded on a violation of the FWPCA, and not upon unreasonable damage to the resources of the [plaintiff] independent of the Act. There is, at present, a significant debate whether causes of action dependent upon violations of the FWPCA can be asserted under federal question jurisdiction, 28 U.S.C. § 1331(a), rather than under grants of jurisdiction expressly provided in the Act.
Id. at 122. The court did "not address these difficult issues, however, because there is a legal bar which clearly precludes the maintenance of this suit under the [plaintiff's] theory: sovereign immunity." Id. at 123. The court concluded that Congress had *1210 waived immunity only as to suits brought under the FWPCA and as that cause of action was unavailable to the plaintiff, the suit based on the federal common law of public nuisance was barred. The court thus never directly addressed the question of a suit brought under 33 U.S.C. § 1365(e) and 28 U.S.C. § 1331(a). In fact, in a later decision by a district court in the First Circuit, it appeared to be assumed that jurisdiction could be grounded upon 28 U.S.C. § 1331(a) through the use of 33 U.S.C. § 1365(e). Save Our Sound Fisheries Ass'n v. Callaway, 429 F.Supp. 1136, 1140-41, 1143 n. 10, (D.R.I.1977).
I concur with the reasoning of the Second and District of Columbia Circuits and find that plaintiff has properly grounded jurisdiction on 28 U.S.C. § 1331(a).[9]
The federal defendants argue that even if jurisdiction is properly based upon 28 U.S.C. § 1331(a), the FWPCA action is barred by sovereign immunity. It is contended that Congress only intended to waive the immunity bar when there was compliance with the notice provision. I reject this argument and find that the action is not barred by sovereign immunity since "it is clear from the language of [the FWPCA] and its legislative history that Congress intended to waive sovereign immunity as to any action brought to enforce the terms of the [FWPCA]." Minnesota v. Callaway, supra at 528.
It also is posited that this Court lacks subject matter jurisdiction because the Administrator is diligently prosecuting a civil action against the City for violations of the FWPCA. The FWPCA provides that
(b) No action may be commenced
(1) under subsection (a)(1) of this section
(A) . . .
(B) if the Administrator or State has commenced and is diligently prosecuting a civil or criminal action in a court of the United States, or a State to require compliance with the standard, limitation, or order, but in any such action in a court of the United States any citizen may intervene as a matter of right.
33 U.S.C. § 1365(b). This statute does not preclude the FWPCA action against the federal defendants because that claim is based upon 33 U.S.C. § 1365(a)(2). Furthermore, the action initiated by the Administrator was filed after this complaint. Therefore, no suit was commenced or being diligently prosecuted at the time the present action was filed. The statute thus does not preclude the exercise of jurisdiction by this Court.
The citizen suit provisions of the FWPCA are identical in all relevant respects to those of the MPRSA. Compare 33 U.S.C. § 1365(a), (b) and (e) with 33 U.S.C. § 1415(g).[10] Accordingly, I find that this *1211 Court has jurisdiction over the claims based upon the MPRSA and that such action against the federal defendants is not barred by sovereign immunity.
Defendants contend that plaintiff lacks standing to bring an action predicated upon section 13 of the Rivers and Harbors Act of 1899,[11] 33 U.S.C. § 407, because the enforcement of that Act is specifically delegated to the United States, see 33 U.S.C. § 413, and there is no implied private right of action emanating therefrom. See, e. g., Connecticut Action Now, Inc. v. Roberts Plating Co., 457 F.2d 81 (2d Cir. 1972) (suit expressly brought on behalf of the general public); Loveladies Property Owners Ass'n v. Raab, 430 F.2d 276, 281 (D.N.J.1975), aff'd mem. 547 F.2d 1162 (3d Cir. 1976), cert. denied, 432 U.S. 906, 97 S.Ct. 2945, 53 L.Ed.2d 1077 (1977); Parsell v. Shell Oil Co., 421 F.Supp. 1275, 1277-80 (D.Conn.1976); Burgess v. M/V Tamano, 373 F.Supp. 839, 844-45 (D.Maine 1974); Bass Anglers Sportsman's Soc'y v. Scholze Tannery, Inc., 329 F.Supp. 339 (E.D.Tenn.1971); Bass Anglers Sportsman's Soc'y v. U. S. Plywood-Champion Papers, Inc., 324 F.Supp. 302 (S.D.Tex.1971); Bass Angler Sportsman Soc'y v. United States Steel Corp., 324 F.Supp. 412, 416 (U.S.D.C.), aff'd per curiam sub nom. Bass Anglers Sportsman Soc'y v. Koppers Co., 447 F.2d 1304 (5th Cir. 1971).[12] Conceding that under normal circumstances no private right of action arises pursuant to this Act, plaintiff, nevertheless, attempts to distinguish these cases by stating that none of them involved a situation wherein the defendant was an agency of the federal government. Plaintiff then proceeds to rely on Natural Resources Defense Council, Inc. v. Grant, 355 F.Supp. 280 (E.D.N.C.1973), wherein the court held that a private person had standing to bring an action pursuant to section 13 of the Refuse Act, 33 U.S.C. § 407. The court therein reasoned that since the defendants were represented by the same office that was delegated the authority to enforce the *1212 Refuse Act, the plaintiffs should be allowed to enforce it and seek injunctive relief as private attorneys general. Accord, Illinois v. Hoffman, 425 F.Supp. 71, 76 (S.D.Ill. 1977). The cases relied upon by the court in reaching that decision, however, did not involve section 13, but, rather, involved other sections of the Refuse Act.[13]See Parsell v. Shell Oil Co., supra at 1277 & n. 4.
Furthermore, a federal agency was one of the defendants in the following cases which held that there was no private right of action under section 13 of the Refuse Act, 33 U.S.C. § 407. Bass Anglers Sportsman's Soc'y v. Scholze Tannery, Inc., supra at 342; Bass Anglers Sportsman's Soc'y v. U. S. Plywood-Champion Papers, Inc., supra at 306-07; Bass Angler Sportsman Soc'y v. United States Steel Corp., supra at 416.
Finally, in Red Star Towing & Transp. Co. v. Department of Transp., 423 F.2d 104, 105 (3d Cir. 1970), the Third Circuit stated that the Refuse Act "did not . . . create any civil cause of action in favor of private parties injured by any violation of the Act." Accord, Loveladies Property Owners Ass'n v. Raab, supra at 281. In fact, a number of other courts have construed that decision as holding that there is no right of private action under any of the provisions of the Refuse Act. Sierra Club v. Morton, 400 F.Supp. 610, 622 n. 6 (N.D. Cal.1975); River v. Richmond Metropolitan Authority, 359 F.Supp. 611, 639 (E.D.Va.), aff'd per curiam, 481 F.2d 1280 (4th Cir. 1973). Contra, Illinois v. Hoffman, supra at 76.
I therefore hold that section 13 of the Refuse Act, 33 U.S.C. § 407, does not give rise to a private right of action. Accordingly, plaintiff's claim under that provision must be dismissed for failure to state a claim upon which relief can be granted.[14]
Plaintiff also attempts to ground its suit upon the Fifth, Ninth and Fourteenth Amendments. This action is one which seeks to protect the environment. It generally has been held that there is no constitutional right to such protection. See Ely v. Velde, 451 F.2d 1130, 1139 (4th Cir. 1971); Gasper v. Louisiana Stadium & Exposition Dist., 418 F.Supp. 716, 720-22 (E.D. La.1976); Upper W. Fork River Watershed Ass'n v. Corps of Engineers, 414 F.Supp. 908, 931-32 (N.D.W.Va.1976), aff'd mem. 556 F.2d 576 (4th Cir. 1977); Pinkney v. Ohio Environmental Protection Agency, 375 F.Supp. 305, 309-10 (N.D.Ohio 1974); Hagedorn v. Union Carbide Corp., 363 F.Supp. 1061, 1064-65 (N.D.W.Va.1973); Virginians for Dulles v. Volpe, 344 F.Supp. 573, 579 (E.D.Va.1972), aff'd in part and rev'd in part, 541 F.2d 442 (4th Cir. 1976); Tanner v. Armco Steel Corp., 340 F.Supp. 532, 536-37 (S.D.Tex.1972); Environmental Defense Fund v. Corps of Engineers, 325 F.Supp. 728, 739 (E.D.Ark.1971). Plaintiff cites no case to the contrary.
Although such a legal theory may be appealing, it is not "desirable for a lower court to embrace the exhilarating opportunity of anticipating a doctrine which may be in the womb of time, but whose birth is *1213 distant." Spector Motor Serv., Inc. v. Walsh, 139 F.2d 809, 823 (2d Cir.) (Hand, J., dissenting), vacated and remanded sub nom. Spector Motor Serv., Inc. v. McLaughlin, 323 U.S. 101, 65 S.Ct. 152, 89 L.Ed. 101 (1944). It accordingly is found that the claims which are based on these constitutional provisions must be dismissed for failure to state a claim upon which relief can be granted.
The federal common law of nuisance is another theory upon which plaintiff predicates its complaint. An analysis of this area must begin with a review of Illinois v. City of Milwaukee, 406 U.S. 91, 92 S.Ct. 1385, 31 L.Ed.2d 712 (1972). In that case, the State of Illinois brought an action against four Wisconsin cities and a City and a County Sewerage Commission seeking to stop the pollution of Lake Michigan, an interstate body of water. It was contended that such pollution constituted a public nuisance. The plaintiff attempted to invoke the original jurisdiction of the Supreme Court pursuant to Article III, section 2, clause 2 of the United States Constitution and 28 U.S.C. § 1251. Because it was ultimately decided that jurisdiction could arise under 28 U.S.C. § 1331(a),[15] the Court declined to exercise its original jurisdiction.
The Court cursorily disposed of the question of the jurisdictional amount by stating that "[t]he considerable interests involved in the purity of interstate waters would seem to put beyond question the jurisdictional amount provided in § 1331(a)." 406 U.S. at 98, 92 S.Ct. at 1390. The principal issue addressed by the Court was "whether pollution of interstate or navigable waters creates actions arising under the `laws' of the United States within the meaning of § 1331(a)." Id. at 99, 92 S.Ct. at 1390. It was held that such an action does arise under § 1331(a) and "that § 1331(a) includes suits brought by a State." Id. The Court reasoned that the term "laws" includes federal common law. See Parks v. "Mr. Ford", 556 F.2d 132, 139 n. 9 (3d Cir. 1977). Accepting the rationale enunciated in Texas v. Pankey, 441 F.2d 236 (10th Cir. 1971), the Court found that federal common law embraced the ecological and environmental rights of a State when those rights are injured by sources outside of the State.
Defendants herein first argue that plaintiff cannot bring this action since it is not a State. It is agreed that the decision in Illinois v. City of Milwaukee, supra, should not be extended to encompass an action by a private person. In response to this contention, it should be noted that plaintiff is not a private person or entity but, rather, is a township. Cases such as Parsell v. Shell Oil Co., supra, are therefore inapposite.[16]
Defendants believe that there is language in Illinois v. City of Milwaukee, supra, which evidences an intent to limit reliance upon the federal common law of nuisance to a State. Although the Court in that case immediately was concerned with an action brought by a State, the broader holding of *1214 the case was the "pollution of interstate or navigable waters creates actions arising under the `laws' of the United States within the meaning of § 1331(a)." 406 U.S. at 99, 92 S.Ct. at 1390. The language to which defendants refer seems to have been utilized only because that action and the cases upon which the Court relied, involved a State plaintiff. In fact, the Court stated that
it is not only the character of the parties that requires us to apply federal law. See Georgia v. Tennessee Copper Co., 206 U.S. 230, 237; cf. Wisconsin v. Pelican Ins. Co., 127 U.S. 265, 289; The Federalist No. 80 (A. Hamilton). As Mr. Justice Harlan indicated for the Court in Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 421-27, where there is an overriding federal interest in the need for a uniform rule of decision or where the controversy touches basic interests of federalism, we have fashioned federal common law . . Certainly these same demands for applying federal law are present in the pollution of a body of water such as Lake Michigan bounded, as it is, by four States.
Id. at 105 n. 6, 92 S.Ct. at 1393.
A number of courts have expanded upon the decision in Illinois v. City of Milwaukee, supra and have allowed the United States to bring an action to abate a common law nuisance. See United States v. Stoeco Homes, Inc., 498 F.2d 597, 611 (3d Cir. 1974), cert. denied, 420 U.S. 927, 95 S.Ct. 1124, 43 L.Ed.2d 397 (1975); United States ex rel. Scott v. United States Steel Corp., 356 F.Supp. 556 (N.D.Ill.1973); United States v. Ira S. Bushey & Sons, Inc., 346 F.Supp. 145, 148 (D.Vt.1972). But see United States v. Lindsay, 357 F.Supp. 784, 794 (E.D.N.Y.1973). Furthermore, in Committee for the Consideration of the Jones Falls Sewage Sys. v. Train, 539 F.2d 1006, 1009 n. 8 (4th Cir. 1976), the court stated that "[i]t is not essential that one or more states be formal parties if the interests of the state are sufficiently implicated." The interests sought to be protected herein are ones which affect the entire state, both aesthetically and economically.
I can see no reason why the township should not be entitled to bring an action based on the federal common law of nuisance. The extension of Illinois v. City of Milwaukee, supra, to include governmental units does not appear to be a drastic or an unwarranted application. In fact, such an expansion appears to aid in the effectuation of the concerns which prompted the Court to take the action further implementing the evolution of the federal common law. For instance, the Court stated that "[w]hen we deal with air and water in their ambient or interstate aspects, there is federal common law." 406 U.S. at 103, 92 S.Ct. at 1392. (footnote omitted). See also Vermont v. New York, 417 U.S. 270, 275 n. 5, 94 S.Ct. 2248, 41 L.Ed.2d 61 (1974). No statement was made that the interest of the State itself precipitated the development of such a common law.
Taking into consideration the equitable nature of the federal common law of nuisance, the clearly interstate nature of the dispute, and the significant repercussions that any matter involving the well-being and preservation of the New Jersey Coastal region has on the entire State, I find that plaintiff is entitled to bring an action based on the federal common law of nuisance. See Byram River v. Port Chester, 394 F.Supp. 618, 622 (S.D.N.Y.1975). Cf. Michie v. Great Lakes Division, Nat'l Steel Corp., 495 F.2d 213, 216 n. 6 (6th Cir.) cert. denied, 419 U.S. 997, 95 S.Ct. 310, 42 L.Ed.2d 270 (1974).
It further is contended that the FWPCA pre-empts the federal common law of nuisance. In Illinois v. City of Milwaukee, supra, the Court found no such preemption, but this decision was before the 1972 amendments to the FWPCA. In fact, the Court noted that "[i]t may happen that new federal laws and new federal regulations may in time pre-empt the field of federal common law of nuisance. But until that comes to pass, federal courts will be empowered to appraise the equities of the suits alleging creation of a public nuisance by water pollution." Id. at 107. The question of pre-emption therefore focuses on the *1215 effect of the 1972 amendments to the FWPCA.
In United States ex rel. Scott v. United States Steel Corp., supra, the court stated that the federal common law of nuisance was not pre-empted by the 1972 amendments, but specifically noted that its decision was prior to the adoption of the regulations. See also United States v. Ira S. Bushey & Sons, Inc., 363 F.Supp. 110, 119-20 (D.Vt.), aff'd mem. 487 F.2d 1393 (2d Cir. 1973), cert. denied, 417 U.S. 976, 94 S.Ct. 3182, 41 L.Ed.2d 1146 (1973). In Stream Pollution Control Bd. v. United States Steel Corp., 512 F.2d 1036 (7th Cir. 1975), the Seventh Circuit found it unnecessary to decide the pre-emption issue at that time since only jurisdictional motions were then before it. The Eighth Circuit in Reserve Mining Co. v. United States, 514 F.2d 492, 532 (8th Cir. 1975) (footnote omitted), found violations of the FWPCA and the Refuse Act and therefore "deem[ed] it unnecessary and, indeed, unwise to also rely on federal nuisance law."
Section 505(e) of the FWPCA, 33 U.S.C. § 1365(e), the provision which provides the authority for citizen suits, reads as follows: "Nothing in this section shall restrict any right which any person (or class of persons) may have under any statute or common law to seek enforcement of any effluent standard or limitation or to seek any other relief (including relief against the Administrator or a State agency)." It would thus seem that Congress did not intend to preempt common law nuisance actions.[17] This interpretation is strengthened by the fact that statutes are not to be construed in derogation of common law unless such an intent is clear. See Isbrandtsen Co. v. Johnson, 343 U.S. 779, 783, 72 S.Ct. 1011, 96 L.Ed. 1294 (1932).
Illinois v. City of Milwaukee, 366 F.Supp. 298 (N.D.Ill.1973), was decided after the Supreme Court remanded the case to the district court for disposition. In that case, the court answered in the negative when faced with the question of whether the 1972 amendments of the FWPCA pre-empted the federal common law of nuisance. The court noted that prior to the 1972 amendments, it consistently had been held that the Act had not pre-empted the common law. It then was pointed out that when Congress intended provisions of the FWPCA to pre-empt other statutes, it made its objective explicit. Also rejected was the contention that certain recently enacted regulations pre-empted the federal common law of nuisance.
I am inclined to hold that there has been no pre-emption of the federal common law of nuisance by the 1972 amendments to the FWPCA and the regulations promulgated thereunder. Apparently, however, even the district court decision in Illinois v. City of Milwaukee, supra, was rendered before the effluent standards were announced. See Stream Pollution Control Bd. v. United States Steel Corp., supra at 1040 n. 10. At this time, I will therefore deny the motion to dismiss based on pre-emption without prejudice to a renewal thereof after further clarification of the nature of this suit, the new regulations and their effect on the pre-emption issue. See Committee for the Consideration of the Jones Falls Sewage Sys. v. Train, supra at 1010 (Butzner, J., dissenting).
The absence of special injury also is said to bar both the federal and state common law nuisance claims. Assuming, without deciding, that it is necessary to establish special injury, the presence or absence of such injury is a material issue of fact certainly not ripe for resolution at this time. Although defendants state that special injury was not alleged in the complaint, upon a liberal reading, the allegations therein are sufficient to imply such a contention.
There is another question with respect to the state and federal nuisance claims which has not been raised and therefore will not be decided at this juncture. The issue concerns *1216 the viability and effect of the state nuisance claim in the face of the applicability of the federal common law of nuisance cause of action. In Illinois v. City of Milwaukee, supra at 107, 92 S.Ct. at 1395 (footnote omitted), the Supreme Court stated that
federal courts will be empowered to appraise the equities of the suits alleging creation of a public nuisance by water pollution. While federal law governs, consideration of state standards may be relevant. . . . Thus, a State with high water-quality standards may well ask that its strict standards be honored and that it not be compelled to lower itself to the more degrading standards of a neighbor. There are no fixed rules that govern; these will be equity suits in which the informed judgment of the chancellor will largely govern.
The direction of the Court's thinking may be somewhat clarified by its quotation of the following passage from Texas v. Pankey, supra at 241-42: "Federal common law and not the varying common law of the individual States is, we think, entitled and necessary to be recognized as a basis for dealing in uniform standard with the environmental rights of a State against improper impairment by sources outside its domain." 406 U.S. at 107 n. 9, 92 S.Ct. at 1395.[18]See generally Miree v. DeKalb County, 433 U.S. 25, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977).
Accordingly, I deny defendants' motions to dismiss the claims based on nuisance.[19] An order consented to as to form shall be submitted within two weeks of the receipt hereof.
NOTES
[1] Plaintiff states that the federal defendants waived their right to raise the improper venue defense by their failure to file a timely pre-answer motion and their failure to file an answer preserving the defense within the 60-day time limitation of F.R.Civ.P. 12(a). Service of the complaint and summons was effected on the federal defendants on October 22, 1976. These defendants filed their answer on January 19, 1977.
The defendants contend that plaintiff failed to serve the Attorney General of the United States as required by F.R.Civ.P. 4(d)(4), consequently never perfecting service and causing the 60-day limitation never to have commenced running until the voluntary appearance of the defendants on January 19, 1977.
F.R.Civ.P. 4(d)(4) does not appear to be applicable, however, since this action is not one against the United States. Instead, F.R.Civ.P. 4(d)(5) applies. That rule requires service upon the defendant officer or agency of the United States, which was accomplished.
I reject, however, plaintiff's proposition that the federal defendants waived their right to object on the ground of improper venue. Granger v. Kemm, Inc., 250 F.Supp. 644 (E.D.Pa. 1966), upon which plaintiff relies, involved a situation wherein the defendant filed no answer, but simply brought a motion objecting to venue 55 days after the complaint was served. In the present suit, the defense was properly preserved in the answer. Plaintiff in this case never instructed the clerk to enter default and in fact later consented to an amendment of the answer.
[2] The federal defendants, presumably on behalf of the City, contend that the venue provision of the FWPCA, 33 U.S.C. § 1365(c)(1), is jurisdictional and therefore nonwaivable. Objection to venue is "a privilege personal to each defendant" and cannot be raised by one defendant on behalf of another. I Moore, Federal Practice ¶ 0.146[6] at 1669-71. Even if this were not so, I believe that any rights obtained under this venue provision are waivable.
[3] Plaintiff argues that because a pre-answer motion based upon improper venue was not made, this Court should not, at this time, consider such objections. The federal defendants preserved this defense in their answer. F.R. Civ.P. 12(d) allows the court to have a preliminary hearing on a motion based upon a 12(b) defense before the trial even though no pre-answer motion was made if the defense is properly preserved. Not to hear such motions until the trial could cause a great waste of both the court's and the litigants' time. Accordingly, I will now consider this motion.
[4] 28 U.S.C. § 1391(b) provides as follows: "A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law."
[5] 33 U.S.C. § 1415(g)(3)(A) provides as follows: "Any suit under this subsection may be brought in the judicial district in which the violation occurs."
[6] The jurisdictional amount is satisfied since "[t]he considerable interests involved in the purity of interstate waters would seem to put beyond question the jurisdictional amount provided in § 1331(a)." Illinois v. Milwaukee, 406 U.S. 91, 98, 92 S.Ct. 1385, 1390, 31 L.Ed.2d 712 (1972). Accord, Minnesota v. Callaway, 401 F.Supp. 524, 527-28 (D.Minn.1975), rev'd on other grounds sub nom. Minnesota v. Hoffman, 543 F.2d 1198 (8th Cir. 1976), appeal dismissed and cert. denied sub nom. Minnesota v. Alexander, 430 U.S. 977, 97 S.Ct. 1672, 52 L.Ed.2d 373 (1977).
[7] Some of these cases hold that jurisdiction can also be based upon the Administrative Procedure Act, 5 U.S.C. § 701 et seq. In Califano v. Sanders, 430 U.S. 99, 97 S.Ct. 980, 51 L.Ed.2d 192 (1977), however, it was held that the Administrative Procedure Act is not an independent grant of jurisdiction. Accord, Chaudoin v. Atkinson, 494 F.2d 1323, 1328 (3d Cir. 1974).
[8] Defendants also rely on Bethlehem Steel Corp. v. Train, 544 F.2d 657 (3d Cir. 1976), cert. denied sub nom. Bethlehem Steel Corp. v. Quarles, 430 U.S. 975, 97 S.Ct. 1666, 52 L.Ed.2d 369 (1977). In that case, the court, while discussing the question of mootness, noted that "a citizen must give the EPA advance notice of his intention to sue." Id. at 660 (footnote omitted). This statement was dictum and was made without any analysis or even mention of the relevant case law. Accordingly, I do not find this language binding.
Defendants' reliance on Loveladies Property Owners Ass'n v. Raab, 430 F.Supp. 276 (D.N.J. 1975), aff'd mem. 547 F.2d 1162 (3d Cir. 1976), cert. denied, 432 U.S. 906, 97 S.Ct. 2949, 53 L.Ed.2d 1077 (1977), is also misplaced. Although the complaint in that case was dismissed for failure to comply with the notice provision, it was specifically noted that the plaintiff therein did not plead jurisdiction based on 28 U.S.C. § 1331(a) and that, moreover, the jurisdictional amount probably would not have been satisfied. See 430 F.Supp. at 281 & n. 5.
[9] In view of this holding, it is not necessary to address the substantial or constructive compliance theory proffered by the plaintiff. It is interesting to note, however, that such a theory has been approved when the giving of notice would be futile, see Massachusetts v. United States Veterans Administration, 541 F.2d 119, 121-22 (1st Cir. 1976); Natural Resources Defense Council v. Callaway, 524 F.2d 79, 84 n. 4 (2d Cir. 1975); Save Our Sound Fisheries Ass'n v. Callaway, 429 F.Supp. 1136, 1142-45 (D.R.I. 1977), or when the notice defect is cured by supplemental pleadings, see Massachusetts v. United States Veterans Administration, supra at 121; Montgomery Environmental Coalition v. Fri, 366 F.Supp. 261, 264-66 (D.D.C.1973).
Plaintiff states that it has alleged violations of the FWPCA based on 33 U.S.C. §§ 1316 and 1317(a), jurisdiction of which is not in any way premised on a 60-day notice requirement. Instead, an action based upon violations of these sections may be brought immediately upon notification. See 33 U.S.C. § 1365(b). Defendants respond by stating that the complaint does not properly allege violations of these provisions and thus conclude that compliance with the 60-day notice requirement is mandatory. Due to the holding that this Court has jurisdiction over the FWPCA claims even in the absence of the 60-day notice, it is not necessary to either address or resolve this controversy.
[10] 33 U.S.C. § 1415(g) provides as follows:
(g)(1) Except as provided in paragraph (2) of this subsection any person may commence a civil suit on his own behalf to enjoin any person, including the United States and any other governmental instrumentality or agency (to the extent permitted by the eleventh amendment to the Constitution), who is alleged to be in violation of any prohibition, limitation, criterion, or permit established or issued by or under this subchapter. The district courts shall have jurisdiction, without regard to the amount in controversy, or the citizenship of the parties, to enforce such prohibition, limitation, criterion, or permit, as the case may be.
(2) No action may be commenced
(A) prior to sixty days after notice of the violation has been given to the Administrator or to the Secretary, and to any alleged violator of the prohibition, limitation, criterion, or permit; or
(B) if the Attorney General has commenced and is diligently prosecuting a civil action in a court of the United States to require compliance with the prohibition, limitation, criterion, or permit; or
(C) if the Administrator has commenced action to impose a penalty pursuant to subsection (a) of this section, or if the Administrator, or the Secretary, has initiated permit revocation or suspension proceedings under subsection (f) of this section; or
(D) if the United States has commenced and is diligently prosecuting a criminal action in a court of the United States or a State to redress a violation of this subchapter.
(3)(A) Any suit under this subsection may be brought in the judicial district in which the violation occurs.
(B) In any such suit under this subsection in which the United States is not a party, the Attorney General, at the request of the Administrator or the Secretary, may intervene on behalf of the United States as a matter of right.
(4) The court, in issuing any final order in any suit brought pursuant to paragraph (1) of this subsection may award costs of litigation (including reasonable attorney and expert witness fees) to any party, whenever the court determines such award is appropriate.
(5) The injunctive relief provided by this subsection shall not restrict any right which any person (or class of persons) may have under any statute or common law to seek enforcement of any standard or limitation or to seek any other relief (including relief against the Administrator, the Secretary, or a State agency).
[11] The Rivers and Harbors Act of 1899 will hereinafter be cited as The Refuse Act.
[12] In the following cases it was held that quitam actions to recover penalties for discharge of refuse matter into navigable waters are not permitted. Hughes v. Ranger Fuel Corp., 467 F.2d 6, 8 n. 1 (4th Cir. 1972); Jacklovich v. Interlake, Inc., 458 F.2d 923, 927 (7th Cir. 1972); Connecticut Action Now, Inc. v. Roberts Plating Co., 457 F.2d 81, 83-86 (2d Cir. 1972); Bass Angler Sportsman Soc'y v. United States Steel Corp., 324 F.Supp. 412, 415-16 (U.S.D.C.) aff'd per curiam sub nom. Bass Anglers Sportsman Soc'y v. Koppers Co., 447 F.2d 1304 (5th Cir. 1971).
[13] Alameda Conservation Ass'n v. California, 437 F.2d 1087, 1088 (9th Cir.) cert. denied, 402 U.S. 908, 91 S.Ct. 1380, 28 L.Ed.2d 649 (1971) (sections 9, 10 & 12 of the Refuse Act, 33 U.S.C. §§ 401, 403 & 406); Neches Canal Co. v. Miller & Vidor Lumber Co., 24 F.2d 763 (5th Cir. 1928) (sections 9 & 12 of the Refuse Act, 33 U.S.C. §§ 401 & 406); Sierra Club v. Leslie Salt Co., 354 F.Supp. 1099, 1104-05 (N.D.Cal. 1972) (sections 9 & 10 of the Refuse Act, 33 U.S.C. §§ 401 & 403). See Citizens Comm. for Hudson Valley v. Volpe, 425 F.2d 97, 101 (2d Cir.), cert. denied, 400 U.S. 949, 91 S.Ct. 237, 27 L.Ed.2d 256 (1970) (sections 9 & 10 of the Refuse Act, 33 U.S.C. §§ 401 & 403); Potomac River Ass'n v. Lundeberg Md. Seamanship School, Inc., 402 F.Supp. 344, 350, 354-58 (D.Md.1975) (section 10 of the Refuse Act, 33 U.S.C. § 403); Sierra Club v. Morton, 400 F.Supp. 610, 622-25 (N.D.Cal.1975) (sections 9 & 10 of the Refuse Act, 33 U.S.C. §§ 401 & 403); River v. Richmond Metropolitan Authority, 359 F.Supp. 611, 617 (E.D.Va.), aff'd per curiam, 481 F.2d 1280 (4th Cir. 1973) (sections 9 & 10 of the Refuse Act, 33 U.S.C. §§ 401 & 403); Rucker v. Willis, 358 F.Supp. 425, 427 (E.D.N.C.1973), aff'd 484 F.2d 158 (4th Cir. 1973) (section 10 of the Refuse Act, 33 U.S.C. § 403).
[14] Because of this disposition, it is unnecessary to address the other issues raised by the defendants with respect to the claims based upon section 13 of the Refuse Act, 33 U.S.C. § 407.
[15] 28 U.S.C. § 1331(a) provides as follows: "The district courts shall have original jurisdiction of all civil actions wherein the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and arises under the Constitution, laws, or treaties of the United States, except that no such sum or value shall be required in any such action brought against the United States, any agency thereof, or any officer or employee thereof in his official capacity."
[16] In Parsell v. Shell Oil Co., 421 F.Supp. 1275 (D.Conn.1976), the court declined to sustain the proffered theory of the federal common law of nuisance on a variety of grounds. First, the plaintiff was a private person. The court noted that courts have allowed the United States to bring such an action, but that such right has not been extended to private plaintiffs. See Committee for the Consideration of the Jones Falls Sewage Sys. v. Train, 375 F.Supp. 1148, 1154-55 (D.Md.1974), aff'd 539 F.2d 1006 (4th Cir. 1976). Second, no interstate effect was alleged, interstate effect being defined as pollution originating within one state adversely affecting another state. See Committee for the Consideration of the Jones Falls Sewage Sys. v. Train, 539 F.2d 1006, 1010 (4th Cir. 1976); Reserve Mining Co. v. United States, 514 F.2d 492, 520-21 (8th Cir. 1975). Finally, the court seemed to believe that damages would be improper, at least in the circumstances before it.
In contrast to that situation, in the case presently before the Court, the plaintiff is not a private person or entity, there is an interstate effect and the relief sought is equitable.
[17] In Committee for the Consideration of the Jones Falls Sewage Sys. v. Train, supra at 1009 n. 9, the court stated that this provision evidenced the intent of Congress not to pre-empt state common law nuisance actions.
[18] In United States ex rel. Scott v. United States Steel Corp., supra, the court dismissed without prejudice the state common law nuisance claim, finding it merely cumulative.
[19] The defendants did not raise and therefore this Court will not address the question of the effect of sovereign immunity on the common law nuisance claims. See generally, Illinois v. City of Milwaukee, 406 U.S. 91, 108 n. 10, 92 S.Ct. 1385, 31 L.Ed.2d 712 (1972); Dugan v. Rank, 372 U.S. 609, 83 S.Ct. 999, 10 L.Ed.2d 15 (1963); Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949); Massachusetts v. United States Veterans Administration, 541 F.2d 119 (1st Cir. 1976); Board of Supervisors of Fairfax County, Va. v. United States, 408 F.Supp. 556, 561 (E.D.Va.1976), appeal dismissed mem. 551 F.2d 305 (4th Cir. 1977); Public Law 94-574, 90 Stat. 2721, 5 U.S.C. § 702. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1841163/ | 189 B.R. 90 (1995)
In re P.K.R. CONVALESCENT CENTERS, INC., Debtor.
P.K.R. CONVALESCENT CENTERS, INC. and Emporia Health Investors, L.C., Plaintiffs,
v.
COMMONWEALTH OF VIRGINIA, DEPARTMENT OF MEDICAL ASSISTANCE SERVICE, Defendant.
Bankruptcy No. 95-30077-T. Adv. No. 95-3056-T.
United States Bankruptcy Court, E.D. Virginia, Richmond Division.
September 21, 1995.
Roy V. Creasy, Roanoke, VA, for debtor.
*91 John T. Arnold, Roanoke, VA, for Emporia Health Investors, L.C.
Henry C. Su, Richmond, VA, for DMAS.
Gregg R. Nivala, Office of United States Trustee, Richmond, VA.
John D. McIntyre, Norfolk, VA, for Essex Savings Bank.
MEMORANDUM OPINION
DOUGLAS O. TICE, Jr., Bankruptcy Judge.
Trial was held July 14, 1995, on the complaint of P.K.R. Convalescent Centers, Inc., and Emporia Health Investors, L.C., for declaratory judgment and injunctive relief. Plaintiffs seek an injunction against the Commonwealth of Virginia, Department of Medical Assistance Service, prohibiting DMAS from pursuing collections against a prospective purchaser of estate property after a sale is executed pursuant to 11 U.S.C. § 363(f). Plaintiffs allege that section 32.1-329 of the Virginia Code, which grants DMAS the authority to recapture depreciation from the purchaser, is preempted by the Bankruptcy Code. Accordingly, plaintiffs request that the court enjoin DMAS pursuant to 11 U.S.C. § 105(a). The court took the matter under advisement. Given the unique circumstances of this case, the court will exercise its equitable powers under § 105(a) and grant the requested injunction.
FACTS[1]
On January 6, 1995, debtor P.K.R. Convalescent Centers, Inc., filed a good-faith, chapter 11 bankruptcy petition.
Debtor operates a nursing home facility with 120 beds and ten adult care beds in Emporia, Virginia, a rural area with a high poverty rate. The facility has for the last five years had an average annual occupancy rate of 95% of which 93% are Medicaid patients. The average age of the patients is seventy-eight years. There are four other nursing homes within a thirty mile radius of the facility which have an average annual occupancy rate of 90%.
The real property is secured by four deeds of trust with the respective current balances:
(1) First deed of trust to First Virginia Bank approximately $900,000.00;
(2) Second and third deeds of trust to the R. Kevin Adams Family approximately $1,800,000.00; and
(3) Fourth deed of trust to Essex Savings Bank approximately $610,000.00.
In addition, there is a federal tax lien against the property in the approximate amount of $775,000.00.
The appraised value of the property is $3,425,000.00.
The facility provides services on behalf of the Virginia Medical Assistance Program, which is Virginia's Medicaid Program. The program is established pursuant to the Social Security Act, 42 U.S.C. § 1396a, and the program is administered by the Virginia Department of Medical Assistance Service in cooperation with the Department of Social Services and the federal government.
In accordance with the Virginia Medical Assistance Program, DMAS paid debtor, as a reasonable cost of debtor's providing services to the program, a certain amount of depreciation on the real property of the facility. Any depreciation previously paid to the debtor is subject to recapture by DMAS upon a transfer of the property if the purchase price of the property exceeds debtor's depreciated cost basis. Va.Code Ann. § 32.1-329 (Michie 1992). In essence, debtor must reimburse DMAS for the amount of depreciation previously allowed as a reasonable cost of providing services to the program if debtor realizes a gain on the sale of the property. If debtor fails to reimburse DMAS for the recapture depreciation, DMAS may, under section 32.1-329 of the Virginia Code, collect it by any means available by law, including a setoff against future Medicaid reimbursement to be paid to the purchaser of the facility under the program. The state of Virginia determines the amount of Medicaid reimbursement that will be available to a purchaser who continues to operate the facility as a nursing home *92 by first calculating a Medical Liability Asset Basis for the purchaser (not necessarily the purchase price). The rate of reimbursement is then based on this Medical Liability Asset Basis.
Thus, DMAS holds a contingent claim against debtor's estate tied to a sale of the property if debtor realizes a gain from the proposed sale. DMAS's contingent claim against debtor's estate is not secured by any lien on the property. DMAS's claim against the purchaser is derived from its claim against the bankruptcy estate.
On April 28, 1995, debtor moved to sell the facility outside of the ordinary course of business, free and clear of liens, claims, encumbrances, and interests pursuant to 11 U.S.C. § 363(f). Debtor and Emporia entered into an asset purchase agreement for the purchase of the property for $3,445,000.00. The price is based on a Medicaid Liability Asset Basis of $3,233,100.00 with the remainder being paid in cash by the purchaser.[2] Debtor has been attempting to sell the property since August 1991, and the only interested purchaser who has submitted an asset purchase agreement has been Emporia.
In fact, because of debtor's continuous financial deterioration, representatives of debtor, Emporia, and DMAS had met pre-petition at various times in 1994 to negotiate an acceptable basis whereby the property could be sold as an on-going business without resorting to bankruptcy. On September 9, 1994, DMAS notified debtor that debtor would be in a better position to sell the property through the bankruptcy process as no determination of the final amount of depreciation recapture could yet be made.
DMAS has now determined that the depreciation recapture on the sale of the property at the agreement price will be approximately $1,700,000.00 which is due within thirty days of the pending sale. DMAS filed an unsecured non-priority proof of claim in the amount of $1,779,395.00.
All secured creditors consented to the sale. An unsecured creditor and the Internal Revenue Service also consented to the sale. However, DMAS objected to the sale, alleging that the sale was not permissible under § 363(f). At a hearing on the motion, DMAS withdrew its objection and agreed that the motion could be approved subject to the rights of DMAS under Va.Code Ann. § 32.1-329 as determined by this court in this adversary proceeding.
On June 28, 1995, this court entered an order, which was endorsed by counsel for DMAS, approving the motion to sell pursuant to § 363(f).
Emporia is unable to consummate the sale for the price set out if DMAS is able to collect its claim from Emporia.
In addition, the Commonwealth of Virginia has placed a legislative moratorium on the construction of any new nursing home beds or expansion of any existing nursing home facilities until June 30, 1996, unless expressly excepted pursuant to Va.Code Ann. § 32.1-102.3:2.
Conversion of this case to chapter 7 may cause closure of the nursing home facility, and the closure of the facility will result in the involuntary discharge of those residents from the facility.
POSITION OF THE PARTIES
Plaintiffs seek a declaratory judgment stating that section 32.1-329 of the Virginia Code must yield to the Bankruptcy Code because DMAS's collection efforts thereunder would restructure debtor-creditor relationships rather than advancing the fundamental purpose of Medicaid to make medical benefits available for needy senior citizens. In essence, plaintiffs argue that the Bankruptcy Code preempts section 32.1-329 of the Virginia Code insofar as estate property is concerned. Therefore, pursuant to 11 U.S.C. § 105(a), plaintiffs seek to enjoin DMAS *93 from pursuing collections against Emporia after the sale has been executed pursuant to § 363(f).
DMAS argues that the Bankruptcy Code does not preempt section 32.1-329 of the Virginia Code because section 32.1-329 does not conflict with 11 U.S.C. § 363 or any other provision of the Bankruptcy Code. Accordingly, DMAS argues that this court is without the equitable jurisdiction under § 105(a) to grant the requested injunctive relief.
DISCUSSION AND CONCLUSIONS OF LAW
PREEMPTION
Under the Supremacy Clause of the United States Constitution, federal law preempts state law if:
(1) Congress has expressly provided preemptive language in the federal statute in question; See Jones v. Rath Packing Co., 430 U.S. 519, 525 [97 S.Ct. 1305, 1309, 51 L.Ed.2d 604] (1977);
(2) Congress' intent to preempt state law is implicit in a "`scheme of federal regulation . . . so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it,' because `the Act of Congress may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject,' or because `the object sought to be obtained by federal law and the character of obligations imposed by it may reveal the same purpose.'" Fidelity Fed. Sav. & Loan Ass'n v. De la Cuesta, 458 U.S. 141, 153 [102 S.Ct. 3014, 3022, 73 L.Ed.2d 664] (1982) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 [67 S.Ct. 1146, 1152, 91 L.Ed. 1447] (1947)); or
(3) An actual conflict exists when "`compliance with both federal and state regulations is a physical impossibility,'" or if state law "`stands as an obstacle to the accomplishment and execution of the full purposes and objective of Congress.'" Hillsborough County v. Automated Medical Labs., Inc., 471 U.S. 707, 713 [105 S.Ct. 2371, 2375, 85 L.Ed.2d 714] (1985) (quoting Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-43 [83 S.Ct. 1210, 1217-18, 10 L.Ed.2d 248] (1963) and Hines v. Davidowitz, 312 U.S. 52, 67 [61 S.Ct. 399, 404, 85 L.Ed. 581] (1941)). In addition, the court can look to the actual wording of the federal statute to determine whether a conflict exists. Michigan Canners and Freezers Assoc., Inc. v. Agricultural Mktg. and Bargaining Bd., 467 U.S. 461, 470 [104 S.Ct. 2518, 2523, 81 L.Ed.2d 399] (1984).
Congress did not place preemptive language in the Bankruptcy Code, nor did Congress intend that the Bankruptcy Code be so pervasive that it occupy the field of debtor/creditor relations. Therefore, in order for this court to conclude that the Bankruptcy Code preempts the Virginia law, the court must conclude that an actual conflict exists between a specific provision of the Bankruptcy Code and section 32.1-329 of the Virginia Code. See Baker & Drake, Inc. v. Public Serv. Comm'n (In re Baker & Drake, Inc.), 35 F.3d 1348, 1353 (9th Cir.1994). Furthermore, "[s]imply making a reorganization more difficult for a particular debtor . . . does not rise to the level of `stand[ing] as an obstacle to the accomplishment of the full purposes and objectives of Congress'" In re Baker & Drake, Inc., 35 F.3d at 1354 (quoting Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 300, 108 S.Ct. 1145, 1150, 99 L.Ed.2d 316 (1988) (footnote omitted)).
An actual conflict exists between 11 U.S.C. § 363(f) and section 32.1-329 of the Virginia Code as demonstrated by the wording of § 363(f). Pursuant to the Bankruptcy Code,
The trustee may sell property under subsection (b) [other than in ordinary course of business] or (c) [ordinary course of business] of this section free and clear of any interest in such property of an entity other than the estate, only if
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be *94 sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
11 U.S.C. § 363(f) (emphasis added).
As the plain meaning of the statute demonstrates, § 363 covers more situations than just sales involving liens. See also In re Beker Indus. Corp., 63 B.R. 474, 478 (Bankr. S.D.N.Y.1986); Connolly v. Nuthatch Hill Assocs. (In re Manning), 37 B.R. 755, 759 (Bankr.D.Colo.1984), aff'd in part, vacated in part, 831 F.2d 205 (10th Cir.1987). Section 363(f) addresses sales free and clear of any interest. In re Manning, 37 B.R. at 759 (emphasis added).
DMAS holds a contingent claim against debtor's estate tied to a sale of the property if debtor realizes a gain from the proposed sale. As part of this interest against the property, if debtor fails to reimburse DMAS for the recaptured depreciation under section 32.1-329 of the Virginia Code, DMAS may collect from Emporia, the proposed transferee. Thus, DMAS's interest is an interest that is subject to being sold free and clear of that interest if one of the five conditions under § 363(f) can be met. See generally In re Welker, 163 B.R. 488, 489 (Bankr.N.D.Tex. 1994) (addressing whether HUD regulatory procedures are interests that are subject to provisions of § 363); In re Dundee Equity Corp., 1992 WL 53743 (Bankr.S.D.N.Y.1992) (examining whether apartment building could be sold free and clear of Tenants' rights as established under two New York City Civil Court stipulated settlements); In re 523 E. Fifth St. Hous. Preservation Dev. Fund Corp., 79 B.R. 568, 576 (Bankr.S.D.N.Y.1987) (addressing whether covenant requiring property to be used solely for low-income housing is interest that is subject to the provisions of § 363(f)).
The first four provisions of § 363(f) are not met in the instant case; applicable nonbankruptcy law does not permit the sale of such property free and clear of DMAS's interest, DMAS does not consent, DMAS's interest is not a lien, and DMAS's interest is not in bona fide dispute.
However, DMAS could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest. DMAS's interest would be extinguished if it received $1,700,000.00 in depreciation recapture.
In addition to the plain language of the statute, an examination of the legislative history demonstrates that § 363(f)(5) applies to the proposed sale in this case. A sale under this section is free and clear of any interest if the entity "could be compelled to accept a money satisfaction of the interest in a legal or equitable proceeding. Sale under this subsection is subject to the adequate protection requirement." H.R.Rep. No. 595, 95th Cong., 2d Sess. 345 (1977), reprinted in 1978 U.S.C.C.A.N. 5963, 6302. "Most often, adequate protection in connection with a sale free and clear of other interests will be to have those interests attach to the proceeds of the sale." S.Rep. No. 989, 95th Cong., 2d Sess. 56 (1978), reprinted in 1978 U.S.C.C.A.N. 5787, 5842.
Any claim that DMAS may acquire against Emporia is derived from its interest in the property. Under a § 363(f) sale, the purchaser acquires the property free and clear of all interests. Thus, the sale extinguishes DMAS's interest in the property because DMAS's interest attaches to the proceeds of the sale.[3] DMAS's derivative claim against Emporia for depreciation recapture is extinguished under § 363(f). And, the authority to collect against Emporia pursuant to section 32.1-329 of the Virginia Code is in direct conflict with the free and clear provision of 11 U.S.C. § 363(f).
DMAS argues that its interest is regulatory and not pecuniary. Even assuming that the interest is regulatory, the court does not see this as a dispositive distinction. The focus is on whether the interest could be *95 released with a money satisfaction and thus fall under the authority of § 363(f)(5). The cases cited by DMAS involve regulatory interests which cannot be satisfied with a money judgment.
For example, in support of its position, DMAS relies on the case of In re Welker, 163 B.R. 488, 489 (Bankr.N.D.Tex.1994). I find that not only is In re Welker distinguishable from the facts at issue, but I also find that In re Welker is contrary to DMAS's position. In In re Welker the court considered whether the trustee could sell free and clear of HUD's interest under a regulatory agreement which bound the owner of the project to maintain the low-income status of the project. The court concluded that "[n]o subsection of § 363 applies to authorize the trustee to sell free and clear of those interests." Unlike the facts in the case before me, the conditions referred to in the regulatory agreement were not interests that could be released with a money satisfaction.
DMAS also argues that section 32.1-329 is consistent with the Social Security Act and is therefore not preempted by the Bankruptcy Code. Although federal law provides a framework for the construction of state reimbursement programs, a depreciation recapture system is not required. Indeed, only a small minority of states has instituted such a depreciation system. Furthermore, even assuming a conflict existed between Medicare payments under the Social Security Act and the Bankruptcy Code, "if the effect of the non-bankruptcy statute is to restructure the debtor/creditor relationship rather than advance its own fundamental concerns, the intersecting non-bankruptcy statute must yield to the Bankruptcy Code." Medicar Ambulance Co. v. Shalala (In re Medicar Ambulance Co.), 166 B.R. 918, 925 (Bankr.N.D.Cal. 1994).
Finally, DMAS argues that section 32.1-329 of the Virginia Code is analogous to environmental cleanup statutes and claims that section 32.1-329 "gives rise to continuing regulatory obligations to which any provider participating in the Program must contractually agree to abide." However, the interests addressed in the cases involving environmental cleanup statutes are not interests that could be released with a money satisfaction. For example, the interests at issue in In re Borne Chemical Co., 54 B.R. 126 (Bankr. D.N.J.1984), a case cited by DMAS, were obligations originating under the New Jersey Environmental Cleanup Responsibility Act (ECRA). As the court described:
ECRA requires an "owner . . . of an industrial establishment planning to sell . . . operations" to notify the DEP in writing within five days of the execution of an agreement of sale. ECRA further requires that within 60 days before transfer of title, the owner or operator must submit either a negative declaration to the DEP stating that there are no environmental hazards, or file a cleanup plan. Upon approval of the plan, the owner must post a bond or other security guaranteeing performance of the cleanup and remains responsible for implementing the plan unless the purchaser assume that responsibility.
ECRA further provides that the DEP or transferees can void the sale if the transferor fails to comply with any provision of the Act, and that penalties of up to $25,000 per day may be imposed on those who fail to comply. The Act also provides that obligations imposed by the Act are intended to "constitute continuing regulatory obligations imposed by the state" and are not to be considered as liens or claims dischargeable in bankruptcy.
In re Borne Chemical Co., 54 B.R. at 128. Obviously, the interests could not be satisfied with a money judgment. See Torwico Elecs., Inc., v. New Jersey Dep't of Envtl. Protection (In re Torwico Elecs., Inc.), 8 F.3d 146, 150-51 (3d Cir.1993), cert. denied, ___ U.S. ___, 114 S.Ct. 1576, 128 L.Ed.2d 219 (1994) (holding debtor's obligation to clean up hazardous waste on property was not claim under Bankruptcy Code; state didn't have right to payment but instead had right to force debtor to comply with existing environmental laws).
In the case at issue, DMAS can be compelled to accept a money satisfaction of its interest. In fact, DMAS concedes that it has no derivative claim against a subsequent purchaser if debtor pays $1,700,000.00 in depreciation *96 recapture. The court cannot conceive a clearer circumstance of an interest, which is not a lien, that is subject to sale under § 363(f)(5).[4]
EQUITABLE POWER TO ENJOIN
Pursuant to § 105(a) of the Bankruptcy Code:
The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.
11 U.S.C. § 105(a). Accordingly, § 105 authorizes this court to enjoin any act to collect an interest in the bankruptcy estate in contravention of a court order to sell the property free and clear of all interests under § 363(f)(5). As this court has already determined, DMAS's interest is subject to § 363(f), and the property can be sold free and clear of that interest. Upon sale of the property, DMAS's interests vest in the sale proceeds of the property, and the state agency no longer has an interest in the property. At that point, DMAS does not have a claim against Emporia.
Based on the conflict between 11 U.S.C. § 363(f) and section 32.1-329 of the Virginia Code, the court will exercise its equitable power and award the injunction.
In addition, there are many factors which weigh in favor of the court granting the injunction. Debtor filed a good faith bankruptcy petition at the suggestion of DMAS.[5] The sale price is greater than the appraised value of the property. Emporia is unable to consummate the sale for the price set out if DMAS is able to collect its claim from Emporia. There are no other prospective purchasers. Thus, if the sale does not go forward, debtor will likely have to convert to chapter 7. Conversion of this case to chapter 7 will likely cause closure of the nursing home facility, and the closure of the facility will result in the involuntary discharge of those residents from the facility.
In addition, the Commonwealth of Virginia has placed a legislative moratorium on the construction of any new nursing home beds or expansion of any existing nursing home facilities until June 30, 1996, unless expressly excepted pursuant to Va.Code Ann. § 32.1-102.3:2. Thus, the patients would have to be transferred to other facilities which are at least thirty miles away. And, ironically, if the injunction is denied and debtor is forced to convert to chapter 7, DMAS will not recover the $1,700,000.00 in depreciation recapture.
Accordingly, the court will enter an order enjoining DMAS from seeking depreciation recapture from Emporia once the property has been sold free and clear of DMAS's interest pursuant to 11 U.S.C. § 363(f)(5). Plaintiffs are directed to submit an order consistent with this opinion.
A separate order will be entered.
NOTES
[1] The parties did not present any evidence at the trial. Instead, the parties stipulated many facts as stated in this section. Other facts are not contested.
[2] DMAS has basically set a ceiling on the sale price with its determination of the Medicaid Liability Asset Basis of $3,233,100.00. Debtor represented, and DMAS did not dispute, that the sale price was initially almost one million dollars higher. Apparently, the price was decreased because DMAS would not allow a Medicaid Liability Asset Basis of greater than $3,233,100.00, and Emporia cannot find a lender willing to finance any amount greater than the Medicaid Liability Asset Basis.
[3] The court realizes that there will not be enough sale proceeds to cover DMAS's claim in bankruptcy. However, the nature of adequate protection depends on the nature of the interest. DMAS does not have a lien against the property; rather, DMAS possesses a contingent, unsecured, nonpriority claim. All claims against the estate are not necessarily satisfied in bankruptcy.
[4] The court's analysis under § 363(f)(5) is limited to those instances where the interest is not a lien. Whether the sale could proceed under § 363(f)(5) if the interest was a lien is not currently before me.
[5] The court is sympathetic to DMAS's concern that owners of nursing homes may file bankruptcy merely to avoid the depreciation recapture requirement of § 32.1-329. However, under such circumstances, it is likely that the case would be dismissed for bad faith. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1973889/ | 322 B.R. 874 (2004)
In the Matter of GOLF, L.L.C., Skyline Woods Country Club, L.L.C., Fox Run Properties, L.C., Lakeview Golf, L.L.C., Debtors.
Nos. BK01-80563 to BK01-80566.
United States Bankruptcy Court, D. Nebraska.
March 22, 2004.
*875 Trenten P. Bausch, Blackwell, Sanders, Peper, Martin LLP, Omaha, NE, Richard M. Beheler, Blackwell, Sanders, Peper, Martin LLP, Kansas City, MO, Charles E. Benish, Koley Jessen P.C., Omaha, NE, Penny J. Berger, Rembolt, Ludtke & Berger, Lincoln, NE, Craig J. Bolton, Phoenix, AZ, Hilary B. Bonial, Brice, Vander Linden & Wernick, Dallas, TX, Emmett D. Childers, Hillman, Forman, Nelson, Childers, Omaha, NE, Joseph M. Colaiano, Omaha, NE, Christopher D. Curzon, Dwyer, Smith, Garner, Lazer, Pohren, Omaha, NE, Richard P. Garden, Jr., Cline, Williams, Wright, Johnson, Lincoln, NE, Jerry L. Jensen, U.S. Trustee's Office, Omaha, NE, Larry A. Jobeun, Fullenkamp Doyle & Jobeun, Omaha, NE, John J. Jolley, Jr., Kutak Rock, Omaha, NE, Myron J. Kaplan, Omaha, NE, David J. Koukol, Dwyer, Smith, Gardner, Lazer, Pohren, Omaha, NE, Steven H. Krohn, Smith Peterson Law Firm, LLP, Council Bluffs, IA, Brian S. Kruse, Lincoln, NE, Rick D. Lange, Rembolt, Ludtke & Berger, LLP, Lincoln, NE, Clifford T. Lee, Rasmussen & Mitchell, Omaha, NE, Deanna L. Longo, Houston, TX, Thomas L. Saladino, Fitzgerald, *876 Schorr, Barmettler & Brennan, Omaha, NE, Jeffrey L. Shields, Salt Lake City, UT, Charles L. Smith, Telpner, Peterson, Smith, Ruesch, Council Bluffs, IA, Donald L. Swanson, Koley Jessen P.C., Omaha, NE, Steven C. Turner, Baird Holm Law Firm, Omaha, NE, Jeffrey T. Wegner, Kutak Rock LLP, Omaha, NE, Tanya Marie Morrison, Blackwell Sanders Peper Martin, Omaha, NE, Michael J. Whaley, Gross & Welch, PC, Omaha, NE, Megan Sebastian Wright, Blackwell, Sanders, Peper, Martin, LLP, Omaha, NE, for creditors.
Tanya Marie Morrison, Blackwell Sanders Peper Martin, Omaha, NE, Robert V. Ginn, Brashear & Ginn, Omaha, NE, for debtors.
James B. Cavanagh, Lieben, Whitted, Houghton, Slowiaczek, Omaha, NE, pro se.
Douglas E. Quinn, McGrath, North, Mullin & Kratz, P.C., Omaha, NE, for Creditors Committee.
MEMORANDUM
TIMOTHY J. MAHONEY, Chief Judge.
Hearing was held on March 18, 2004, in Omaha, Nebraska, before a United States Bankruptcy Judge for the District of Nebraska regarding Filing No. 444, Motion to Sell Certain Operating Assets Outside the Ordinary Course of Debtors' Business Pursuant to an Asset Purchase Agreement, filed by the debtors; Filing No. 450, Objection by Business Mens Assurance Co. of America; and Filing No. 451, Objection by Detente, L.L.C. Robert Ginn appeared for the debtors, Douglas Quinn appeared for the Creditors Committee, Richard Beheler and Trent Bausch appeared for Business Men's Assurance Co. of America and General Security Corporation of America, Jeffrey Wegner appeared for Detente, L.L.C, Michael Washburn appeared for Nebraska State Bank, and Patricia McCormick appeared for American National Bank. This memorandum contains findings of fact and conclusions of law required by Federal Rule of Bankruptcy Procedure 7052 and Federal Rule of Civil Procedure 52. This is a core proceeding as defined by 28 U.S.C. § 157(b)(2)(N).
Golf, L.L.C, and Lakeview Golf, L.L.C, and the other related entities listed in the above heading, filed a Second Amended Plan of Reorganization, Filing No. 335, which was confirmed on February 10, 2003, at Filing # 395. The order of confirmation was not stayed, and became final. The effective date of the plan was, pursuant to Section 1.32 of the Second Amended Plan, ten days after the confirmation order was entered. The confirmed plan, at Section 10.1(f) on page 32, provides for the retention of jurisdiction by the Bankruptcy Court "[t]o hear and determine any and all pending or future applications for approval of the sale of the Assets or any portion thereof, free and clear of all liens pursuant to § 363 of the Bankruptcy Code[.]"
On January 26, 2004, at Filing No. 444, the reorganized debtor filed a motion to sell certain of its operating assets outside the ordinary course of business pursuant to an asset purchase agreement. That motion requests the court to approve a sale of the real estate assets and personal property inventory assets of debtor Lakeview Golf, for $1 million, free and clear of all liens. The motion drew two objections, each of which was filed by real estate lien creditors. On the date of the hearing on the motion and objections, the objection filed by General Security Corporation of America, assignee of Business Men's Assurance Company of America ("BMA"), was settled on the record. However, the objection filed by Detente, L.L.C, ("Detente") was not settled. Arguments were presented, evidence was taken and briefs *877 were filed, and the court took the matter under advisement.
The motion, Filing No. 444, is denied, for the following reasons:
1. This motion is brought before the court pursuant to 11 U.S.C. § 363(f) which provides:
The trustee may sell property under subsection (b) or (c) of this section free and clear of any interest in such property of an entity other than the estate, only if
(1) applicable nonbankruptcy law permits sale of such property free and clear of such interest;
(2) such entity consents;
(3) such interest is a lien and the price at which such property is to be sold is greater than the aggregate value of all liens on such property;
(4) such interest is in bona fide dispute; or
(5) such entity could be compelled, in a legal or equitable proceeding, to accept a money satisfaction of such interest.
Generally, Section 363(f) is used by a debtor-in-possession or a trustee during the pendency of a bankruptcy case and before confirmation. It allows the debtor, under certain circumstances, to downsize its operation and eliminate non-performing assets. The cases which deal with this section of the Bankruptcy Code are uniform with regard to the invocation of 11 U.S.C. § 363 during the pendency of a case and prior to confirmation. Post-confirmation sales of assets are accomplished pursuant to terms of the confirmed plan, or, since the debtor is generally outside of the jurisdiction of a bankruptcy court within a short period of time after confirmation of a plan, such sales are accomplished pursuant to non-bankruptcy law.
Some authors note the distinction between the purposes of § 363 and §§ 1123 and 1141, observing that § 363(b) and (f) control asset sales prior to plan approval and require less notice and opportunity for hearing than § 1123(a)(5)(D) and § 1141(c), which govern sales made pursuant to a plan. George W. Kuney, Misinterpreting Bankruptcy Code Section 363(f) and Undermining the Chapter 11 Process, 76 Am. Bankr.L.J. 235, 236 (Spring 2002). However, as a practical matter, current practice seems to have expanded § 363(f)'s use from its original intent. Id.
In this case, the debtor proposes, postconfirmation, to invoke Section 363. The confirmed plan does not mention even the possibility of the sale of this asset, except to the extent that the jurisdiction retention provision enumerated above implies that since the court retains jurisdiction to supervise Section 363 sales, such sales must have been contemplated by the plan and authorized by the confirmation order. It appears to the undersigned that this court has no continuing jurisdiction with regard to the type of sale that is before the court, because Section 363(f) is not operational once the plan is confirmed.
2. However, assuming for the moment that the court does have jurisdiction and that Section 363(f) sales may be approved post-confirmation, this proposed sale nonetheless is not approved. It does not meet the requirements of Section 363(f). Detente, the objecting creditor, holds a lien by virtue of a deed of trust on the Lakeview Golf real estate. Although the movant suggests that Detente's rights with regard to enforcement of the lien did not arise until a date certain in the future, and are subordinate to payment of administrative claims and other provisions of the confirmed plan, such provision by the movant ignores the plain terms of the confirmed plan.
*878 Paragraph 5.11 of the confirmed plan deals with the interests of holders of "C" Shares of Golf. The members of Detente were some of the holders of such shares. The members of Detente, however, are participants in what is identified in the plan as the "GWR Compromise." Paragraph 5.11 provides that the holders of Class 11 Interests, other than the accepting shareholders as that term is defined in the GWR Compromise, "shall neither be paid nor receive any compensation, nor retain any property rights, with respect to such Interests unless, and until, all Administrative Claims, Priority Claims, Class 6 Claims and Class 7 Claims have been paid in full, and the Debtor is in compliance will all other material provisions of this Plan". The members of Detente, L.L.C, have been excluded from the limitations on their rights by the plain language of the confirmed plan. Therefore, they have lien rights at this time and have standing to object to the proposed sale and to raise issues concerning the requirements of Section 363(f).
3. Detente suggests that the proposed sale is barred by the plain language of 11 U.S.C § 363(f)(3) because the sale price is not greater than the aggregate value of all of the liens on such property. Detente suggests that the term "aggregate value" means the face amount of the debts secured by the real estate. Since the face amount of the debts, including those held by BMA or its assignee, and the debt held by Detente, secured by the Deed of Trust, far exceed the sale price, the sale is prohibited. There is a split of authority with regard to whether Detente's position is correct or whether the movant's position that the term "aggregate value" means "value of the lien as determined under Section 506(a)" is correct. This court does not need to add its opinion to the split of authority because, even if the movant is correct, the sale cannot be approved under this section.
As noted by the Seventh Circuit Court of Appeals in dicta, the traditional rule holds that there is no reason to approve a sale free and clear of liens unless the proceeds will fully compensate the secured lien holders and produce some equity for the benefit of the estate. In re Riverside Inv. P'ship, 674 F.2d 634, 640 (7th Cir. 1982). See also Scherer v. Federal Nat'l Mortgage Ass'n (In re Terrace Chalet Apartments), 159 B.R. 821, 826 (N.D.IU. 1993); Rouse v. Federal Land Bank Ass'n (In re Rouse), 54 B.R. 31, 32-33 (Bankr. W.D.Mo.1985).
In this case, the sale under the terms proposed by the movant will benefit only some of the lien holders, and there will be no benefit to the Chapter 11 unsecured creditors or to any other entity except the administrative claimants. There is no reason to approve a sale which does not benefit any creditor of the estate and which places the administrative claimants ahead of secured lien holders.
4. The sale also cannot be approved because it attempts to change the priority with regard to payment of claims. The motion suggests that after the first lien holder is paid and the lien holder on inventory receives a compromised amount, the balance will be used to pay administrative claimants. As mentioned above, such a proposal changes the priority scheme of the Bankruptcy Code to the detriment of Detente, a creditor secured by the real property which is being sold. Such a sale cannot be approved.
5. There is insufficient evidence before the court to convince the court that the sale price is fair and in the best interest of the estate. Although during oral argument, counsel for the movant suggested that there had been significant attempts to sell the property, there is no evidence *879 before the court concerning the manner in which the property was attempted to be marketed or the length of time the marketing took place. Therefore, the court cannot make a finding concerning the fairness of the sale price.
For any and all of the above reasons, the motion to sell is denied.
A separate order denying the motion shall be entered. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2215791/ | 95 Cal.App.2d 605 (1950)
DELLA LOUISA WILKINS, Respondent,
v.
ALBERT JOHN WILKINS, Appellant.
Civ No. 3894.
California Court of Appeals. Fourth Dist.
Jan. 17, 1950.
Harry V. Leppek for Appellant.
Waldo Willhoft for Respondent. *606
GRIFFIN, Acting P. J.
Plaintiff and defendant were divorced. By the interlocutory decree, entered July 2, 1936, defendant was ordered "until further order of the court" to pay plaintiff $40 per month, payable semimonthly on the 10th and 26th days of each month, commencing June 26, 1936, as and for the support of plaintiff and the two minor children, Alberta and Joseph Wilkins. On March 4, 1938, said sum was increased to $50 per month. In an ex parte application, on September 28, 1948, plaintiff filed an affidavit alleging that defendant paid $50 per month "up to and including August 10, 1943," but thereafter failed to make any further payments; that all payments subsequent to September 10, 1943, amounting to $2,950, or "56 monthly payments," were unpaid under the order, and asked that execution be issued accordingly. On September 28, 1948, an order was signed allowing that amount, and ordering execution to issue. Execution did issue on that same date. On December 16, 1948, defendant moved to vacate the order and recall the writ issued on the ground that the court was not informed of the true facts when the order was signed. This motion was submitted. By affidavit of defendant, he claimed that he had made all payments due until July 10, 1943; that the minor daughter, Alberta, was married in August, 1939, at the age of 19; that the son, Joseph, was married in June, 1943, at about the age of 19, that plaintiff remarried in June, 1948, and that the interlocutory decree ordering the maintenance had never been modified and that said court order was never "severed" to show how much was to be paid for each child or to the plaintiff and therefore defendant claimed that no reason existed for said order to continue.
After argument, on December 30, 1948, the court signed an order denying the motion. Defendant, on February 17, 1949, appealed from the order on the clerk's transcript alone, which transcript sets forth the facts above related.
Defendant's opening brief raises the question as to whether plaintiff should be allowed the full amount ordered paid to the mother and minor children, jointly, after the date the minor children were married and became of age. In support of the contention that the order was erroneous, the defendant cites such cases as Parker v. Parker, 203 Cal. 787 [266 P. 283]; Hale v. Hale, 6 Cal.App.2d 661 [45 P.2d 246]; Clavey v. Lord, 87 Cal. 413 [25 P. 493]; Doehla v. Phillips, 151 Cal. 488 [91 P. 330]; and Tremper v. Tremper, 39 Cal.App. 62 [177 P. 868]. *607
Plaintiff, in her brief, points out that at no time has she sought to collect any sums accruing under said order subsequent to her remarriage.
Section 139 of the Civil Code provides that the husband may be compelled to provide for the maintenance of the children and suitable allowance for the wife; that upon the wife's remarriage, the husband is no longer obligated to provide for her support; but that her remarriage shall not affect the husband's duty to provide for the children of his marriage.
[1] It has been definitely decided that it is a father's duty towards his children to support them during their minority and as each child attains majority this duty terminates. (Tremper v. Tremper, supra; Hale v. Hale, supra.)
[2] From the record it appears that Alberta became of age in August, 1941, and Joseph about June, 1946, and under the authorities cited the father's duty to support them terminated as of that time. It was said in Hale v. Hale, supra, where a similar order was being questioned allowing the wife and minor children $45 per month for their support, that:
"While it is true that the defendant should have applied for a modification of the decree, as the decree does not specify separate amounts for the wife and each child, it is also true that, when under ordinary circumstances the duty of defendant to support plaintiff and two of the children had ceased, plaintiff was not in equity and good conscience entitled thereafter to the full amount set forth in the decree, nor to the issuance of execution therefor when the granting of the writ lies within the discretion of the court. To require defendant to be answerable for this full amount palpably effects an injustice."
It was there held that it was not the province of the appellate court to determine what portions of the entire amount, during the period in question, should be allowed for the support of the minor children and what amount should be allowed for the support of the wife, and that to do so would be to indulge in speculation and guess, citing Parker v. Parker, supra. It then held that the defendant could not avoid the portion of the obligation that appeared to be just and the proceedings were remanded to the trial court with directions to amend its order and the execution so that the order would be for the total sum due at the time of the application. Under the authorities cited, such a disposition must be made of this order on appeal. *608
Whether plaintiff should be permitted to recover any sums due under said order between the dates said minors were married and the dates they became of age is problematical.
In Hale v. Hale, supra, one of the minor children married, but about three weeks after the marriage she separated from her husband and thereafter lived with her mother until she became of age. Just what the factual situation is in the instant case pertaining to the dependency of the minor children after their marriage is not shown. Since the order on appeal must be reversed for the first reasons stated, the question as to the amount of the order that may be enforced by execution might be reconsidered by the trial court. It does not appear that defendant ever made application for modification of the decree because of the fact of the marriage of the minor children. No cases have been cited that hold that upon the marriage of a minor child the order for payment therefor automatically ceases.
In Cohen v. Cohen, 150 Cal. 99 [88 P. 267, 11 Ann.Cas. 520], the wife was allowed alimony The question of community property was not involved. Within a few months after the entry of the final decree the wife remarried and was subsequently divorced from her second husband. About four years later, the wife obtained an order requiring her first husband to show cause why an execution should not issue against him for the money due up to the date of the application notwithstanding her subsequent marriage. The court refused to vacate the decree as to the amounts already accrued but modified the former decree so that the payments would cease as of the date of her remarriage and directed that execution be issued for the sums previously accrued. The husband appealed. The Supreme Court held that:
"Good public policy would not compel a divorced husband to support his former wife after she has become another man's wife, except under extraordinary conditions, which she should be required to prove. Unless such conditions are shown by her to exist, the court should, on the former husband's motion, cancel all payments accruing after the remarriage, in all cases where, as here, there are no children and the allowance is based solely upon the husband's probable earning capacity, or upon his breach of the marriage vows, and not upon existing property rights."
The order appealed from was reversed and the cause remanded for further proceedings in accordance with the opinion rendered. *609
Harris v. Harris, 10 Cal.App.2d 734 [52 P.2d 985, 54 P.2d 459], involved a joint order for $25 per month for the support of the wife and minor child. The child died during minority. The father paid the full amount up to the date of its death. The order attempted to be enforced included the full amount awarded, covering two years after the child's death and up to the date of the application. The court held in an action in the municipal court on said judgment, that the amount accumulated since the date of the death of the child was too uncertain to be enforceable and that since the municipal court judgment became final the order was sustained as having been once decided. In denying the petition for hearing, in the order involved in Harris v. Harris, supra, the court pointed out that the wife, however, had her right to proceed in the divorce action to recover any unpaid installments accruing to her prior to the date the order was made terminating the allowance.
Parker v. Parker, 203 Cal. 787 [266 P. 283], was a case where an order was made in 1912 for the sum of $40 per month for the support of the wife and minor child and where the wife, eight days after the entry of the final decree, remarried, was subsequently divorced and was awarded temporary alimony. She then, under her former name, 13 years later, made an affidavit and presented the same to the court and averred that none of the payments had been made that were due and owing under the decree, and asked for an execution to issue in that sum. The application was made ex parte, was granted, and an order was made directing that execution issue. The former husband made a motion to vacate the order directing execution to issue and to recall the execution that had issued. In support of the motion the affidavits setting forth the facts were submitted. Under said motion the court endeavored to modify the former decree and the execution issued thereon, by reducing the amount. It then denied the motion to vacate the order directing the issuance of execution and to recall it. The defendant appealed from this order. During this period the child had married and had become of age. The Supreme Court, on appeal, speaking through Justice Shenk, said that in fairness to the trial court, the wife should have set forth the facts with reference to her subsequent marriage and the fact that the child had married and become of age at the time she made her application for the accumulated orders; that all of these matters would have been pertinent *610 in the consideration by the trial court of the application and also in determining to what extent, if at all, the relief should have been granted in the exercise of a wise discretion. The court then held that if the defendant, as a judgment debtor, had good cause to show against the issuance and enforcement of process, he has his remedy by motion to vacate the order and recall the execution. In effect, the court held that a denial of this motion, under the circumstances related, was an abuse of discretion and required a reversal of the order. Then follows the holding, at page 795, that "Where, as here, the minor became of age and married prior to such order of modification, such order should not disturb the accrual of payments under the original judgment. But whether such payments should be enforced and the manner of the enforcement of the same require separate consideration" (Italics ours.) Accordingly, the court held that on the showing made the former wife was not entitled to the order directing execution to issue in the full amount.
The only distinction between the cited cases and the one at bar pertains to the fact that the cited cases appear to involve orders for execution on judgments in excess of five years accumulation, where the instant one, according to the record, apparently involves one under five years.
In Lohman v. Lohman, 29 Cal.2d 144 [173 P.2d 657], the majority opinion held that a creditor is entitled, as a matter of right, to execution on a judgment payable in installments for all amounts which have accrued within five years of the date of the application. As to a judgment beyond that period, the issuance of an execution is discretionary, depending upon the circumstances. (See Code Civ. Proc., 685.)
[3] While the creditor is, as a matter of right, entitled to an execution, the affidavit, order and execution issued thereon are subject to review and the execution is subject to recall, upon motion, timely made, at which time the trial court may exercise its judicial discretion in determining whether the facts set forth in the affidavit are true, and whether there has been a misrepresentation of the facts or wilful suppression of facts which should have been related to the court in the first instance, or whether the husband was or was not under a legal duty to support the children or wife during the period in question. It therefore would appear that the trial court has, under the circumstances here related, the right to recall the execution and allow the enforcement of the judgment, only to *611 the extent of the husband's legal and equitable liability to pay. If the rule were otherwise, a judgment creditor might falsely swear that a certain amount of money was due under the order, accumulated within the five- year period, when in fact the debtor had paid all or nearly all of the sums due prior to her application. It would be an injustice to hold that the execution must issue, as a matter of right, and the court had no power to order the execution withdrawn or to exercise its discretion in determining the truth of the facts related and to order enforcement according to the law and equities involved.
The court held, in Lohman v. Lohman, supra, that where issuance of an execution on a judgment requiring monthly payments is sought upon payments accruing within the five years and where such facts are established, a prima facie right to execution exists and the burden is cast upon the judgment debtor to establish facts justifying an order denying the writ.
Defendant, in his reply brief, for the first time, endeavors to raise the question of the jurisdiction of the trial court to issue a writ of execution, upon the claim that the supplemental execution was issued after the five- year period without notice. This point will be considered in a companion case (Wilkins v. Wilkins, 4 Civ. No. 4125, post, p. 611 [213 P.2d 752]) this day decided.
Order reversed.
Mussell, J., concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2172694/ | 99 N.Y.2d 596 (2003)
788 N.E.2d 611
758 N.Y.S.2d 262
THE PEOPLE OF THE STATE OF NEW YORK, Respondent,
v.
FRANK BRISCO, Appellant.
Court of Appeals of the State of New York.
Argued January 16, 2003.
Decided February 20, 2003.
Legal Aid Society Appeals Bureau, Riverhead (Robert B. Kenney and Robert C. Mitchell of counsel), for appellant.
Thomas J. Spota, District Attorney, Riverhead (Guy Arcidiacono of counsel), for respondent.
Before: Chief Judge KAYE and Judges CIPARICK, WESLEY, ROSENBLATT, GRAFFEO and READ concur; Judge SMITH dissents and votes to reverse in an opinion.
OPINION OF THE COURT
MEMORANDUM.
The order of the Appellate Division should be affirmed.
*597 The sole issue on this appeal is whether the crime scene showup identification of defendant was unduly suggestive when defendant, who was wearing tan shorts and no shirt, was asked to hold a pair of maroon shorts. The maroon shorts belonged to defendant, were found at the house where he was located, and matched the identifying victim's prior description of the clothing worn by the perpetrator.
We have allowed showup identifications, in the absence of exigent circumstances, where the showup was reasonable under the circumstancesthat is, when conducted in close geographic and temporal proximity to the crimeand the procedure used was not unduly suggestive (see People v Ortiz, 90 NY2d 533, 537 [1997]; People v Johnson, 81 NY2d 828, 831 [1993]). Whether a crime scene showup is unduly suggestive is a mixed question of law and fact. Thus, if record evidence supports the determination below, this Court's review is at an end.
Here, record evidence supports the conclusion that the procedures used were reasonable under the circumstances. The showup took place at the scene of the crime, within an hour of the commission of the crime, and in the context of a continuous, ongoing investigation.[*] Record evidence also supports the conclusion that the showup identification was not unduly suggestive. The victim stated that defendant was the person whom she had seen leaving her house, and initially and independently identified him relying on his height, hair color, and build. In these circumstances, the presence of defendant's maroon shorts, admittedly his own, did not, as a matter of law, negate the reasonableness of the police action.
SMITH, J. (dissenting).
Because the showup in this case was unwarranted and broadened the use of a showup in violation of this Court's jurisprudence, I dissent. I would reverse the conviction.
The chronology of the relevant events is not in dispute. At 11:30 A.M. on July 6, 1999, two uniformed officers, Brian Holtje and Thomas Bafundo, riding in a patrol car, received a radio report of a burglary at 51 Mills Pond Road in Smithtown, New York. About 20 minutes later, at 11:55 A.M., the officers arrived at the crime scene where they met with another officer, John Crowley, who had arrived earlier. Crowley told the two officers *598 that the complainant, an elderly lady, saw a man fleeing her home upon her arrival. The complainant described the man as a shirtless 18- to 20-year-old white male with brown hair and muscular build wearing red or maroon (i.e., dark red) shorts.
The two officers then drove north looking for suspects. The officers stopped in front of 66 Mills Pond, which appeared to be under renovation. While Holtje knocked on the front door, which was open, Bafundo went around the back where he noticed a swimming pool, and a man inside the house wrapping himself in a towel. Bafundo then came back to the front, told Holtje that he saw a man inside the house, and then went back to the back of the house again. Holtje knocked on the door once more, and defendant answered, wearing a towel. Defendant told Holtje that the house belonged to his sister and that he was renovating the bathroom. To Holtje, defendant appeared to be 30 years old although he was actually 40. Also in the house was a white male in his twenties fully clothed with either brown or black hair.
Once Holtje and Bafundo were back in their car, Holtje expressed skepticism at defendant's claim that the bathroom was being renovated, considering that he was wearing a towel. At that time, Holtje was not aware that there was a pool in the back. Holtje and Bafundo then drove around and contacted detective, Brian McNeil, who later met them in front of 66 Mills Pond. When Holtje knocked on the door, defendant answered, this time wearing tan shorts and no shirt. Defendant agreed to invite the officers inside. Once inside, Holtje went into a nearby bedroom where he noticed wet maroon shorts on the floor. Defendant stated that the shorts belonged to him. McNeil eventually asked defendant if he would go to the crime scene, and he agreed.
Another officer, Christine Ward, arrived in a patrol car and drove Holtje and defendant to the victim's house, which was two minutes away by car. McNeil and Bafundo went in separate cars. Once they all arrived, around 12:25 P.M., defendant exited the police car and stood in the driveway, about 15 to 20 feet from the front of the house. He was wearing the tan shorts, no shirt, and he was not handcuffed. McNeil asked defendant to hold the shorts, and then went inside the house to meet the complainant. Apparently, defendant held the shorts "down to his side" "next to his hip." Bafundo and Ward were standing beside defendant and Holtje was behind him. There were three vehicles in front of the house. As McNeil and the complainant were standing in the front room of the house looking out the *599 window, McNeil asked her if she recognized anyone standing outside. According to McNeil, the complainant stated that defendant was "the person that she saw leaving the house, and that he was the same height, color hair, build, and she also identified the shorts that he was holding."
Defendant was then asked to go to the precinct, but he was not arrested until three days later. At a suppression hearing, the trial court found that "(1) the show-up was conducted promptly, within a short time after the commission of the crime; (2) it was conducted at the crime scene; (3) defendant was not singled outin fact, he was not even in handcuffs; and (4) he was allowed to leave after the victim saw him." After his arrest, defendant was charged with burglary in the second degree and petit larceny. He pleaded guilty to one count of second-degree attempted burglary after receiving assurances that he could appeal the suppression ruling.
A majority of the Appellate Division affirmed, holding that the identification was proper. Also relevant, the Court found that the "show up was conducted in close temporal and geographical proximity to the crime scene." (292 AD2d 626.) The majority rejected the argument that requiring defendant to hold the shorts during the identification was improper. The lone dissenter argued that "[t]here was no reason for him to hold the shorts, other than to single him out as the perpetrator." (292 AD2d at 629.)
On appeal, defendant focuses on the argument of the dissent that the showup was unduly suggestive because he was required to hold the shorts, although he still argues that "no exigency existed."
It has been said repeatedly that a showupthe presentation of a single witness for identificationis inherently suggestive and for that reason strongly disfavored (see People v Riley, 70 NY2d 523, 528 [1987]). That showup identifications are inherently suggestive means that they are likely to result in the identification of an innocent person as the perpetrator of a crime. Despite their inherent suggestiveness, showup identifications "are permissible if exigent circumstances require immediate identification (People v Rivera, 22 NY2d 453), or if the suspects are captured at or near the crime scene and can be viewed by the witness immediately (People v Love, 57 NY2d 1023)" (id.). Showups that are "not the product of police suggestion but rather spontaneous" or "the result of happenstance" need not satisfy temporal and geographic conditions (People v Clark, 85 NY2d 886, 888 [1995]).
*600 In light of the difficulty of having to show that exigent circumstances compelled a showup of a defendant sitting in jail, rather than the less suggestive lineup, it should come as no surprise that precinct showups are presumptively infirm (Riley, 70 NY2d at 529). We have found exigent circumstances, however, where the eyewitness was in the hospital suffering from critical wounds (see Rivera). While street showups of suspects caught in or near the crime scene are not presumptively infirm, they "must be scrutinized very carefully for unacceptable suggestiveness and unreliability" (People v Duuvon, 77 NY2d 541, 542, 543 [1991]). We have stated that "[w]hile the limits of an appropriate time period between the alleged crime and a showup identification may vary from case to case, the emphasis must be upon the prompt and immediate nature of an identification after the crime has been committed * * *" (People v Johnson, 81 NY2d 828, 831 [1993]).
The cases where we have found no infirmity with the showups have generally involved a temporal span of 15 minutes or less between the crime and the showup. In some of these cases, the central focus was the legality of the stop or arrest. For example, in People v Brnja (50 NY2d 366 [1980]), the defendant and his accomplice were sitting in a van parked less than a mile from the crime scene when the police, acting on a description by the robbery victim and witness, handcuffed and frisked them, and then transported them back to where the crime had occurred 15 minutes earlier. We found that the arrest was based on probable cause and that the showup was valid "in view of its proximity in time and location to the point of arrest" (id. at 372). In People v Hicks (68 NY2d 234 [1986]), we found that the police had reasonable suspicion to detain and transport defendant and his accomplice to the crime scene, which was one minute away by car (id. at 240). In addition to defendants' fitting the general description of the perpetrators, there were no other cars at the intersection where they were stopped, and defendant and the accomplice gave an answer regarding their prior whereabouts that the police knew was incorrect (id. at 237). Defendants were detained for about 10 minutes and the time between the crime and the identification was not much longer (id.).
In other cases, the legality of the showup was the central focus. In Duuvon, the defendant alone robbed a dry cleaners that he, as part of a group, had robbed 10 days earlier. As defendant made his way toward his getaway car, a taxicab, two employees who now had been twice robbed, and were determined *601 to prevent a third, bellowed for help. Defendant got into the cab, but a police car blocked its path. Defendant then fled, but was caught seconds later, clutching in his hand a wad of cash. One of the employees immediately appeared and spontaneously identified the defendant. Defendant was arrested and taken back to the cleaners where he was identified by the other employee while in the back of the police car in handcuffs. Although we disapproved the use of the handcuffs, we found that the showup in front of the employee was "within the permissible boundaries of the governing legal principles" because it took place several minutes after the crime and around the corner from the scene (77 NY2d at 544). In addition, there was an "unbroken chain of eventscrime, escape, apprehension and identifications * * *" (id. at 545).
As in this case, the complainant in People v Love (57 NY2d 1023 [1982]) came home to find a burglar. Unlike this case, however, a transit officer who immediately responded to complainant's call for help saw the defendant on the fire escape of the building, chased him down the street, and upon apprehending him, brought him back to the building where the complainant identified him in the presence of bystanders. The showup took place five minutes after the crime.
In contrast to the foregoing cases, we found in Johnson that the showup was improper and that a lineup should have been conducted. There, the complainant was robbed by a perpetrator who then escaped. After the police arrived, they drove the victim around the neighborhood without finding the perpetrator. About 2½ hours later, the police apprehended defendant near the crime scene and brought him back there. The police also drove the complainant, who was not nearby, to the crime scene where he identified the defendant.
Here, the identification took place about 55 minutes after the occurrence of the crime. Looking solely at the time span, 55 minutes exceeds by 40 minutes the longest temporal span we have permitted (see Brnja). While such a delay does not render the showup automatically invalid, it is an important factor militating against a finding that the show up was prompt and immediate, which could be rebutted by the circumstances of the case. But even when the time span is coupled with the circumstances of this case, the showup was not prompt and immediate. This is not a case that involved a fast-paced investigation. The officers did not see defendant run from the house, nor did they chase him down the street. On a very warm day, they found him at a nearby house with a pool, also occupied *602 by another person, initially wearing a towel and then tan shorts. The officers knew where to find him, and had no trouble locating him the second time. That there was no urgent need for a showup is also evidenced by the fact that police did not arrest him until three days later.
Defendant was the only person the police suspected, even after their second drive around the neighborhood, and they obviously did not feel that they had sufficient information to detain or arrest him. This is significant because immediate showups (the one here was not immediate), are tolerated based "on [the] objective that the police have reasonable assurances that they arrested or detained the right person" (Duuvon, 77 NY2d at 545). In light of these circumstances, and the inherent suggestiveness of showups, a lineup should have been conducted.
Moreover, the showup was unduly suggestive. While showups are inherently suggestive, they become unduly suggestive when they create a "substantial likelihood of misidentification" (id. at 544). Here, looking through the window of her home, the complainant saw standing 15 to 20 feet away a man of the same height, hair color, and build as the one she had seen earlier, although much older, who was wearing and holding maroon and tan shorts, respectively, while flanked by three uniformed officers. In the background, there were two patrol cars and one unmarked car. The holding of the shorts "at his side," even though they were his, while being virtually surrounded by officers, essentially rendered defendant a bull's eye, and created a substantial likelihood of misidentification (cf. Riley, 70 NY2d at 527-528 [in a precinct showup, gun and stolen property were laid out on a table near the suspects who were the only nonuniformed persons in the room]).
Courts should do more than pay lip service to the acknowledgment that" `[t]he influence of improper suggestion upon identifying witnesses probably accounts for more miscarriages of justice than any other factorperhaps it is responsible for more such errors than all other factors combined' * * *" (id. at 530 [citations omitted]). An identification plays a central role in the truth finding process of the criminal justice system. Since showups tend to undermine that process, they should be, in substance and in form, strictly scrutinized and admitted in exceptional circumstances. This is particularly the case given that "[t]he inadmissibility of the showup identification evidence alone * * * does not preclude admission of identifications subsequent to the showup ones if they, in turn, are justified by independent source reliability standards and if they are otherwise authorized" (id. at 531).
*603 In summary, because the showup was unnecessary, untimely and suggestive, I dissent.
Order affirmed in a memorandum.
NOTES
[*] Unlike our dissenting Colleague, we do not draw a bright-line rule to determine the timeliness of a showup. The "limits of an appropriate time period between the alleged crime and a showup identification may vary from case to case" (Johnson, 81 NY2d at 831). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2245545/ | 42 Ill. App.3d 316 (1976)
356 N.E.2d 144
U-HAUL CO., Plaintiff-Appellant,
v.
DONALD J. KATHAN, Individually and d/b/a Arlington Texaco and Arlington Rentals, Defendant-Appellee.
No. 76-590.
Illinois Appellate Court First District (5th Division).
Opinion filed September 24, 1976.
Theodore R. Sherwin and Robert A. Sherwin, both of Chicago (Sherwin & Sherwin, of counsel), for appellant.
Stephen P. Carponelli, of Arlington Heights (Carponelli, Massucci & Krug, of counsel), for appellee.
Order affirmed.
Mr. PRESIDING JUSTICE LORENZ delivered the opinion of the court:
Plaintiff brings this interlocutory appeal from an order which denied its motion for a preliminary injunction. Plaintiff contends the trial court abused its discretion by finding that plaintiff would suffer no irreparable injury if an injunction was not issued and that an adequate remedy at law existed in the form of money damages.
Plaintiff's complaint alleged defendant had breached its dealership contract with plaintiff to rent trucks, trailers, and various equipment by failing to remit past due rental fee percentages. The dealership contract provided for termination under certain conditions:
"* * * with the exception that the dealer warrants, covenants and *317 agrees that, within the geographical limits of the county of his place of business, he will not represent or render any service either on his own behalf or in any capacity for any other persons, firm or corporation engaged in any rental business which offers the rental of equipment similar to that operated by U-Haul Co. for the duration of the then existing telephone directory listing, plus a period of one year from the termination of such telephone directory listing."
Since the date of termination, February 11, 1976, defendant had allegedly continued to rent other trucks and equipment for a similar concern, Ryder Truck Rental, Inc. Plaintiff prayed for a permanent injunction to restrain defendant from further renting within the county and for $24,246.48 in past due rentals.
Plaintiff also moved for a preliminary injunction to restrain defendant from competing for rentals within the area while this cause was pending. In response, defendant moved to strike plaintiff's complaint and request for a preliminary injunction on the grounds that plaintiff failed to allege an irreparable injury and did not represent that any trade secret, formula, or rental customer list was involved.
After a hearing on the motion, the trial court specifically found there was no irreparable injury which warranted a preliminary injunction and an adequate remedy existed at law in money damages, and denied plaintiff's motion. This appeal was then perfected pursuant to Supreme Court Rule 307. Ill. Rev. Stat. 1975, ch. 110A, par. 307.
OPINION
1 Plaintiff contends the trial court abused its discretion by finding that plaintiff would suffer no irreparable injury if an injunction was not issued and that an adequate remedy at law existed in the form of money damages. A clear abuse of discretion must be shown before a reviewing court will set aside a trial court's decision to deny a preliminary injunction. (Lonergan v. Crucible Steel Co., 37 Ill.2d 599, 229 N.E.2d 536.) A preliminary injunction generally will not be issued unless the movant shows a probability of success on the merits and a need to preserve the status quo in order to prevent an irreparable injury for which there is no adequate remedy at law. Amber Automotive, Inc. v. Illinois Bell Telephone Co., 15 Ill. App.3d 769, 305 N.E.2d 270.
2 We believe the trial court exercised sound discretion in denying plaintiff's motion. Plaintiff has argued that the losses it has already suffered and will continue to suffer during the period covered by the restrictive covenant include unpaid rental fee percentages, advertising expenses and revenues diverted to its competitor. These injuries are clearly not irreparable. If proved, all could be recompensed by money *318 damages. (Tele-Controls, Inc. v. Ford Industries, Inc. (7th Cir.1967), 388 F.2d 48.) We hold, therefore, that there was no need to preserve the status quo by a preliminary injunction when an adequate remedy in money damages existed for any injuries which plaintiff may have sustained.
For this reason we affirm the order of the circuit court.
Affirmed.
SULLIVAN and BARRETT, JJ., concur. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1535695/ | 114 B.R. 362 (1990)
In re Judith Ann BUCHARDT, Debtor.
Bankruptcy No. 89-01991.
United States Bankruptcy Court, N.D. New York.
March 16, 1990.
David R. Garner, Canton, N.Y., for debtor; Paul M. Fisher, of counsel.
Melvin & Melvin, Louis Levine, Syracuse, N.Y., for Merchants Nat. Bank and Trust Co.
MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
STEPHEN D. GERLING, Bankruptcy Judge.
This contested matter is before the Court by way of the motion of Judith Ann Buchardt *363 ("Debtor") to avoid a judicial lien of Merchants National Bank and Trust Co. ("Merchants"), pursuant to § 522(f)(1) of the Bankruptcy Code 11 U.S.C. §§ 101-1330 (West 1979 and Supp.1989) ("Code").
JURISDICTION
The Court has subject matter jurisdiction over this contested matter pursuant to 28 U.S.C. §§ 157(b)(1), 1334 (West Supp.1989). The matters herein are core proceedings under 28 U.S.C. § 157(b)(2)(K).
FACTS
On November 2, 1989 the Debtor filed her voluntary petition for relief under Chapter 7 of the Code. At the time of filing, the Debtor owned real property located on Clinton Street in Waddington, New York ("Property"). In her petition she claims entitlement to a $10,000.00 exemption in the Property pursuant to New York Debtor & Creditor Law § 282 (McKinney's Supp.1990) ("NYD & CL") and New York Civil Practice Law and Rules § 5206(a) (McKinney's Supp.1990) ("NYCPLR"), the statutory provisions which set forth New York's homestead exemption.
The judgment lienor, Merchants, holds a lien against the Debtor's exempt Property in the amount of $7,043.68. Merchants' judgment is based upon the Debtor's default on a promissory note which she executed in August 1976. The judgment was entered against the Debtor in the office of the Clerk of the Supreme Court of the State of New York for Onondaga County on September 16, 1977.[1] No portion of the judgment has been paid since its entry.
In July, 1987 Merchants commenced an action against the Debtor in the Supreme Court of the State of New York for the County of St. Lawrence based upon on its previous 1977 judgment pursuant to NYCPLR § 5014. The resulting judgment was entered in the Office of the Clerk of St. Lawrence County on September 18, 1987 in the amount of $7,043.68. The Debtor seeks avoid the fixing of Merchants' lien upon the Property which she claims as exempt pursuant to Code § 522(f)(1).
ARGUMENTS
The Debtor claims entitlement to an exemption in the Property in the amount of $10,000.00. She also claims to have had $9,000.00 in equity in the Property at the time of filing. The Debtor asserts that Merchants' lien impairs her homestead exemption and is, therefore, subject to avoidance under Code § 522(f).
Merchants seeks an Order denying the Debtor's motion in all respects. It argues that the application of Code § 522(f) to avoid liens entered prior to its enactment is unconstitutional. Merchants contends that the 1987 judgment which is based upon the 1977 judgment relates back to the entry date of the original judgment. As the Code cannot affect property rights created before its enactment, Merchants maintains that Code § 522(f) does not apply to the 1977 judgment.
In addition, Merchants has objected to the claim of entitlement to the current homestead exemption as provided in NYCPLR § 5206. Merchants maintains that, because the judgment was founded upon a debt contracted by the Debtor before the present amended version of the homestead exemption statute became effective, she cannot claim entitlement under the current statute.
DISCUSSION
The Court's initial inquiry is whether Code § 522, which was enacted in 1978 and became effective in 1979, may be applied retrospectively to a debt incurred in 1977. This was previously considered by the Supreme Court in United States v. Security Industrial Bank, 459 U.S. 70, 103 S. Ct. 407, 74 L. Ed. 2d 235 (1982). In Security Industrial, supra, the debtors moved pursuant to Code § 522(f) to avoid judicial liens obtained and perfected before the Bankruptcy and Reform Act of 1978, *364 Pub.L. 95-598, 92 Stat. 2549 ("1978 Act") was enacted on November 6, 1978. The Supreme Court decided that the Bankruptcy Code was not intended by Congress to be applied retroactively. See id. at 71, 103 S.Ct. at 408. The Court restated the principle that "[n]o bankruptcy law shall be construed to eliminate property rights which existed before the law was enacted in the absence of an explicit command from Congress." Id. at 81, 103 S.Ct. at 414. To apply the statute retroactively would destroy a property right acquired prior to the statute's enactment thereby violating the Takings Clause of the Fifth Amendment. In Security Industrial, supra, the Court avoided finding that there was such a taking as it concluded that Congress intended that Code § 522(f) be applied only to property rights created post enactment, i.e., after November 6, 1978.
In the instant case, the original entry date of Merchants' judgment is September 16, 1977. Therefore, it is clear that the Debtor may not avoid Merchants' judicial lien pursuant to Code § 522(f) if the 1987 judgment relates back to the September 16, 1977 entry date. Conversely, the conclusion that Merchants' 1987 lien is a completely independent, new lien would result in the applicability of Code § 522(f), and the avoidability analysis in accordance with that section.
a. NYCPLR § 5014(1)
Under New York law, the statute of limitations of a judgment lien is ten years. NYCPLR § 5203(b). The judgment itself is effective for twenty years after the docketing of the judgment. NYCPLR § 211(b). However, a ten year statutory realty lien is measured not from the time of the docketing, but from the filing of the judgment roll. Quarant v. Ferrara, 111 Misc. 2d 1042, 445 N.Y.S.2d 885 (1981). In the case at bar, the date from which the ten year period ran was September 16, 1977.
On July 7, 1987, Merchants commenced an action on its 1977 judgment pursuant to NYCPLR § 5014 to obtain another ten year lien.[2] The primary objective of an action on a judgment under NYCPLR § 5014(1), is to revive the lien of judgment and not to enforce it. 5 Weinstein-Korn-Miller, N.Y. CIV.PRACT. § 5014.04 (1989). In the past, the statute required the judgment creditor to wait until ten years had elapsed from the first docketing of the judgment in order to bring a new action on that judgment. See NYCPLR § 5014 Supplemental Practice Commentaries at 541-44.
NYCPLR § 5014 was amended in 1986. As amended, NYCPLR § 5014 permits an action on a judgment to be commenced during the year prior to the expiration of ten years from the first docketing of the judgment. 3A Weinstein-Korn-Miller, N.Y.CIV.PRAC. § 24.04 (1989). It also provides that if the new judgment is obtained, it is designated a "renewal judgment", and the lien created by the renewal judgment automatically takes effect when ten years have expired after the first docketing of the original judgment. See id.
The purpose of NYCPLR § 5014 is to protect the judgment creditor and to prevent the uncollected judgment from expiring as a lien. See NYCPLR § 5014, Supplemental Practice Commentary at 542. As a judgment remains valid for twenty years, the judgment creditor is allowed under the statute "to revive the judgment so as to revalidate it as a lien for a second ten years." Id. at 541. While procedurally a renewal judgment may be obtained through a "plenary action . . . in which the creditor should earn a quick summary judgment, . . . a simple registration procedure . . . subject to nothing more than the mailing of notice to the judgment debtor" may also be used. Id. The new lien would attach or "tack on" to the old lien and "will not start to run until the first ten year period has run." Id.
In light of the plain language of the statute and the accompanying discussion of the provision in the Practice Commentaries, the Court concludes that Merchants' 1987 *365 lien relates back to the 1977 lien for the purposes of analysis under Code § 522. The statute expressly provides that a judgment resulting from an action pursuant to NYCPLR § 5014 "shall be designated a renewal judgment and shall be so docketed by the clerk." Such an overt designation, together with the additional provision that the renewal judgment "shall take effect upon the expiration of ten years from the first docketing of the original judgment," indicates the legislature's intent that the renewal lien does not stand apart from, but is a continuation of, the original lien. It is not docketed as a freestanding lien and the point from which its ten year period runs is solely dependent upon the expiration of the original ten year lien. The relatively lax procedure of allowing the judgment creditor to register the judgment, as used in NYCPLR Article 54 for the local recognition of foreign judgments, additionally sets the renewal judgment apart from a typical judgment on the merits.[3] Thus, the lien resulting from an action on the judgment pursuant to NYCPLR § 5014 was not intended to create, and does not create, on the part of the creditor any new property rights in the judgment debtor's property.[4]
The Court, therefore, concludes that, because Merchants' action on their 1977 judgment pursuant to NYCPLR § 5014 was timely commenced and obtained in accordance with that section, their 1987 lien relates back to, and is analyzed for the purpose of Code § 522(f), as if it was docketed on September 16, 1977. As the Code cannot be applied to property rights created before its enactment on November 6, 1978, Code § 522(f) is not available to the Debtors as pertains to Merchants' instant lien.
b. Objection to Exemption
The Court now turns to Merchants' objection to the Debtor's claimed homestead exemption. Merchants asserts that the currently enacted version of NYCPLR § 5206 is not available to debts contracted before enactment of the previous amendment to that statute on August 22, 1977.
The Court has visited this issue previously in In re Ventura, 65 B.R. 29 (Bankr.N. D.N.Y.1986). In In re Ventura, supra, 65 B.R. at 30, the Court held that the present provisions of NYCPLR § 5206 are not applicable to judgments on contractual obligations executed prior to August 22, 1977. NYCPLR § 5206 was amended by the New York Legislature on May 24, 1977. The amended version became effective on August 22, 1977. Act of May 24, 1977, Ch. 181, 1977 N.Y.Laws 235. NYCPLR § 5206 has not been significantly amended further since the Court's decision in In re Ventura.
Merchants has included in its Affidavit a copy of the promissory note which served as the basis for Merchants 1977 judgment against the Debtor. The note was executed by the Debtor and dated August 2, 1976. Merchants further included their original Complaint filed in the 1977 action against the Debtor. The Complaint, and therefore the judgment, clearly is based upon the Debtor's note dated August 2, 1976.
The law is unequivocal and the evidence is uncontroverted. Merchants' judgment is based upon the Debtor's contractual obligation which she executed prior to August 22, 1977. She is, therefore, not entitled to utilize the exemption under the current form of NYCPLR § 5206 in relation to Merchants' lien. Her exemption, for the sole purpose of avoiding Merchants' lien pursuant to Code § 522(f), is limited to NYCPLR § 5206 as it existed prior to August 22, 1977. See In re Ventura, supra, 65 B.R. at 30-31.
For the foregoing reasons, the Court finds that the Debtor is unable to avoid Merchants' judicial lien pursuant to Code § 522(f). In addition, the Debtor's claimed homestead exemption pursuant to NYCPLR § 5206 (McKinney's Supp.1990) is denied only insofar as the Debtor seeks to *366 claim it in order to avoid Merchants' judicial lien herein.
IT IS SO ORDERED.
NOTES
[1] Merchants' judgment was also entered at that time against B.L. Buchardt a/k/a Bruce L. Buchardt, who is not a debtor and, with whom the Court is not concerned.
[2] It should be noted that Merchants did not employ NYCPLR § 5203(b) to "extend" its 1977 lien. Such an extension is granted only for the length of time necessary for the judgment creditor to dispose of the property.
[3] See NYCPLR § 5403 which provides for the filing of a foreign judgment and notice to the judgment debtor by the judgment creditor.
[4] While the amount of the judgment may change over time, that quantitative difference is separate from any creation or termination of rights in the property. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2259550/ | 777 F.Supp. 787 (1991)
ON COMMAND VIDEO CORPORATION, Plaintiff and Counterdefendant,
v.
COLUMBIA PICTURES INDUSTRIES, Paramount Pictures Corporation, Twentieth Century Fox Film Corporation, Universal City Studios, Inc., the Walt Disney Company, and Warner Brothers, Inc., Defendants and Counterclaimants,
Embassy Pictures, Defendant.
No. C-89-4022 SAW (JSB).
United States District Court, N.D. California.
November 14, 1991.
*788 Jeffrey King, Jeffrey Poston, Bickel & Brewer, Washington, D.C., Michael Healy, Sedgwick, Detert, Moran & Arnold, San Francisco, Cal., for plaintiff and counterdefendant.
Robert D. Raven, Michael A. Jacobs of Morrison & Foerster, San Francisco, Cal., Paul Goldstein, Stanford Law School, Harvey Shapiro of Sargoy, Stein, Rosen & Shapiro, New York City, Robert Kuenzel, Proskauer, Rose, Goetz & Mendelsohn, San Francisco, Cal., Carole Hander, Arthur Silber, Proskauer, Rose, Goetz & Mendelsohn, Los Angeles, Cal., for defendants and counterclaimants.
MEMORANDUM AND ORDER
WEIGEL, District Judge.
Plaintiff seeks a declaratory judgment that its hotel video-movie viewing system does not infringe defendants' copyrights in the movies shown through the system. All but one of the defendants have joined to counterclaim for damages for copyright infringement by plaintiff's system.[1] Before the Court are cross-motions for summary judgment on the issue of liability. Plaintiff, the designer and builder of an innovative video viewing system currently installed in a number of hotels, insists that a hotel occupant's viewing of one or more of defendants' movies through its system does not constitute a "public performance" under the 1976 Copyright Act, 17 U.S.C. § 101 et seq. Defendants, seven major United States movie companies, contend that such viewings do constitute public performances and that plaintiff's system therefore violates defendants' exclusive right of public performance under § 106(4) of the Act.
I. Facts
The material facts of this case are not in dispute. On Command has developed a system for the electronic delivery of movie video tapes. The system consists of a computer program, a sophisticated electronic switch, and a bank of video cassette players ("VCPs"), all of which are centrally located in a hotel equipment room. The VCPs are connected to the hotel's guest rooms by wiring. The computer program directs the electronic switches so that a particular VCP will be dedicated to the guest room where a particular movie is requested. Each VCP contains a video tape. When a guest requests a particular movie, the computer identifies the VCP containing that movie, switches the VCP to that particular room, and starts the movie video.
A hotel guest operates the system from his or her room by remote control. After the television is turned on, the screen lists a menu of available movies. The guest selects a movie by entering the appropriate code on the remote control. Once a particular video is selected, that video selection disappears from the menu of available videos displayed on all other television sets in the hotel. The video is seen only in the room where it was selected by the guest. It cannot be seen in any other guest room or in any other location in the hotel. The viewer cannot pause, rewind, or fast-forward the video. When the movie ends, it is automatically rewound and then immediately available for viewing by another hotel guest.
The only components of the system installed in the guest rooms are the hand-held remote control and a microprocessor in the television set. When a guest checks in to the hotel, the hotel clerk uses a front-desk terminal connected to the On Command computer program to activate movie transmission to the appropriate room. At the guest's request, the clerk can prevent the transmission of adult movies to a room or deactivate service to a room altogether. The apparent advantages On Command's system enjoys over existing closed-circuit hotel video systems with pre-set movie times, such as "Spectravision," are the larger variety of movies available for viewing and the guests' freedom to watch them on their own schedule. On Command's system also eliminates the effort and potential guest embarrassment of in-house *789 hotel video rental programs, in which VCPs are installed in individual rooms and guests must physically rent videos from the hotel staff.
II. Discussion
A copyright owner has the exclusive right "to perform the copyrighted work publicly" or to authorize any such public performance. 17 U.S.C. § 106(4). What constitutes a public performance is defined by the Copyright Act in two clauses. Under clause (1), the "public place" clause, a performance is public if it occurs
at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered.
17 U.S.C. § 101. Under clause (2), the "transmit" clause, a performance is public if someone
transmit[s] or otherwise communicate[s] a performance or display of the work to a place specified by clause (1) or to the public, by means of any device or process.
Id. Under the transmit clause, a performance is public "whether the members of the public capable of receiving the performance or display receive it in the same place or in separate places and at the same time or at different times." Id.
Both plaintiff and defendants base their motions for summary judgment on favorable interpretations of these clauses. Both also rely heavily on the Ninth Circuit's decision in Columbia Pictures v. Professional Real Estate, 866 F.2d 278 (9th Cir. 1989). This Court must therefore determine whether On Command's system results in the public performance of defendants' movies under the statutory clauses and Professional Real Estate.
A. The Public Place Clause.
Professional Real Estate held that hotel guest rooms are not "public places" for the purposes of the Copyright Act. 866 F.2d at 280. Defendants do not challenge this holding. Rather, defendants argue that because On Command's system comprises components dispersed throughout a hotel i.e., the command center is located in a hotel equipment room, the hotel operator's terminal is in the front lobby, the transmission wiring is installed throughout the walls and ceilings the relevant place of performance is not the individual hotel rooms but the entire hotel, which defendants contend is a public place under the language of the Act. This argument is unavailing. At least for the purposes of public place analysis, a performance of a work does not occur every place a wire carrying the performance passes through; a performance occurs where it is received. Accepting defendants' argument would eviscerate both the concepts of "performance" and "public place." The Act defines the performance of a motion picture as the "show[ing of] its images in any sequence or to make the sounds accompanying it audible." 17 U.S.C. § 101. A movie video is thus performed only when it is visible and audible. In On Command's system, this viewing and hearing occurs only in an individual guest room. That can be the only relevant place of performance for public place analysis. Since hotel guest rooms are indisputably not public places for copyright purposes, On Command's system results in no public performances under the public place clause.
B. The Transmit Clause.
Public performance of defendants' movies under this clause occurs if On Command "transmits" the movies "to the public." Under the Copyright Act, to "transmit" a performance is
to communicate it by any device or process whereby images or sounds are received beyond the place from which they are sent.
Id. Plaintiff's argument that On Command's system involves not "transmissions" but "electronic rentals" similar to patrons' physical borrowing of videotapes is without merit. On Command transmits movie performances directly under the language of the definition. The system "communicates" the motion picture "images and sounds" by a "device or process" the equipment and wiring network *790 from a central console in a hotel to individual guest rooms, where the images and sounds are received "beyond the place from which they are sent." See also Professional Real Estate, 866 F.2d at 282 n. 7. The fact that hotel guests initiate this transmission by turning on the television and choosing a video is immaterial.
On Command's video transmissions are also "to the public" for the purposes of the transmit clause. Hotel guests watching a video movie in their room through On Command's system are not watching it in a "public place" but they are nonetheless members of "the public." See Columbia Pictures Industries, Inc. v. Redd Horne, 568 F.Supp. 494 (W.D.Pa.1983), aff'd 749 F.2d 154, 159 (3rd Cir.1984) ("the transmission of a performance to members of the public, even in private settings such as hotel rooms ... constitutes a public performance") (citing H.R.Rep. No. 1476, 94th Cong., 2d Sess. at 64 (1976) ["1976 House Report"]); ESPN, Inc. v. Edinburg Community Hotel, Inc., 735 F.Supp. 1334, 1340 (S.D.Tex.1986) ("The [1976] House Report ... on the Copyright Act makes explicit that performances to occupants of hotel rooms fall within the definition of a public performance"). This is because the relationship between the transmitter of the performance, On Command, and the audience, hotel guests, is a commercial, "public" one regardless of where the viewing takes place. The non-public nature of the place of the performance has no bearing on whether or not those who enjoy the performance constitute "the public" under the transmit clause.
A performance may still be public under the transmit clause "whether the members of the public ... receive it in the same place or in separate places and at the same time or at different times." 17 U.S.C. § 101. A 1967 Report by the House of Representatives reveals that Congress added this language to the transmit clause to cover precisely the sort of single-viewer system developed by plaintiff:
[This language makes doubly clear that] a performance made available by transmission to the public at large is "public" even though the recipients are not gathered in a single place, and even if there is no direct proof that any of the potential recipients was operating his receiving apparatus at the time of the transmission. The same principles apply whenever the potential recipients of the transmission represent a limited segment of the public, such as the occupants of hotel rooms....; they are also applicable where the transmission is capable of reaching different recipients at different times, as in the case of sounds or images stored in an information system and capable of being performed or displayed at the initiative of individual members of the public.
H.R.Rep. No. 83, 90th Cong., 1st Sess. at 29 (1967). Thus, whether the number of hotel guests viewing an On Command transmission is one or one hundred, and whether these guests view the transmission simultaneously or sequentially, the transmission is still a public performance since it goes to members of the public. See also Redd Horne, 749 F.2d at 159 (transmissions of videos to private viewing booths occupied by one to four persons infringing under transmit clause); Paramount Pictures Corp. v. Labus, 16 U.S.P.Q.2d (BNA) 1142, 1147, 1990 WL 120642 (W.D.Wisc.1990) (hotel's distribution of unauthorized copies of video cassettes to single guest violated copyright owner's exclusive right to distribute work to "the public"). On Command therefore "publicly performs" defendants' movies under the meaning of the transmit clause.
C. Defendants' Ownership of Copyright.
Plaintiff raises defendants' ownership of copyright in a number of the movies in question as a disputed issue of fact. Defendants concede that their copyright in five (5) of these movies is insufficiently documented in the submitted exhibits and ask leave to supplement their submissions accordingly. Since defendants seek summary judgment only on the issue of liability, however, it is unnecessary to postpone the Court's ruling until the documentation regarding these five movies is complete. *791 The failure of proof regarding these movies bears ultimately on the question of remedies, which will be awarded only for those infringements properly proven.
Accordingly,
IT IS HEREBY ORDERED that:
(1) Defendants' motion for summary judgment is GRANTED;
(2) Plaintiff's motion for summary judgment is DENIED;
(3) Further proceedings on injunctive relief and damages are scheduled for hearing before this Court on January 16, 1992, at 2:15 pm. Defendants must serve and file any supplemental documentation proving copyright ownership on or before December 16, 1992. Plaintiff's response, if any, must be served and filed on or before December 31, 1992.
NOTES
[1] Embassy Pictures does not join as a counterclaimant. According to plaintiff, Embassy was originally named as a defendant but has since changed its name, was not served with the complaint, and is not a party to this suit at this time. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1669246/ | 375 F. Supp. 1148 (1974)
COMMITTEE FOR the CONSIDERATION OF the JONES FALLS SEWAGE SYSTEM, an association of neighborhood and community organizations and persons, et al.
v.
Russell E. TRAIN, Individually and as Administrator of the United States Environmental Protection Agency, et al., Intervening Defendants.
Civ. No. 73-1188-Y.
United States District Court, D. Maryland.
May 13, 1974.
*1149 Mitchell Stevan, Baltimore, Md., for plaintiffs.
George Beall, U. S. Atty., and James M. Kramon, Asst. U. S. Atty., for Russell E. Train.
Francis B. Burch, Atty. Gen., and Paul Walter and Donald H. Norel, Sp. Asst. Attys. Gen., for Dr. Neil Solomon.
George L. Russell, Jr., City Sol., and Harry S. Swartzwelder, Jr., and William Hughes, Asst. City Sols., for Dr. F. Pierce Linaweaver and Mayor and City Council of Baltimore City.
R. Bruce Alderman and Harry S. Shapiro, Towson, Md., and Douglas R. Due, Baltimore, Md., for C. Elmer Hoppert, Jr., and County Executive and County Council of Baltimore County.
Charles B. Heyman and Searle E. Mitnick, Baltimore, Md., for Carl M. Freeman, Trustee, and Carl M. Freeman Associates, Inc.
Hugo A. Ricciuti, Baltimore, Md., for Ralph DeChiaro Enterprises, Inc.
MEMORANDUM AND ORDER
JOSEPH H. YOUNG, District Judge.
Plaintiffs, two individuals who reside in the vicinity of the Jones Falls stream and several citizens associations from nearby communities, seek injunctive relief restraining defendants from granting permits for sewer hook-ups into the Jones Falls sewer system and requiring them to revoke certain existing hook-up permits in cases where the connection has not yet been made. An order is also requested which would compel Russell E. Train, as the Administrator of the Environmental Protection Agency (E.P.A.) to perform allegedly non-discretionary acts required of him by the Federal Water Pollution Control Act Amendments of 1972 (F.W.P.C.A. or the Act), 33 U. S.C. §§ 1251-1376, 86 Stat. 816.
The Jones Falls stream system originates in Baltimore County, Maryland, and flows through parts of Baltimore City into the Patapsco River, which in turn flows through the Baltimore Harbor into Chesapeake Bay. It is alleged that discharges of raw sewage have occurred and continue to occur from the sewer systems of Baltimore City and Baltimore County into the Jones Falls stream.
The complaint, accompanied by a motion for a temporary restraining order and a motion for a preliminary injunction, was filed in this Court December 5, 1973, at which time the motion for a temporary restraining order was denied.
The defendants Dr. F. Pierce Linaweaver and the Mayor and City Council of Baltimore submitted a motion to dismiss the complaint which was joined in by all other defendants except Train.[1] A hearing was held on January 11, 1974, to consider this motion and the plaintiffs' motion for a preliminary injunction.[2] At that hearing the Court indicated that it was inclined to grant the defendants' motion to dismiss but, for reasons which will be hereinafter set forth, that ruling was reserved pending further developments. There is no longer any reason to delay disposition of the pending motions.
As grounds for their motion to dismiss the complaint, defendants assert two principal arguments: (1) that this Court lacks subject matter jurisdiction, and (2) if jurisdiction should be found, the Court should elect not to act under the doctrine of primary jurisdiction.
Plaintiffs allege jurisdiction under 33 U.S.C. §§ 1251-1376 (F.W.P.C.A.); 28 U.S.C. §§ 1331-1361; and 28 U.S.C. §§ 2201-2203 (Declaratory Judgment). Their complaint states "[t]his suit arises out of Title IV of the F.W.P.C.A., sections 1341, et seq."
*1150 Section 1365 of the F.W.P.C.A. authorizes citizen suits
(1) against any person (including (i) the United States, and (ii) any other governmental instrumentality or agency to the extent permitted by the eleventh amendment to the Constitution) who is alleged to be in violation of (A) an effluent standard or limitation under this chapter or (B) an order issued by the Administrator or a State with respect to such a standard or limitation, or
(2) against the Administrator where there is alleged a failure of the Administrator to perform any act or duty under this chapter which is not discretionary with the Administrator.
33 U.S.C. § 1365(a), and provides that the district courts shall have jurisdiction of such suits.[3] However, defendants argue that the exception or immunity clause set out in 33 U.S.C. § 1342(k) deprives the plaintiffs of any action under the Act.
Section 1342 of Title 33, United States Code (section 402 of the Act) is entitled "National pollutant discharge elimination system Permits for discharge of pollutants." It spells out the procedures for the administration of the permit programs envisioned by the Act.
Subsection k of section 1342 provides, in pertinent part:
Until December 31, 1974, in any case where a permit for discharge has been applied for pursuant to this section, but final administrative disposition of such application has not been made, such discharge shall not be a violation of (1) section 1311, 1316, or 1342 of this title, or (2) section 407 of this title, unless the Administrator or other plaintiff proves that final administrative disposition of such application has not been made because of the failure of the applicant to furnish information reasonably required or requested in order to process the application. For the 180-day period beginning on October 18, 1972, in the case of any point source discharging any pollutant or combination of pollutants immediately prior to such date of enactment which source is not subject to section 407 of this title, the discharge by such source shall not be a violation of this chapter if such a source applies for a permit for discharge pursuant to this section within such 180-day period.
33 U.S.C. § 1342(k). Thus, if this provision is applicable, the defendants are, in effect, immune from suit under the Act.
On October 4, 1973, the City of Baltimore Department of Public Works submitted several applications for National Pollutant Discharge Elimination System waste discharge permits to the E.P.A., Region III, in Philadelphia, Pennsylvania. One of these applications was for the Back River waste water treatment plant. The Jones Falls sanitary sewer system and the Jones Falls pumping station which are involved in the present controversy are part of the overall sanitary sewer system which feeds into the Back River plant. As such, the moving defendants contend, they are covered by the permit application submitted to the E.P.A. for that plant and, therefore, the immunity provision applies in the instant case.
The Act itself lends strong support to the conclusion that the Jones Falls sewer system and pumping station should be considered included in the treatment plant application. At 33 U.S.C. § 1292 *1151 the Act contains the following definition:
(2) (A) The term "treatment works" means any devices and systems used in the storage, treatment, recycling, and reclamation of municipal sewage or industrial wastes of a liquid nature to implement section 1281 of this title, or necessary to recycle or reuse water at the most economical cost over the estimated life of the works, included intercepting sewers, outfall sewers, sewage collection systems, pumping, power, and other equipment, and their appurtenances; extensions, improvements, remodeling, additions, and alterations thereof; elements essential to provide a reliable recycled supply such as standby treatment units and clear well facilities; and any works, including site acquisition of the land that will be an integral part of the treatment process or is used for ultimate disposal of residues resulting from such treatment.
(B) In addition to the definition contained in subparagraph (A) of this paragraph, "treatment works" means any other method or system for preventing, abating, reducing, storing, treating, separating, or disposing of municipal waste, including storm water runoff, or industrial waste, including waste in combined storm water and sanitary sewer systems. * * *.
Moreover, it is clear from the application forms utilized by the E.P.A. and the conduct of the E.P.A. in processing the application for the Back River plant that the E.P.A. considers the sewer systems and pumping stations feeding into the plant to be covered by the same permit.
In light of these considerations, the Court concludes that the permit application filed by the City of Baltimore for the Back River waste water treatment plant properly includes the Jones Falls sanitary sewer system and pumping station for purposes of section 1342(k). Thus, at least at first glance, the defendants are entitled to the immunity there provided.
However, at the time of oral argument on this motion, counsel for plaintiffs theorized that the last sentence of section 1342(k) would render the section inoperative in this case. That sentence reads: "For the 180-day period beginning on October 18, 1972, in the case of any point source discharging any pollutant or combination of pollutants immediately prior to such date of enactment which source is not subject to section 407 of this title, the discharge by such source shall not be a violation of this chapter if such a source applies for a permit for discharge pursuant to this section within such 180-day period." Plaintiffs interpret this sentence to mean that a discharger there described must apply for a permit within 180 days of October 18, 1972, and that if it does not it cannot thereafter obtain the immunity offered by the section.
Reference to 33 U.S.C. § 407 (section 13 of the Rivers and Harbors Act of 1899, 30 Stat. 1121) reveals that it does not apply to refuse matter "* * * flowing from streets and sewers and passing therefrom in a liquid state." This exception clause has been construed by the courts to exempt municipal dischargers of sewage from the operation of the 1899 Act. Illinois v. City of Milwaukee, 406 U.S. 91, 101, 92 S. Ct. 1385, 31 L. Ed. 2d 712 (1972); United States v. Lindsay, 357 F. Supp. 784 (E.D.N.Y. 1973); United States v. City of Asbury Park, 340 F. Supp. 555 (D.N.J.1972).
Congressional awareness of this judicial construction is reflected in the "Discussion of Intent" which appears in the legislative history for the F.W.P.C.A. In discussing the Refuse Act of 1899 the report states:
[T]he Refuse Act authority has significant gaps (particularly its exemption of municipal waste treatment works) that render it seriously inadequate as a means of implementation of *1152 a water pollution control program.[4]
It further states:
In 1899, the Congress enacted a statute which precisely prohibited the discharge of any "refuse" (subsequently defined by the Courts to include everything except sewage from municipalities).[5]
Thus, it is clear that the authors of this legislation would consider the sewer system here in question as a "source not subject to section 407." It is equally clear that the point source or sources here involved were discharging pollutants prior to October 18, 1972. However, the Court does not accept the argument that the final sentence of 1342(k) would therefore disallow the immunity offered by the section unless a permit application was filed within 180 days of the enactment date.
The second sentence of section 1342(k) states "in any case where a permit has been applied for" the immunity shall apply. (Emphasis supplied.) To read the entire section in a manner which would make it internally consistent, the final sentence should be interpreted as granting additional protection to the dischargers there described. In other words, since municipal dischargers of sewage were not previously subject to regulation, it is reasonable to assume that Congress intended to allow them an additional grace period of 180 days within which they would be immune from suit under the Act, even if they had not as yet filed a permit application. After that 180-day period had expired the second sentence of the section would be controlling. If the plaintiffs' interpretation is accepted, municipal dischargers would be required to file a permit application within the 180-day period in order to obtain immunity, but other dischargers, even though previously subject to regulation under the Refuse Act, could obtain immunity regardless of when they filed so long as they filed before a suit was brought. Such a construction is neither logical nor consistent with the purpose of the immunity system.
Even accepting the application of section 1342(k) to the instant case, plaintiffs argue that defendants are still subject to suit under the Act because the complaint alleges violations of 33 U. S.C. § 1318, which violations are not suspended by section 1342(k). The weakness in this argument is that the defendants could not possibly have violated section 1318. In pertinent part that section provides: "Whenever required to carry out the objective of this chapter * * * the Administrator shall require the owner or operator of any point source" to maintain records, file reports, use monitoring devices, sample effluents and provide such other information as the Administrator might reasonably require. Obviously, a discharger cannot be in violation of this section or an order issued under this section unless such an order has in fact been issued. It is not alleged in the complaint nor does it appear to be the case that any such order has been issued to any of the defendants herein.
One further aspect of the immunity question remains to be considered. Plaintiffs suggest that they should be allowed the opportunity to demonstrate that final administrative disposition of the defendants' application has not occurred due to the defendants' failure to cooperate with the E.P.A. Such a showing would deprive defendants of the protection offered in section 1342(k).[6] However, it is apparent to this Court from the documents which have been filed in this case that it is too early in the application process for the plaintiffs *1153 to be able to make the required showing.[7]
Since defendants are entitled to the statutory immunity, Counts 2, 3, and 4 of the complaint as amended, which allege violations of the F.W.P.C.A., must be dismissed. This leaves only Count 1 of the complaint which relates to the defendant Train and, of course, the intervening defendants. Forewarned by the Court of its probable ruling on defendants' motion to dismiss, plaintiffs have requested that should the Court decide to rule in defendants' favor without a further hearing, plaintiffs be granted leave to file an amended complaint. The purpose of this amended complaint would be to add an additional count alleging the existence of a public nuisance justiciable under federal common law.[8]
As a basis for this cause of action under federal common law the plaintiffs rely upon the recent Supreme Court decision in Illinois v. City of Milwaukee, 406 U.S. 91, 92 S. Ct. 1385, 31 L. Ed. 2d 712 (1972). The Supreme Court was there considering a motion by the State of Illinois for leave to file a bill of complaint, under the Court's original jurisdiction, against several Wisconsin cities and sewerage commissions for pollution of Lake Michigan. In a unanimous decision written by Justice Douglas the Court held that Illinois had stated a cause of action under federal common law for abatement of a public nuisance; that the term "laws" in 28 U.S.C. § 1331(a) included claims founded upon federal common law; and that, because a federal question claim was therefore presented over which a district court would also have original jurisdiction, the Court would remit the case to an appropriate district court since its own original jurisdiction was not mandatory but merely permissible under 28 U.S.C. § 1251(b)(3).
Defendants maintain that the cause of action acknowledged to exist in City of Milwaukee is limited to governmental units and does not extend to private plaintiffs. This Court is in agreement with the defendants' position and therefore, even if plaintiffs amend their complaint, the Court would still lack jurisdiction as to all the defendants save Train and the intervenors.
The plaintiff in City of Milwaukee was, obviously, a state. The plaintiffs in the two principal cases relied upon by the Court in the course of its opinion were also states. Each of those cases indicates that the character of the plaintiffs as governmental units was integral to the determination that a federal cause of action existed.
Justice Douglas in City of Milwaukee wrote "when we deal with air and water in their ambient or interstate aspects, there is a federal common law, as Texas v. Pankey, 441 F.2d 236, recently held." 406 U.S. at 103. The decision in Texas v. Pankey, 441 F.2d 236 (10th Cir. 1971), was based upon the right of a state to have federal judicial protection of its ecological interests. In a passage which was quoted by the Supreme Court *1154 in City of Milwaukee, the Pankey opinion states:
As the field of federal common law has been given necessary expansion into matters of federal concern and relationship (where no applicable federal statute exists, as it does not here) the ecological rights of a State in the improper impairment of them from sources outside the State's own territory, now would and should, we think, be held to be a matter having basis and standard in federal common law and so directly constituting a question arising under the laws of the United States.
441 F.2d at 240, quoted 406 U.S. at 99-100.[9] In arriving at this conclusion the Tenth Circuit relied upon the early environmental case of Georgia v. Tennessee Copper Co., 206 U.S. 230, 27 S. Ct. 618, 51 L. Ed. 1038 (1907). The following language from that case was singled out both by the Pankey court and later by the Supreme Court in City of Milwaukee:
The caution with which demands of this sort on the part of a state, for relief from injuries analogous to torts, must be examined, is dwelt upon in Missouri v. Illinois, 200 U.S. 496, 520, 521 [26 S. Ct. 268, 50 L. Ed. 572, 578, 579]. But it is plain that some such demands must be recognized, if the grounds alleged are proved. When the states by their union made the forcible abatement of outside nuisances impossible to each, they did not thereby agree to submit to whatever might be done. They did not renounce the possibility of making reasonable demands on the ground of their still remaining quasi-sovereign interests, and the alternative to force is a suit in this court. Missouri v. Illinois, 180 U.S. 208, 241 [21 S. Ct. 331, 45 L. Ed. 497, 512].
206 U.S. at 237. When speaking specifically to the question of water pollution the Court again turned to cases which demonstrate that it was the character of plaintiffs as governmental units which was seen as the justification for a federal action to deal with water pollution as a public nuisance.[10]See, e. g., North Dakota v. Minnesota, 263 U.S. 365, 44 S. Ct. 138, 68 L. Ed. 342 (1923); Missouri v. Illinois, 200 U.S. 496, 26 S. Ct. 268, 50 L. Ed. 572 (1906).
The case law which has developed in this area since the Supreme Court's decision in City of Milwaukee sheds little light on the question here presented. Neither the Court nor the attorneys in this case have been able to find a single case[11] in which a private plaintiff has attempted to bring suit under the federal common law rationale of City of Milwaukee. After careful consideration this Court has concluded that to allow such an action would be an improper extension of the Supreme Court's holding; an extension which was not contemplated by the Supreme Court[12] and which *1155 would conflict with the theory underlying its decision.
Since this finding is dispositive of the motion to dismiss of Dr. Linaweaver and the Mayor and City Council, it is unnecessary to consider the primary jurisdiction question. Likewise, since all the defendants except Russell Train adopted the City's motion to dismiss and that motion will be granted herein, a consideration of the other grounds for dismissal raised by other defendants is unnecessary.
Accordingly, it is this 13th day of May, 1974, by the United States District Court for the District of Maryland, ORDERED:
1. That Counts 2, 3 and 4 of the complaint be, and the same are, hereby dismissed.
2. That plaintiffs' request for resumption of hearing on defendants' motion to dismiss be and the same is hereby denied.
3. That plaintiffs' motion to amend be, and the same is, hereby denied.
4. That plaintiffs' supplementary motion to amend be, and the same is, hereby granted.
NOTES
[1] The preliminary injunction does not pertain to the defendant Russell Train. By agreement of the parties, the Administrator has been granted an extension of time within which to answer the complaint until after the resolution of the pending motions to dismiss.
[2] The motion to intervene as defendants of Carl M. Freeman, Trustee, Carl M. Freeman Associates, Inc., and Ralph DeChiaro Enterprises, Inc., was also considered and granted.
[3] Part (b) of § 1365 requires 60 days notice before filing a citizen's suit and instructs that "[n]otice under this subsection shall be given in such manner as the Administrator shall prescribe by regulation." 33 U.S.C. § 1365(b). Intervening defendants contend that plaintiffs should not be allowed to maintain this action because of their failure to comply with the notice regulations promulgated by the E.P.A. which appear at 40 C.F.R. § 135. However, plaintiffs' notice was mailed May 23, 1973, and the E.P.A. regulations did not become effective until July 9, 1973. In light of this fact, since the spirit of the provision was complied with, plaintiffs' notice was sufficient.
[4] 1972 U.S.Code Cong. & Admin.News, 92nd Cong. 2nd Sess. at p. 3736.
[5] Id.
[6] The section provides that the immunity shall apply "unless the Administrator or other plaintiff proves that final administrative disposition of such application has not been made because of the failure of the applicant to furnish information reasonably required or requested in order to process the application." 33 U.S.C. § 1342(k).
[7] At the hearing on January 11, 1974, dealing with this motion the Court reserved its ruling to await the compliance of the City of Baltimore with a request from the E.P.A. for additional information concerning the permit application. The Court indicated at that time that if the City did not timely supply the information to the E.P.A., the failure-to-cooperate language of 33 U.S.C. § 1342(k) might become relevant. The City did supply the requested information within the time allowed by the E.P.A.
[8] On April 10, 1974, plaintiffs filed a supplementary motion to amend the complaint. This latest motion seeks to add an additional count asserting that the alleged discharges into the Jones Falls stream system constitute "an imminent and substantial endangerment to the health of persons" under the provisions of 33 U.S.C. § 1364. This motion to amend will be granted. However, it can have no effect as against any of the defendants except Russell Train. Section 1364 authorizes only the Administrator to bring suit on behalf of the United States. It does not provide plaintiffs herein a cause of action under the Act.
[9] Admittedly this passage was referred to by the Supreme Court in relation to its discussion of the "arising under" issue. However, it should also be noted that the Court stated "when we deal with air and water in their ambient or interstate aspects, there is a federal common law, as Texas v. Pankey, 441 F.2d 236, recently held" (emphasis supplied), 406 U.S. at 103. Nowhere did the Court indicate disagreement with the rationale of the Pankey decision.
[10] Defendants emphasize the fact that the Supreme Court constantly referred to the concept of a "public nuisance" and that traditionally private individuals have not been allowed to bring an action to abate a public nuisance. This is consistent with this Court's view that the character of the plaintiff was an essential element of the City of Milwaukee holding.
[11] There has been some limited discussion of this question in the legal literature with conflicting conclusions. See, e. g., Comment, Federal Common Law in Interstate Water Pollution Disputes, 1973 U.Ill.L.For. 141, 150; Comment, Federal Common Law and the Environment: Illinois v. Milwaukee, 2 Envir.L.Rep. 10168, 10172 (1972).
[12] Footnote 6 of Justice Douglas' opinion states that "it is not only the character of the parties that requires us to apply federal law." This statement can be read in at least two different ways. It could mean a) that there were other considerations sufficient in themselves to require application of federal law, or b) that there were other federal interests which in addition to the character of the parties required the application of federal law although those other interests in themselves would not have been sufficient. In the view this Court takes of the basis for the Supreme Court's decision, the latter interpretation is the proper one. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1769837/ | 421 F. Supp. 1275 (1976)
Walter PARSELL et al.
v.
SHELL OIL COMPANY et al.
Civ. No. B-700.
United States District Court, D. Connecticut.
October 19, 1976.
*1276 Daniel Shepro, Bridgeport, Conn., George G. Kilarjian, New York City, for plaintiffs.
G. Whitney Biggs, Bridgeport, Conn., for defendants.
RULING ON MOTION TO STRIKE DEMAND FOR JURY TRIAL
NEWMAN, District Judge.
Defendants' motion to strike plaintiffs' jury demand in this oil spill case raises important questions concerning the availability of federal jurisdiction for water pollution claims. The plaintiffs in this action claim damages for injuries arising out of an oil spill in Bridgeport harbor in 1970. The complaint alleges that while a cargo of oil was being pumped off a cargo ship to a terminal operated by the defendant Buckley Bros., an improper alignment of a valve caused a discharge of 655,000 gallons of oil into the navigable water of the harbor.
A previous motion to dismiss for lack of federal jurisdiction has been denied, the magistrate finding that whatever other bases of jurisdiction may exist, the complaint at least alleged a cause of action in admiralty. Further consideration of available bases of federal jurisdiction is now required by defendant's motion to strike the demand for a jury trial. For if the sole basis for federal jurisdiction is admiralty, the plaintiffs have no right to a jury trial, while if a separate and independent basis for federal jurisdiction exists to support a claim for damages at law, the jury demand must be honored.[1] Fed.R.Civ.P. 28; 7A *1277 Moore's Federal Practice ¶ 0.59[3]. Since there is no diversity of citizenship, it is necessary to examine plaintiffs' claim that jurisdiction may be founded on 28 U.S.C.A. § 1331.
Section 1331 clearly does not provide federal question jurisdiction for an admiralty claim, Romero v. International Terminal Operating Co., 358 U.S. 354, 79 S. Ct. 468, 3 L. Ed. 2d 368 (1959). Plaintiffs argue, however, that they have stated a cause of action arising under the laws of the United States within the meaning of § 1331 for two separate reasons. First, they assert that they have an implied federal civil remedy under § 13 of the Rivers and Harbors Appropriation Act of 1899, 33 U.S.C.A. § 407. Second, they argue that they have a claim arising under a federal common law of water pollution, which may be recognized for the purpose of § 1331 under the doctrine of Illinois v. City of Milwaukee, 406 U.S. 91, 92 S. Ct. 1385, 31 L. Ed. 2d 712 (1972).
Do the plaintiffs have an implied private right of action under 33 U.S.C.A. § 407?
The federal statute that plaintiffs allege affords them a basis for federal jurisdiction makes it unlawful to discharge refuse matter into navigable waters.[2] Although private parties have brought suits under § 407 and companion sections of the Rivers and Harbors Appropriation Act, their success in previous cases is not controlling on the present issue. Many of the cases invoking § 407 were brought in admiralty and thus did not require consideration of whether a federal question claim at law existed.[3] In general these cases invoked the Act to support a standard of care rather than to provide a cause of action arising under federal law.
The cases finding a private right of action under other sections of the Rivers and Harbors Appropriation Act[4] are not controlling on the question of the existence of such a right under § 407. The statutory provisions involved in these cases, 33 U.S. C.A. §§ 401, 403, and 406, contain an express grant of jurisdiction to the district courts to grant injunctive relief for violations of those provisions. The absence of such a remedy in § 407 renders these cases doubtful authority for finding an implied right of action under this provision.
With the recent growth of environmental litigation in the federal courts, attempts to find some sort of private right of action implied under the 1899 statute have increased.[5] Our circuit left this disputed issue *1278 open in Connecticut Action Now, Inc. v. Roberts Plating Co., 457 F.2d 81 (2d Cir. 1972). But other cases that have recognized or denied a private right of action under federal regulatory statutes shed light on whether such a right can be found in § 407. See, e. g., J. I. Case Co. v. Borak, 377 U.S. 426, 84 S. Ct. 1555, 12 L. Ed. 2d 423 (1964); Reitmeister v. Reitmeister, 162 F.2d 691 (2d Cir. 1947); Fischman v. Raytheon Mfg. Co., 188 F.2d 783 (2d Cir. 1951); Fitzgerald v. Pan American World Airways, 229 F.2d 499 (2d Cir. 1956); Colonial Realty Corp. v. Bache & Co., 358 F.2d 178 (2d Cir. 1966); Ivy Broadcasting Co. v. American Telephone & Telegraph Co., 391 F.2d 486 (2d Cir. 1968). These cases set forth a general doctrine "which, in the absence of contrary implications, construes a criminal statute, enacted for the protection of a specified class, as creating a civil right in members of the class, although the only express sanctions are criminal." Reitmeister v. Reitmeister, supra at 694. But they also make clear that "contrary implications" may be found in "the nature of the particular rule and its place in the regulatory scheme." Colonial Realty Corp. v. Bache & Co., supra at 182. The Supreme Court set forth the proper standards for judging a particular statute in Cort v. Ash, 422 U.S. 66, 78, 95 S. Ct. 2080, 2087, 45 L. Ed. 2d 26 (1975):
In determining whether a private remedy is implicit in a statute not expressly providing one, several factors are relevant. First, is the plaintiff "one of the class for whose especial benefit the statute was enacted," that is, does the statute create a federal right in favor of the plaintiff? Second, is there any indication of legislative intent, explicit or implicit, either to create such a remedy or to deny one? Third, is it consistent with the underlying purposes of the legislative scheme to imply such a remedy for the plaintiff? And finally, is the cause of action one traditionally relegated to state law, in an area basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law? [citations omitted].
Consideration of the statute in light of these criteria makes it clear that even though the statute explicitly condemns certain conduct, Congress intended to place responsibility for its enforcement somewhere other than in private hands.
Section 407, which makes discharge of refuse illegal, must be read together with the companion sections of the Rivers and Harbors Appropriation Act providing for enforcement. Section 411 of the Act provides that a violation of § 407 shall be punished by fine or imprisonment or both, and also provides that one-half of such fine shall be paid to the person or persons giving information leading to conviction.[6] Section 413 of the Act makes it the duty of the Department of Justice to enforce the Act and the duty of United States attorneys to prosecute whenever requested to do so by certain designated officials.[7] This statutory *1279 scheme evinces an intent to lodge enforcement responsibility solely in the Department of Justice, which can make discretionary prosecutorial decisions taking into account the effects of other federal water quality legislation.[8] Congress has not authorized "private attorneys-general" to enforce this section. For this reason every court which has considered the question has denied to private plaintiffs the right to bring an action under the Act to recover in a qui tam action the percentage of the fine which they might have been entitled to receive as informers if an offense had been prosecuted to conviction.[9] Our circuit has taken this position in Connecticut Action Now, Inc. v. Roberts Plating Co., supra, stating: "It is hard to look at [the statutory] pattern except as a mandate that the Federal Government is to be the initiator of the proceeding." 457 F.2d at 85. See also Hooper v. United States, 331 F. Supp. 1056 (D.Conn.1971); Morris v. Tennessee Valley Authority, 345 F. Supp. 321 (N.D.Ala.1972).
While the Second Circuit reserved decision on the question of a private right of action for compensatory damages, its reasoning on the issue of a private suit for the informer's half of the fine is persuasive as to damages as well. Many of the persons in possession of information that could help the Government convict violators would be injured persons as well. If they could bring their own private suit for compensation, it would seem to follow that the informer's reward should be granted in the same proceeding, since all issues of law and fact with the exception of burden of proof would be the same or closely related. Yet it is the unanimous opinion of the federal courts that have considered the question that the Department of Justice must be the initiator of the proceeding. The informer's status as injured person has not enhanced his rights under the statute.[10]
Several courts have directly confronted the question of an implied right of action in favor of a private party personally injured by a violation of § 407. Guthrie v. Alabama By-Products Co., 328 F. Supp. 1140 (N.D.Ala.1971), aff'd, 456 F.2d 1294 (5th Cir. 1972), cert. denied, 410 U.S. 946, 93 S. Ct. 1352, 35 L. Ed. 2d 613 (1973); Lavagnino v. Porto-Mix Concrete, Inc., 330 F. Supp. 323 (D.Colo.1971); and Chambers-Liberty Counties Navigation District v. Parker Bros. & Co., 263 F. Supp. 602 (S.D.Tex.1967),[11] declined to find a private *1280 right of action under § 407, at least where the allegations of the complaint did not include obstruction of navigation. Justification for limiting any private right of action to cases involving navigation was found in the legislative history of the 1899 Act. As in these cases, there is no allegation of obstruction of navigation in the present case.[12]
Under the standards set by the Supreme Court in Cort v. Ash, supra, it would be inappropriate to find a private right of action implied under § 407 of the Rivers and Harbors Appropriation Act of 1899. The "class for whose especial benefit the statute was enacted" is the public at large rather than any particular private parties.[13] The legislative intent, as manifested by the scheme of enforcement through criminal prosecutions, is to leave the prosecutorial responsibility exclusively with the Department of Justice. Implication of a private remedy would upset the criminal enforcement system of this Act and the other federal water quality statutes, and would be inconsistent with the unanimous judicial construction that informer's fines be awarded only after a criminal prosecution has taken place. Finally, state law of nuisance and federal admiralty law provide ample traditional remedies, so that the Court's decision on this point does not leave the plaintiff without any redress. The Court does no more than hold that § 407 does not create a private cause of action under the laws of the United States so as to provide an independent basis for federal jurisdiction outside of admiralty.
Do the plaintiffs have a right of action under the federal common law of water pollution?
Plaintiffs urge that Illinois v. Milwaukee, 406 U.S. 91, 92 S. Ct. 1385, 31 L. Ed. 2d 712 (1972), requires a finding of federal question jurisdiction for § 1331 purposes on the theory that the claim arises under the federal common law of water pollution. The broadest possible reading of that decision would give considerable support to the plaintiffs. But at least three important factors were present in Illinois v. Milwaukee and are not present here. The first was the fact that the plaintiff was a governmental entity; the second was the interstate nature of the pollution involved; and the third was the claim in that case for equitable relief.
In Illinois v. Milwaukee the plaintiff was a state. Further, in the cases cited by the Supreme Court in support of its holding, state plaintiffs were likewise involved. The Court quoted a passage from Georgia v. Tennessee Copper Co., 206 U.S. 230, 238, 27 S. Ct. 618, 51 L. Ed. 1038 (1907), highlighting the significance of the plaintiff's sovereign status:
It is a fair and reasonable demand on the part of a sovereign that the air over its territory should not be polluted on a great scale by sulphurous acid gas, that the forests on its mountains, be they better or worse, and whatever domestic destruction they have suffered, should not be further destroyed or threatened by the act of persons beyond its control, that the crops and orchards on its hills should not *1281 be endangered from the same source. If any such demand is to be enforced this must be, notwithstanding the hesitation that we might feel if the suit were between private parties, and the doubt whether for the injuries which they might be suffering to their property they should not be left to an action at law.
As the Court in Milwaukee stated:
Thus, a State with high water-quality standards may well ask that its strict standards be honored and that it not be compelled to lower itself to the more degrading standards of a neighbor. 406 U.S. at 107, 92 S.Ct. at 1395.
Several recent cases have extended the federal common law of nuisance action beyond cases brought by states as plaintiffs to include cases brought by the United States. See, e. g., United States v. Ira S. Bushey & Sons, Inc., 346 F. Supp. 145 (D.Vt.1972), 363 F. Supp. 110 (D.Vt.1973), aff'd, 487 F.2d 1393 (2d Cir. 1973), cert. denied, 417 U.S. 976, 94 S. Ct. 3182, 41 L. Ed. 2d 1146 (1976); United States v. United States Steel Corp., 356 F. Supp. 556 (N.D.Ill.1973); United States v. Stoeco Homes, Inc., 498 F.2d 597, 611 (3d Cir. 1974), cert. denied, 420 U.S. 927, 95 S. Ct. 1124, 43 L. Ed. 2d 397 (1975); see also Stream Pollution Control Board of Indiana v. United States Steel Corp., 512 F.2d 1036, 1040, n. 9 (7th Cir. 1975). But this right of action has not been extended to suits brought by private plaintiffs. Thus in Committee for the Consideration of the Jones Falls Sewage System v. Train, 375 F. Supp. 1148 (D.Md.1974), the Court agreed with the defendants that individuals and citizen associations could not bring an action based on the federal common law of nuisance.
Even if, as some commentators have urged,[14] the federal nuisance law right of action should be extended to private plaintiffs, at the very least this right of action should be limited to suits involving pollution with an impact on more than one state. In Illinois v. Milwaukee the discharges flowed from the state of Wisconsin to the state of Illinois and had an adverse impact on persons living in the state of Illinois. In contrast, although the oil spill involved here took place in navigable waters, no interstate effect[15] is alleged in the complaint. The impact of the spill appears to have been limited to Bridgeport Harbor. See Reserve Mining Co. v. Environmental Protection Agency, 514 F.2d 492, 520 (8th Cir. 1975), in which the Court rejected the federal common law of nuisance as a basis of relief because "federal nuisance law contemplates, at a minimum, interstate pollution of air or water." The Court noted that neighboring states had not complained and no effects outside the Silver Bay, Minnesota, area were alleged.
It will take a clearer indication than the opinion in Illinois v. Milwaukee to persuade me that the Supreme Court intends federal jurisdiction for a common law claim to be available for every incident of pollution involving navigable waters.
Finally, there is some justification for limiting any right of action under Illinois v. Milwaukee to private parties seeking injunctive relief rather than damages.[16] Part *1282 of the reason why the Supreme Court encouraged the development of the federal common law of water pollution in Milwaukee was the need for resolution of intricate and highly important questions of the appropriate water quality standards to apply. As the Court said, "These will be equity suits in which the informed judgment of the chancellor will largely govern." 406 U.S. at 107-108, 92 S.Ct. at 1395. A jury awarding damages in an oil spill case with wholly intrastate impact would be contributing to the development of evolving water quality standards only in the most ad hoc way.
Conclusion
Since neither the Rivers and Harbors Appropriation Act nor the federal common law of water pollution affords a basis for invoking federal jurisdiction for a damage action brought by private plaintiffs for pollution not affecting interstate interests, the case must remain on the admiralty side of the Court. Defendants' motion to strike the jury demand is therefore granted.
NOTES
[1] The plaintiffs have not suggested that there are pendent state law claims which a jury should hear. The complaint is in one cause of action, characterized in the jurisdictional allegations as a "maritime tort."
[2] 33 U.S.C.A. § 407 reads as follows:
It shall not be lawful to throw, discharge, or deposit, or cause, suffer, or procure to be thrown, discharged, or deposited either from or out of any ship, barge, or other floating craft of any kind, or from the shore, wharf, manufacturing establishment, or mill of any kind, any refuse matter of any kind or description whatever other than that flowing from streets and sewers and passing therefrom in a liquid state, into any navigable water of the United States, or into any tributary of any navigable water from which the same shall float or be washed into such navigable water; and it shall not be lawful to deposit, or cause, suffer, or procure to be deposited material of any kind in any place on the bank of any navigable water, or on the bank of any tributary of any navigable water, where the same shall be liable to be washed into such navigable water, either by ordinary or high tides, or by storms or floods, or otherwise, whereby navigation shall or may be impeded or obstructed.
[3] See, e. g., Acme Boat Rentals, Inc. v. J. Ray McDermott & Co., 424 F.2d 393 (5th Cir. 1970); Burgess v. M/V Tamano, 370 F. Supp. 247 (D.Me.1973); Lauritzen v. Chesapeake Bay Bridge & Tunnel Dist., 259 F. Supp. 633 (E.D. Va.1966); Gulf Atlantic Transp. Co. v. Becker County Sand & Gravel Co., 122 F. Supp. 13 (E.D.N.C.1954); Maier v. Publicker Commercial Alcohol Co., 62 F. Supp. 161 (E.D.Pa.1945), aff'd, 154 F.2d 1020 (3d Cir. 1946).
[4] See, e. g., Neches Canal Co. v. Miller & Vidor Lumber Co., 24 F.2d 763 (5th Cir. 1928); Lauritzen v. Chesapeake Bay Bridge & Tunnel Dist., 259 F. Supp. 633 (E.D.Va.1966); Sierra Club v. Leslie Salt Co., 354 F. Supp. 1099 (N.D. Cal.1972); Sierra Club v. Morton, 400 F. Supp. 610 (N.D.Cal.1975); Potomac Riv. Assn., Inc. v. Lundeberg Maryland Seamanship School, Inc., 402 F. Supp. 344 (D.Md.1975).
[5] Annot., Right of Private Party to Sue Polluter, 15 A.L.R.Fed. 636; Note, Environmental LawPrivate Remedies for Pollution of Navigable Waters, 50 No.Car.L.Rev. 153 (1971).
[6] Every person and every corporation that shall violate, or that shall knowingly aid, abet, authorize, or instigate a violation of the provisions of sections 407, 408, and 409 of this title shall be guilty of a misdemeanor, and on conviction thereof shall be punished by a fine not exceeding $2,500 nor less than $500, or by imprisonment (in the case of a natural person) for not less than thirty days nor more than one year, or by both such fine and imprisonment, in the discretion of the court, one-half of said fine to be paid to the person or persons giving information which shall lead to conviction.
[7] The Department of Justice shall conduct the legal proceedings necessary to enforce the provisions of sections 401, 403, 404, 406, 407, 408, 409, 411, 549, 686, and 687 of this title; and it shall be the duty of United States attorneys to vigorously prosecute all offenders against the same whenever requested to do so by the Secretary of the Army or by any of the officials hereinafter designated . . and for the better enforcement of the said provisions and to facilitate the detection and bringing to punishment of such offenders, the officers and agents of the United States in charge of river and harbor improvements, and the assistant engineers and inspectors employed under them by authority of the Secretary of the Army, and the United States collectors of customs and other revenue officers shall have power and authority to swear out process, and to arrest and take into custody, with or without process, any person or persons who may commit any of the acts or offenses prohibited by the said sections, or who may violate any of the provisions of the same . . .
[8] Fed. Water Pollution Control Act, 62 Stat. 1155, 33 U.S.C. § 1151; National Environmental Policy Act of 1969, 83 Stat. 852, 42 U.S.C. § 4321 et seq.
[9] Connecticut Action Now, Inc. v. Roberts Plating Co., 457 F.2d 81 (2d Cir. 1972); Hughes v. Ranger Fuel Corp., 467 F.2d 6 (4th Cir. 1972); Jacklovich v. Interlake, Inc., 458 F.2d 923 (7th Cir. 1972); Anderson v. Norfolk & Western Ry., 349 F. Supp. 121 (W.D.Va.1972); Gerbing v. I.T.T. Rayonier Inc., 332 F. Supp. 309 (M.D. Fla.1971); Mitchell v. Tenneco Chemicals, Inc., 331 F. Supp. 1031 (D.S.C.1971); Enquist v. Quaker Oats Co., 327 F. Supp. 347 (D.Neb. 1971); Lavagnino v. Porto-Mix Concrete, Inc., 330 F. Supp. 323 (D.Colo.1971); Bass Anglers Sportsman's Soc. v. Scholze Tannery, Inc., 329 F. Supp. 339 (E.D.Tenn.1971); United States ex rel. Mattson v. Northwest Paper Co., 327 F. Supp. 87 (D.Minn.1971); United States v. Florida-Vanderbilt Development Corp., 326 F. Supp. 289 (S.D.Fla.1971); Reuss v. Moss-American, Inc., 323 F. Supp. 848 (E.D.Wis. 1971); Bass Anglers Sportsman's Soc. v. United States Plywood-Champion Papers, Inc., 324 F. Supp. 302 (S.D.Tex.1971); Bass Angler Sportsman Soc. v. United States Steel Corp., 324 F. Supp. 412 (M.D.Ala.1971), aff'd per curiam, 447 F.2d 1304 (5th Cir. 1971); Durning v. I.T.T. Rayonier, Inc., 325 F. Supp. 446 (W.D. Wash.1970).
[10] Although in the Connecticut Action Now case and some of the other qui tam cases the plaintiff did not claim to be personally injured and would not have been able to recover compensatory damages in any event, the fact that plaintiff was personally injured has not changed the result in the cases which have presented the issue. See, e. g., Lavagnino v. Porto-Mix Concrete, Inc., supra.
[11] See also H. Christiansen & Sons, Inc. v. City of Duluth, 154 F.2d 205 (8th Cir. 1946), in which the Court expressed grave doubts concerning the existence of any federal question jurisdiction in a private suit under § 407 and concluded at 207:
The statute relied upon has particular reference to impeding or obstructing navigation. It is a penal statute and hence, must be strictly construed. It contains no provision for the recovery of damages for its violation. It does not on its face purport to establish a civil liability. It imposed a penalty as punishment for a wrong to the public. Any private right of action which exists under it is by implication only and would not in any event extend beyond the purposes of its prohibitions.
[12] In view of the absence of allegations relating to obstruction of navigation in this complaint, the Court follows these cases insofar as they hold that the Act creates no private cause of action against a polluter. But it should be noted that reading the 1899 legislative history to distinguish obstruction of navigation from pollution is questionable in light of the Supreme Court's recent interpretations of the Act to encompass pollution as well as obstruction where the United States brings an enforcement action. United States v. Standard Oil Co., 384 U.S. 224, 86 S. Ct. 1427, 16 L. Ed. 2d 492 (1966); United States v. Pennsylvania Industrial Chemical Corp., 411 U.S. 655, 93 S. Ct. 1804, 36 L. Ed. 2d 567 (1973).
[13] See Guthrie v. Alabama By-Products Co., supra, 328 F.Supp. at 1145, citing Wyandotte Transportation Co. v. United States, 389 U.S. 191, 88 S. Ct. 379, 19 L. Ed. 2d 407 (1967), for the proposition that "a principal beneficiary of the Act, if not the principal beneficiary, is the Government itself."
[14] Note, Environmental Law Cause of Action Under Federal Common Law for Pollution of Interstate Waters, 77 Dick.L.Rev. 451 (1973); Note, Jurisdiction Federal Common Law Under 1331(a), 52 Neb.L.Rev. 301 (1973); McMahan, The New Federal Common Law, 13 For the Defense 83 (1972).
[15] "Interstate effect" is used here to mean pollution originating within one state adversely affecting another state. Of course, as a matter of constitutional power Congress can regulate pollution affecting interstate commerce as expansively as the modern reach of the commerce clause permits, and this power can be used to authorize private enforcement if Congress so chooses. But courts asked to fashion a federal common law to adjudicate interstate disputes have usually done so only in contexts where the "interstate" nature of the dispute concerned states or state interests, rather than matters within interstate commerce in the constitutional sense. See Note, "The Case for a Federal Common Law of Aircraft Disaster Litigation," 51 N.Y.U.L.Rev. 231, 243, n. 84 (1976).
[16] See Byram River v. Village of Port Chester, N. Y., 394 F. Supp. 618 (S.D.N.Y.1975), where the suit was brought to abate the depositing of inadequately treated sewage. The private plaintiffs included not only an individual and an association, but also the river itself. The requested relief, however, was equitable in nature. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2261628/ | 861 F.Supp. 247 (1994)
UNITED STATES of America,
v.
Omar Ahmad Ali Abdel RAHMAN, a/k/a "Omar Amed Ali," a/k/a "Omar Abdel Al-Rahman," a/k/a "Sheik Rahman," a/k/a "The Sheik," a/k/a "Sheik Omar," El Sayyid Nosair, a/k/a "Abu Abdallah," a/k/a "El Sayyid Abdul Azziz," a/k/a "Victor Noel Jafry," Ibrahim A. El-Gabrowny, Siddig Ibrahim Siddig Ali, Clement Rodney Hampton-El, a/k/a "Abdul Rashid Abdullah," a/k/a "Doctor Rashid," Mohammed Abouhalima, Abdo Mohammed Haggag, Amir Abdelgani, a/k/a "Abdou Zaid," Fares Khallafalla, a/k/a "Abdou Fares," Tarig Elhassan, Fadil Abdelgani, Mohammed Saleh, a/k/a "Mohammed Ali," Victor Alvarez, a/k/a "Mohammed," Matarawy Mohammed Said Saleh, a/k/a "Wahid," Earl Gant, a/k/a "Abd Rashid," a/k/a "Abd Jalil," a/k/a "Abdur Rasheed," Defendants.
No. S3 93 Cr. 181 (MBM).
United States District Court, S.D. New York.
August 18, 1994.
*248 *249 Patrick J. Fitzgerald, Robert S. Khuzami, Andrew C. McCarthy, Alexandra Rebay, Asst. U.S. Attys., New York City, for U.S.
Emmanuel A. Moore (Legal Advisor to defendant Abdel Rahman, pro se).
William M. Kunstler, Ronald L. Kuby, New York City, for defendant Siddig Ali.
Kenneth D. Wasserman, New York City, for defendant Hampton-El.
Wesley M. Serra, Brown Berne & Serra, New York City, for defendant Alvarez.
Charles Lavine, Grossman Lavine & Rinaldo, Forest Hills, NY, for defendant Fadil Abdelgani.
OPINION AND ORDER
MUKASEY, District Judge.
The defendants in this case are charged with participating in a seditious conspiracy to conduct a war of urban terrorism against the United States, and with related acts and agreements in furtherance of that goal. Now before the court are motions by Omar Ahmad Ali Abdel Rahman, Siddig Ibrahim Siddig Ali, Clement Rodney Hampton-El, Victor Alvarez and Fadil Abdelgani to suppress tape recorded telephone calls which the government intends to introduce at trial, and which were obtained by the government through electronic surveillance that the government says was conducted pursuant to the Foreign Intelligence Surveillance Act of 1978 ("FISA" or the "Act"). 50 U.S.C. §§ 1801-1811 (1988). Also before the court is an application by the government to have the legality of its surveillance determined based on ex parte, in camera submissions, pursuant to 50 U.S.C. § 1806(f). For the reasons set forth below, the government's application is granted and the defendants' motions are denied.
I.
The Act creates a Foreign Intelligence Surveillance Court ("FISA court") which reviews government applications to conduct surveillance in aid of protecting the United States against attack by foreign governments or international terrorist groups. 50 U.S.C. §§ 1801(e), 1803. The surveillance in question here was conducted based on six separate applications relating to four separate defendants: Rahman, Hampton-El, Siddig Ali and Earl Gant. Rahman and Hampton-El were the subject of two applications each. These applications and related documents are contained in a sealed exhibit submitted to the court. On June 30, 1993 and September 2, 1993, the Attorney General, acting pursuant to 50 U.S.C. § 1806(b), authorized use of materials derived from the electronic surveillance in connection with this prosecution.
Each of the six orders was signed by a judge of the FISA court, and is based on an application accompanied by a certification from either the Director of the FBI or the Assistant to the President for National Security Affairs, each of whom is or had been authorized to make such certification pursuant to authority granted by 50 U.S.C. § 1804(a)(7), that the information sought is foreign intelligence information within the meaning of 50 U.S.C. § 1801(e)(1)(B) i.e., information relating to either a United States citizen or a lawful resident alien that is necessary to protect the United States against "sabotage or international terrorism by a foreign power or an agent of a foreign power." The statute defines a "foreign power" to include "a group engaged in international terrorism or activities in preparation therefor," 50 U.S.C. § 1801(a)(4), and defines "international terrorism" as activities that:
(1) involve violent acts or acts dangerous to human life that are a violation of the criminal laws of the United States or of any State, or that would be a criminal violation if committed within the jurisdiction of the United States or any State,
(2) appear to be intended
(A) to intimidate or coerce a civilian population;
*250 (B) to influence the policy of a government by intimidation or coercion; or
(C) to affect the conduct of a government by assassination or kidnapping; and
(3) occur totally outside the United States, or transcend national boundaries in terms of the means by which they are accomplished, the persons they appear intended to coerce or intimidate, or the locale in which their perpetrators operate or seek asylum.
50 U.S.C. § 1804(c). Each of the orders is accompanied by one or more implementing or amended orders and certifications therefor.
The FISA court judge who reviewed each of the applications was charged under the statute with determining only that there was probable cause to believe that the target of the surveillance was an agent of a foreign power as defined in the statute, including a member of a group engaged in international terrorism or activities in preparation for such terrorism, 50 U.S.C. § 1801(b)(2)(C), (D), that the application contained all the necessary certifications and that the certifications were not clearly erroneous, including insofar as they represented that the primary purpose of the surveillance was the gathering of foreign intelligence information. 50 U.S.C. § 1805; United States v. Duggan, 743 F.2d 59, 77 (2d Cir.1984). Specifically, it was not the function of that FISA court judge nor is it the function of this judge to "second-guess" the certifications. Duggan, 743 F.2d at 77.
Also included with the materials submitted to the court is the affidavit of the Acting Assistant Director of the FBI, sworn to September 2, 1993, describing some of the foreign intelligence information derived from the surveillance and why disclosure of the applications and other materials that comprise the sealed exhibit would be prejudicial to the security interests of the United States. These reasons include disclosure to possible terrorist groups of the nature of the information gathered by this country, the methods used to gather such information, and other sensitive information about the techniques and capabilities employed by this country to detect and combat international terrorism. Based on that affidavit, the Attorney General has averred by affidavit sworn to September 7, 1993,
that to publicly disclose, or have an adversary hearing with respect to, the particular facts contained in the sealed Exhibit and concerning electronic surveillance other than to the court, ex parte, in camera, would harm the national security of the United States; that the sealed Exhibit contains sensitive information concerning United States intelligence sources and methods and other information relating to United States efforts to conduct counter-terrorism investigations; and that it would damage the security interests of the United States to further reveal the sources and methods this Nation is using to conduct such investigations.
(Reno Aff. 9/2/93 ¶ 4)
The statute directs that this court's function when presented with motions of the kind involved here is to review the application and related materials "in camera and ex parte ... to determine whether the surveillance of the aggrieved person was lawfully authorized and conducted." 50 U.S.C. § 1806(f). The statute authorizes disclosure of such materials or portions thereof to an aggrieved party, under appropriate security procedures and protective orders, "only where such disclosure is necessary to make an accurate determination of the legality of the surveillance." Id. Finally, the statute directs that the fruits of surveillance not lawfully authorized or conducted be suppressed, but that if the court determines that the surveillance has been lawfully authorized and conducted, "it shall deny the motion of the aggrieved person except to the extent that due process requires discovery or disclosure." § 1806(g).
II.
Based on the statutory provisions above cited and the materials above described, I find that no disclosure to any of the moving defendants is necessary to make an accurate determination of whether the surveillance at issue was lawfully authorized or conducted. Although no more is necessary under the statute to determine the legality *251 of the surveillance, Siddig Ali argues, apparently as a matter of due process, see 50 U.S.C. § 1806(f), supra, not so much that discovery or disclosure is required as that in view of the disclosure of the substance of the surveillance itself in this case there is no longer any justification for the Attorney General's position that disclosure of the sealed exhibit would harm national security.
That argument has no factual merit because the information heretofore disclosed the substance of the intercepted conversations does not compromise the security concerns that underlie the Attorney General's request that the exhibit remain confidential. Thus, disclosure of the conversations does not disclose the strategies, capabilities and techniques of those who gather information, or risk disclosing the identity of those who may provide information.
Beyond its lack of factual merit, the argument has no logical application here because there has been no suggestion of how disclosure is necessary for the court to evaluate the lawfulness of the surveillance or is otherwise necessary to assure due process. Because those are the only justifications for disclosure, the motions will be decided with the submitted material held in camera.
III.
The moving defendants' main argument is that FISA was misused. They argue that the principal purpose of a FISA surveillance must be to gather foreign intelligence information, 50 U.S.C. § 1804(7)(B); Duggan, 743 F.2d at 77, but that the purpose of the surveillance here was to gather evidence for a criminal case. However, once a reviewing court be it the FISA court or this court finds that an authorized executive branch official has certified that that is the purpose, and his certification is supported by probable cause to believe that the target is an agent of a foreign power as defined in the statute, and that the location is one being or to be used by the target, and it appears from the application as a whole that that certification is not clearly erroneous, the task of that court is at an end. Duggan, 743 F.2d at 73-74. Again, a reviewing court is not to "second-guess" the certification. Id. at 77.
In this case, each of the applications contained ample basis for believing that the target of the surveillance was an agent of a foreign power as defined in the statute, which is to say in this case a participant or conspirator in a group engaged in or planning international terrorism, and that the location at which the surveillance was to be conducted was being used or would be used by that person. Further, none of the applications, each read as a whole, suggests that its underlying certification is erroneous, let alone clearly so.
The statute itself was written with full anticipation that those defined as agents of a foreign power would violate the laws of the United States, see, e.g., 50 U.S.C. § 1801(c)(1) and (d) (defining subject activity to include violations of United States law), and that foreign intelligence information would be used in criminal prosecutions. See, e.g., 50 U.S.C. § 1806(b) and (c) (providing for use in criminal proceedings following notice). Therefore, it is not compelling to argue, as the moving defendants do, that because the government believed that these defendants had violated or would violate a criminal statute, the primary purpose of the surveillance cannot have been gathering of foreign intelligence, FISA was misused, and the evidence therefore must be suppressed. There is no contradiction, indeed there probably is often a congruence, between foreign intelligence information and evidence of criminal wrongdoing. That does not mean the government may not avail itself of FISA in order to protect national security when to do so will also generate evidence that may be used in a criminal case. "[O]therwise valid FISA surveillance is not tainted simply because the government can anticipate that the fruits of such surveillance may later be used, as allowed by § 1806(b), as evidence in a criminal trial." Duggan, 743 F.2d at 78.
There is nothing in the material submitted to the court or in the surrounding circumstances to suggest any misuse of FISA as suggested by the moving defendants, and therefore the motion to suppress on that ground is denied.
*252 IV.
Hampton-El and Rahman challenge the certification by the authorized official that each was an "agent of a foreign power" and therefore a proper target of FISA surveillance. Hampton-El simply states that such a label must have been knowingly or recklessly wrong as applied to him, and Rahman argues that only an "international organization" can be an agent of a foreign power, and he is not such an organization. It is sufficient response to both claims to point out that the statute defines an agent of a foreign power to include a person who "knowingly engages in sabotage or international terrorism," or knowingly aids and abets another to do so, 50 U.S.C. § 1801(b)(2)(C), (D), and to find, as I do, that the application contained ample basis for concluding that there was probable cause to believe both men fit that category.
Hampton-El's casual suggestion that no statements of his that are arguably protected by the free speech or free exercise provisions of the First Amendment, U.S. Const. amend. I, cl. 1, 2, could constitute evidence that he was an agent of a foreign power (Hampton-El Mem. at 17), is simply wrong. Brandenburg v. Ohio, 395 U.S. 444, 448, 89 S.Ct. 1827, 1830, 23 L.Ed.2d 430 (1969); United States v. Rowlee, 899 F.2d 1275, 1278 (2d Cir.) and cases cited therein, cert. denied, 498 U.S. 828, 111 S.Ct. 87, 112 L.Ed.2d 59 (1990).
Although both Alvarez and Abdelgani challenge their status as agents of a foreign power, neither has standing to challenge the admissibility of evidence on that basis because, although both were overheard in the course of FISA surveillance, neither was a target of such surveillance, and therefore there need have been no finding that either fit the statutory definition before surveillance of others was authorized.
V.
Siddig Ali and Hampton-El have challenged the sufficiency of the minimization conducted here because apparently all calls were recorded rather than simply monitored intermittently with only relevant portions recorded. Siddig Ali notes that his wife's conversations were recorded, and Hampton-El notes that he speaks English and therefore monitoring would have been possible as to his conversations. Siddig Ali also faults the government for failure to detect "patterns of innocent conversations" that would have permitted certain calls to pass unrecorded. (Siddig Ali Mem. 15)
The minimization procedures followed here were the standard minimization procedures incorporated in the surveillance orders at issue, which specifically permit either contemporaneous monitoring or automatic recording. (Sealed Exhibit, Tab 4 § 3(d)) They provide for the possibility that all communications in connection with a surveillance may be acquired, and direct that the monitoring of tapes of such communications be conducted with the same procedures as live monitoring. (Id. § 3(e)(2), (3)) It appears that those procedures were followed, with summaries at the logging stage referring only in broad terms to the content of apparently non-relevant calls, logs distributed only to targets, and only pertinent calls distributed generally. (Gov't.Mem. 5/18/94 at 21-22 n. 18, 19)
The government offers five reasons why it was necessary here to record all calls automatically. First, many conversations were in Arabic, a language with many dialects and one not easily monitored. Second, the government points to use of coded or cryptic language, which makes it difficult to decide while a call is being monitored which parts of it may be relevant and which are not. Third, the government notes that all the authorized interceptions were completed within the 90-day period of the initial authorizations, with the result that there was not a great deal of time to detect patterns of innocent conversations, if there were such patterns. In addition, the government cites two portions of FISA legislative history to support the argument that when the purpose of surveillance is to gather intelligence about international terrorism, greater flexibility in acquiring and storing information is necessary, because innocent-sounding conversations may later prove to be highly significant, and because individual items of information, not apparently significant when taken in isolation, may *253 become highly significant when considered together over time. H.R.Rep. No. 1283, 95th Cong.2d Sess., pt. 1 at 55, 59 (1978).
The moving defendants have not disputed the government's account of its minimization in this case, nor have they seriously contested the government's arguments, beyond insisting that the wheat could have been separated from the chaff while the stalks were still growing. That is simply not persuasive.
For the above reasons, the motions to suppress the FISA interceptions are denied.
SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1847997/ | 56 B.R. 186 (1986)
In re ALL AMERICAN OF ASHBURN, INC., Debtor.
In re ALL AMERICAN HOUSING OF ALABAMA, INC., Debtor.
In re FAMILY HOMES SALES CENTER INC., Debtor.
AMERICAN LIVING SYSTEMS, Plaintiff,
v.
Paul BONAPFEL (Not Individually but Solely in his Capacity as Trustee), Sharon L. Lambert, Jennifer L. Lambert, James Harward, and Holiday Homes of Georgia, Inc., Defendants.
Bankruptcy Nos. 83-03719A, 83-03720A and 83-04266A, Adv. No. 85-0599A.
United States Bankruptcy Court, N.D. Georgia, Atlanta Division.
January 7, 1986.
*187 David G. Bisbee, Bisbee, Parker & Rickertsen, Atlanta, Ga., for plaintiff.
Eugene Brooks, Michael K. Mixon, Middleton & Anderson, P.C., Savannah, Ga., and Carolyn Berg, The Keenan Law Firm, Atlanta, Ga., for Sharon Lambert, Jennifer Lambert, James Harward and Holiday Homes of Georgia, Inc.
Paul W. Bonapfel, Palmer, Lamberth, Bonapfel & Cifelli, P.A., Atlanta, Ga., for trustee.
ORDER
W. HOMER DRAKE, Bankruptcy Judge.
The plaintiff, American Living Systems, Inc. ("ALS"), initiated this adversary proceeding against the defendants, Paul Bonapfel ("Trustee"), as Trustee for All American of Ashburn, Inc. ("All American"), Sharon and Jennifer Lambert ("Lamberts"), James Harward and Holiday Homes of Georgia, Inc., on August 12, 1985, by filing a complaint for injunctive and declaratory relief, rescission, and for enforcement of this Court's Orders. The Lamberts filed their answer on September 13, 1985, and the Trustee filed his answer and counterclaim on September 27, 1985. Pursuant to a motion for voluntary dismissal without prejudice filed on November 1, 1985 by ALS, the Court entered an Order on December 4, 1985, dismissing this adversary proceeding against James Harward and Holiday Homes of Georgia, Inc.
The adversary proceeding is presently before the Court on two motions to dismiss filed by the Lamberts on September 13, 1985, and on cross-motions for summary judgment filed by ALS and the Lamberts on November 1, 1985. The motion to dismiss filed by Jennifer Lambert states that the complaint improperly names Jennifer Lambert instead of Sharon Lambert (Jennifer's mother). On November 1, 1985, ALS filed an amendment to its complaint to add the words "Sharon Lambert as Guardian of" before the words "Jennifer L. Lambert" wherever they appear in the complaint. The Court finds that this amendment remedies whatever defect existed in that respect in the complaint.
The motion to dismiss filed by Sharon Lambert and the cross-motions for summary judgment involve the same issues; therefore, this Order will apply to both Sharon Lambert's motion to dismiss and the cross-motions for summary judgment. With respect to the motions for summary judgment, both parties filed response briefs *188 on November 12, 1985, and reply briefs on November 18, 1985. The Trustee, asserting that the "adversary proceeding raises a critical issue," filed a brief in his capacity as an officer of the Court on November 18, 1985 in support of ALS' motion for summary judgment.
The issue to which the Trustee refers is the issue of whether the sale by the Trustee to ALS, pursuant to 11 U.S.C. § 363(f), of assets used in the manufacture of an allegedly defective mobile home ("Mobile Home") precludes the application of the successor doctrine in the product liability suit filed by the Lamberts against ALS in the Superior Court of Chatham County, Georgia ("Superior Court"). Before reaching that issue, the Court must decide whether the denial of ALS' motion for summary judgment in the Superior Court has any preclusive effect on this adversary proceeding under the doctrines of res judicata and collateral estoppel.
FINDINGS OF FACT
In May of 1982, the Lamberts purchased the Mobile Home manufactured by All American. All American filed its petition for relief under Chapter 11 of the Bankruptcy Code on August 18, 1983. The Lamberts filed a complaint in September of 1983 in the Superior Court against two corporations allegedly involved in the manufacture of the Mobile Home, Georgia Pacific Corporation and Weyerhauser Company. In that lawsuit, the Lamberts seek to recover damages based on product liability. When the Lamberts initiated the lawsuit, they were aware of All American's pending Chapter 11 case, but did not file a proof of claim.
This Court entered Orders on May 18, 1984 and February 5, 1985 authorizing sales by the Trustee to ALS pursuant to 11 U.S.C. § 363(f) of improved real estate, machinery, equipment and other property previously used by All American in the manufacture of mobile homes. On October 18, 1984, the Superior Court granted the Lamberts' motion to add ALS as a defendant in the pending lawsuit. The Superior Court denied ALS' motion for summary judgment on July 10, 1985. ALS' application for interlocutory appeal from the Superior Court's Order was denied by the Court of Appeals of the State of Georgia on August 13, 1985.
CONCLUSIONS OF LAW
The Bankruptcy Court, like other federal courts, must apply the doctrines of res judicata and collateral estoppel to state court proceedings in accordance with the principles of "full faith and credit" set out in 28 U.S.C. § 1738. Bend v. Eadie (In re Eadie), 51 Bankr. 890, 892 (Bankr.E.D. Mich.1985); Harris v. Byard (In re Byard), 47 Bankr. 700, 701 (Bankr.E.D. Tenn.1985). The application of that statute involves two steps. First, the Bankruptcy Court must determine the preclusive effect of the state court's findings in accordance with the laws of that state. Byard, 47 Bankr. at 705-706. Then the Bankruptcy Court must decide whether any federal statute expressly or impliedly prevents the Bankruptcy Court from applying this same preclusive effect. Id. at 706.
Under Georgia law, res judicata and collateral estoppel apply only to decisions which are final. Cable Holdings of Battlefield, Inc. v. Cooke, 764 F.2d 1466, 1473 (11th Cir.1985) (res judicata); Gresham Park Community Organization v. Howell, 652 F.2d 1227, 1242 (5th Cir.1981) (collateral estoppel). The Georgia courts have consistently held that the denial of a motion for summary judgment is not a final decision. Weldon v. Southeastern Fidelity Insurance Co., 157 Ga.App. 698, 278 S.E.2d 500 (1981); Giordano v. Stubbs, 129 Ga.App. 283, 285, 199 S.E.2d 322, 324 (1973). In fact, the Georgia Supreme Court has refused to give preclusive effect to an order granting a motion for summary judgment with respect to fewer than all of the parties. Culwell v. Lomas & Nettleton Co., 242 Ga. 242, 243, 248 S.E.2d 641, 642 (1978).
Based on these authorities, neither res judicata nor collateral estoppel apply to the Superior Court's denial of ALS' motion *189 for summary judgment. Since the Court is not aware of any federal statute which expressly or impliedly authorizes the Court to accord preclusive effect to the denial of ALS' motion for summary judgment, the Court will now consider the merits of this adversary proceeding.
ALS' complaint requests that this Court grant declaratory and injunctive relief to prevent the Lamberts from prosecuting their product liability suit against ALS in the Superior Court. The complaint alternatively requests that if the Court allows the Lamberts to continue the product liability action, then the Court should rescind ALS' purchases of assets from the Trustee, on the grounds that the sales were the product of a mutual mistake by both ALS and the Trustee. ALS also requests attorney's fees for the costs of bringing this action.
The Court has not found a case directly addressing the issue of whether a sale, free and clear of all claims pursuant to 11 U.S.C. § 363(f), of assets used in the manufacture of an allegedly defective product precludes the application of the successor doctrine in a product liability suit filed against a purchaser of those assets, when the product liability cause of action arose prior to the date of the sale.
The Lamberts urge the Court to rely on the holding in Mooney Aircraft Corp. v. Foster (In re Mooney Aircraft, Inc.), 730 F.2d 367 (5th Cir.1984). In Mooney, two families filed product liability suits in a California Superior Court under the successor doctrine against a purchaser of the assets used to manufacture an allegedly defective airplane. Id. at 371. The families' cause of action arose out of an accident resulting from the airplane's loss of a wing. Id. The accident occurred several years after the bankrupt manufacturer of the airplane had sold its assets in a bankruptcy sale. Id. In finding that the Bankruptcy Court lacked jurisdiction to enjoin the families' product liability suit in the Superior Court, the Fifth Circuit Court of Appeals stated:
The [families] did not even have a claim at the time of the bankruptcy court's order of sale. There was no property right to be deprived; by the same token, there was no claim to be divested.
Id. at 375 (footnotes omitted). It follows that the Fifth Circuit only held that a sale free and clear of claims cannot divest a product liability suit which arises after the sale.
In the case sub judice, the Lamberts' cause of action necessarily arose prior to the filing of their complaint in the Superior Court in September of 1983. This Court entered the Orders approving the sales to ALS in May of 1984 and February of 1985. Since the holding in Mooney applies only to cases in which a product liability cause of action arises after the § 363 sale, Mooney is inapplicable to the case at bar.
In a case analogous to Mooney, the Court of Appeals for the Third Circuit held that a discharge in bankruptcy does not discharge a product liability claim, when the claimant does not have a sustainable cause of action at the time of the discharge. Schweitzer v. Consolidated Rail Corp. (Conrail), 758 F.2d 936, 942 (3d Cir. 1985). Cf. In re UNR Industries, Inc., 29 Bankr. 741, 745 (N.D.Ill.1983). This holding reinforces the conclusion that the finding in Mooney was based entirely on the fact that the product liability cause of action did not exist at the time of the sale. In fact, the Court in Schweitzer stated that a cause of action in tort is a "claim." Schweitzer 758 F.2d at 941. Since the Lamberts' cause of action, as evidenced by their lawsuit in the Superior Court, existed prior to the sale of assets to ALS, the sale was free and clear of the Lamberts' product liability cause of action.
This holding does not dispose of the issue of whether the sale free and clear precludes the application of the successor doctrine to the Lamberts' product liability cause of action. On this point, ALS argues that the Court should apply the reasoning set forth in Forde v. Kee-Lox Manufacturing Co., Inc., 437 F. Supp. 631 (W.D.N.Y. 1977), aff'd on other grounds, 584 F.2d 4 (2d Cir.1978), and Rubinstein v. Alaska Pacific Consortium (In re New England *190 Fish Co.), 19 Bankr. 323 (Bankr.W.D.Wash. 1982). In these cases, the courts held that a sale of the debtor's assets, approved by the Bankruptcy Court as free and clear of all claims, precludes the application of the successor doctrine against a purchaser of those assets in a suit based on the debtor's alleged employment discrimination and violations of employees' civil rights.
The Forde case sets out two policies against allowing successor liability to follow bankruptcy sales. The first is that if a plaintiff asserts a claim grounded on successor liability after a bankruptcy sale, he, in effect, receives a priority over those claims which were paid in accordance with the Bankruptcy Code. Forde, 437 F.Supp. at 633. The result is that successor liability theory would rearrange the priority scheme established by the Bankruptcy Code. Id. The other reason is the negative impact that potential successor liability claims would have on the trustee's ability to sell assets of the estate at a fair price. Id. at 633-634.
The Bankruptcy Court in Rubinstein also applied these two principles. In doing so, the Court relied on the mandate of the United States Supreme Court in Nathanson v. National Labor Relations Board, 344 U.S. 25, 29, 73 S. Ct. 80, 83, 97 L. Ed. 23 (1952), that "[t]he theme of the Bankruptcy Act is `equality of distribution' (Sampsell v. Imperial Paper Corp., 313 U.S. 215, 219, 61 S. Ct. 904, 907, 85 L. Ed. 1293); and if one claimant is to be preferred over others, the purpose should be clear from the statute." Rubinstein, 19 Bankr. at 326. The Court in Rubinstein further observed that "the successor doctrine is not a Congressional enactment, nor does the legislative history to any statute state or, in our view, suggest such a doctrine." Id. at 328. Finding no suggestion that Congress intended to allow the successor doctrine to rearrange the priority of distribution established by the Bankruptcy Code, the Court held that the Supreme Court holding in Nathanson must prevail over the policies in favor of allowing successor liability in civil rights cases. Id.
This reasoning applies in the case at bar. There is no suggestion of Congressional intent to apply the successor doctrine to elevate product liability claims above their status under the Bankruptcy Code. In fact, the product liability cause of action asserted by the Lamberts arises out of state law, O.C.G.A. § 51-1-11, whereas the civil rights claims in Rubinstein are based on statutes passed by Congress, Rubinstein, 19 Bankr. at 324. For these reasons, the Court finds that the sale of assets to ALS free and clear of all claims precludes the application of the successor doctrine in the Lamberts' product liability suit against ALS.
The Lamberts contend that the bankruptcy sale should not be free and clear of their claim, because they received no notice of the sale. With respect to the notice requirement, the Lamberts direct the Court's attention to the cases of Mooney, supra, and Whitehead & Kales Co. v. Dempster (In re Wiltse Brothers Corp.), 361 F.2d 295 (6th Cir.1966). The Court in Mooney did not reach the issue of whether notice is required for a sale under § 363 to divest tort claims. Mooney, 730 F.2d at 375. The Court noted, however, "that a sale free and clear is ineffective to divest the claim of a creditor who did not receive notice." Id. One of the cases relied on for this proposition was the Whitehead case cited above.
In that case, the Court observed that although the creditor may have been without formal notice, he did have actual notice of the sale. Whitehead, 361 F.2d at 298. The Whitehead Court stated that the issue of notice was not properly before it, since there was no appeal from or motion to set aside the sale. Id. Similarly, this Court finds that its Orders approving the sales of assets to ALS are final and not subject to collateral attack. See Dooley v. Weil (In re Garfinkle), 672 F.2d 1340, 1348 (11th Cir.1982).
This Court will, however, consider the issue of notice to the Lamberts to the extent that it may be relevant to the application of the successor doctrine. It is admitted that the Lamberts were aware of *191 All American's Chapter 11 case when they filed their product liability suit in the Superior Court. Despite their knowledge of the bankruptcy case, the Lamberts elected not to file a proof of claim against All American's estate. It was this failure on the part of the Lamberts to file and otherwise pursue their claim that ultimately prevented them from receiving formal notice of the sale under Bankr.R. 2002. Since the lack of formal notice of the sale to the Lamberts resulted from their decision to file a lawsuit in the Superior Court and add ALS rather than file and pursue a claim against All American's estate, the Court finds that the absence of formal notice to the Lamberts is outweighed by the policies in favor of preserving the integrity of the priority system established by the Bankruptcy Code.
In order to protect the validity of a Bankruptcy Court's Orders directing that a sale of property is free and clear of claims, injunctive relief is appropriate. Jacksonville Blow Pipe Co. v. Reconstruction Finance Corp., 244 F.2d 394 (5th Cir.1957). See also Southmark Properties v. Charles House Corp., 742 F.2d 862, 868 (5th Cir. 1984) (jurisdiction to protect orders approving the sale of assets free and clear of claims). On that basis, the Lamberts will be permanently enjoined from further prosecuting their product liability suit against ALS in the Superior Court.
Since the Court has found in favor of granting declaratory and injunctive relief to ALS, the Court need not address ALS' arguments in favor of rescinding the sales. The requests for attorney's fees by ALS in its complaint and by the Trustee in his counterclaim are both without merit.
Accordingly, it is ORDERED that:
(1) this Court's Orders entered on May 18, 1984 and February 5, 1985, authorizing the Trustee's sale of assets to ALS, preclude the Lamberts from recovering from ALS under the successor doctrine in their product liability suit now pending in the Superior Court;
(2) the Lamberts are permanently enjoined from prosecuting their product liability suit against ALS in the Superior Court;
(3) the requests for attorney's fees in ALS' complaint and in the Trustee's counterclaim are DENIED;
(4) the Lamberts' two motions to dismiss filed in this adversary proceeding on September 13, 1985 are DENIED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2404673/ | 409 F. Supp. 2d 101 (2006)
Andres GUILLEMARD GINORIO, et at., Plaintiffs,
v.
Fermin CONTRERAS, et al., Defendants.
Civil No. 03-2317 (JAG).
United States District Court, D. Puerto Rico.
January 10, 2006.
*102 *103 *104 Joan Schlump-Peters, Nachman & Guillemard, San Juan, PR, Jeffrey J. Pyle (PHV), Joseph D. Steinfield (PHV), Prince Lobel Glovsky & Tye LLP, Boston, MA, for Plaintiffs.
Eduardo A. Vera-Ramirez, Eileen Landron-Guardiola, Landron & Vera LLP, Guaynabo, PR, Ivette M. Berrios, Luis A. Rodriguez Muñoz, Landron & Vera LLP, Guaynabo, PR, for Defendants.
AMENDED OPINION AND ORDER[1]
GARCIA-GREGORY, District Judge.
On December 10, 2003 plaintiffs Lone Star Insurance Producers, Inc. ("Lone Star") and its shareholders Andres Guillemard Ginorio ("Guillemard") and his wife Maria Noble Fernandez (collectively the "plaintiffs") filed this action against the Office of the Insurance Commissioner ("OIC") and Fermin Contreras ("Contreras"), in his individual and official capacity as the former Insurance Commissioner of Puerto Rico, alleging civil rights violations pursuant to 42 U.S.C. § 1983 (Docket No. 1). On June 6, 2004, the plaintiffs amended the complaint to include Dorelisse Juarbe ("Juarbe") in her individual and official capacity as the current Insurance Commissioner (Docket No. 58). On May 20, 2005 plaintiffs moved for the entry of partial summary judgment on their due process claims (Docket Nos. 204-207). On June 7, 2005 the defendants opposed the motion and cross-moved for summary judgment, seeking dismissal of the complaint (Docket Nos. 216, 218, 220, 221). On July 7, 2005, plaintiffs opposed (Docket Nos. 231-238). On August 31, 2005, the Court referred the motions to Magistrate-Judge Camille Velez-Rive for a Report and Recommendation (Docket No. 261). On November 17, 2005, the Magistrate-Judge recommended that the Court deny plaintiffs' motion for summary judgment and grant in part and deny in part the defendants' (Docket No. 287). On December 2, 2005, the parties filed objections to the Report and Recommendation (Docket Nos. 294, 296). For the reasons discussed below, the Court ADOPTS in part and REJECTS in part the Magistrate-Judge's Report and Recommendation. Accordingly, the Court GRANTS plaintiffs' motion for summary judgment and DENIES the defendants' motion.
FACTUAL BACKGROUND[2]
Plaintiff Guillemard is the President and fifty percent (50%) stockholder of Lone Star. Contreras was the Insurance Commissioner of Puerto Rico until his resignation became effective on December 31, *105 2003. On January 7, 2004, Juarbe was appointed as the Puerto Rico Insurance Commissioner.
On November 20, 2001, Contreras ordered an audit as to Lone Star's operations and transactions from January 1, 1997 through September 30, 2001. On November 26, 2001, David Castro Anaya ("Castro-Anaya") initiated the audit. Plaintiffs submit that Castro-Anaya's sole purpose was to determine whether improper payments had been made to third parties (Exhibit 5, Castro-Anaya's Deposition at p. 71). Plaintiffs made available to Castro-Anaya two (2) Certified Public Accountants to fully cooperate with the audit and provide all relevant documents (Exhibit 1, Guillemard's Deposition at pp. 74, 52-54).
By December 17, 2001, the audit had concluded and one hundred percent (100%) of the documents pertaining to governmental agency insurance had been examined. (Castro-Anaya's Deposition at p. 98; Guillemard's Deposition at pp. 98-101). Castro-Anaya informed Guillemard and Miguel Carbonell, Lone Star's CPA, that he found no irregularities or improprieties and that he would prepare a draft of his final report within the next few months and send them a copy (Castro-Anaya's Deposition at pp. 99-100).
Neither during the year 2002 nor during the first half of the year 2003, did the plaintiffs receive a report from Castro-Anaya. On July 10, 2003, Castro-Anaya submitted a report to his supervisor entitled "Final Investigation Findings Report", but he did not send a copy to Guillemard. The report found no improper payments to third parties (Exhibit 7). The report, however, raised other issues not given as reasons for the initial investigation; in particular, that Lone Star had entered into a commission-sharing arrangement with an insurance broker, Urrutia Valles, Inc ("UVI"). The report concluded that the sharing of commissions is a violation to Section 939(2) of the Puerto Rico Insurance Code. Plaintiffs, not being informed of this report, had no opportunity to object or present evidence on their behalf.
On December 10, 2003, plaintiffs filed this federal lawsuit against Contreras for violations to their First and Fourteenth Amendment rights, alleging that defendants engaged in political discrimination by singling them out in an investigation not carried out in good faith and seeking to punish plaintiffs' business because of Guillemard's political activities. By that time, no order or draft on the audit report had been prepared. Contreras learned of plaintiffs' lawsuit by December 11, 2003 (Exhibit 2, Contreras's Deposition at pp. 112-113). On December 23, 2003, Contreras issued an order revoking plaintiffs' insurance license for a period of five (5) years; denying any license in any capacity for a period of five (5) years; and imposing a fine of $2,035,000. The order included wording to the effect that plaintiffs had been "incompetent" and "untrustworthy" (Exhibit 11). The order further notified to plaintiffs of their right to request a hearing to review its findings, but stated that the revocation of their insurance agent's license would remain in effect while the administrative proceedings were ongoing (Id. ¶ 8-9).
An administrative hearing was held on March 4, 2005.[3] Soon thereafter, Insurance Commissioner Juarbe issued a resolution *106 which still found violations to the Insurance Code and which imposed sanctions on Lone Star, but drastically reduced those sanctions that had been imposed by Contreras. The fine of over $2,035,000 was reduced to $208,000; the five (5) year license suspension was reduced to three (3) months; the prohibition of filing for a license within five (5) years was eliminated, and the references within Contreras' order as to plaintiffs' "untrustworthiness" and "incompetence" were left without effect (Exhibit 12, Resolution ¶ 24-25).
DISCUSSION
A. Summary Judgment Standard
The court's discretion to grant summary judgment is governed by Rule 56 of the Federal Rules of Civil Procedure. Rule 56 states, in pertinent part, that the court may grant summary judgment only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R.Civ.P.56(c); See also Santiago-Ramos v. Centennial P.R. Wireless Corp., 217 F.3d 46, 52 (1st Cir.2000).
Summary judgment is appropriate if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." See Fed.R.Civ.P. 56(c). The party moving for summary judgment bears the burden of showing the absence of a genuine issue of a material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986).
Once a properly supported motion has been presented before the court, the opposing party has the burden of demonstrating that a trial-worthy issue exists that would warrant the court's denial of the motion for summary judgment. For issues where the opposing party bears the ultimate burden of proof, that party cannot merely rely on the absence of competent evidence, but must affirmatively point to specific facts that demonstrate the existence of an authentic dispute. See Suarez v. Pueblo Int'l, Inc., 229 F.3d 49 (1st Cir. 2000).
In order for a factual controversy to prevent summary judgment, the contested facts must be "material" and the dispute must be "genuine". "Material" means that a contested fact has the potential to change the outcome of the suit under governing law. The issue is "genuine" when a reasonable jury could return a verdict for the nonmoving party based on the evidence. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). It is well settled that "[t]he mere existence of a scintilla of evidence" is insufficient to defeat a properly supported motion for summary judgment. Id. at 252, 106 S. Ct. 2505. It is therefore necessary that "a party opposing summary judgment must present definite, competent evidence to rebut the motion." Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d 576, 581 (1st Cir.1994).
In making this assessment, the court "must view the entire record in the light most hospitable to the party opposing summary judgment, indulging in all reasonable inferences in that party's favor." Griggs-Ryan v. Smith, 904 F.2d 112, 115 (1st Cir.1990). The court may safely ignore "conclusory allegations, improbable inferences, and unsupported speculation." Medina-Muñoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir.1990).
B. Standard for Reviewing a Magistrate-Judge's Report and Recommendation
A District Court may, on its own motion, refer a pending motion to a U.S. Magistrate-Judge *107 for a Report and Recommendation. See 28 U.S.C. § 636(b)(1)(B); Fed.R.Civ.P. 72(b); Local Rule 72(a). Pursuant to Fed.R.Civ.P. 72(b) and Local Rule 72(d), the adversely affected party may contest the Magistrate-Judge's Report and Recommendation by filing written objections "[w]ithin ten days of being served" with a copy of the order. See 28 U.S.C. § 636(b)(1). Since defendants have filed timely objections to the Magistrate-Judge's Report and Recommendation, the Court shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which specific objection is made. See United States v. Raddatz, 447 U.S. 667, 673, 100 S. Ct. 2406, 65 L. Ed. 2d 424 (1980); Lopez v. Chater, 8 F. Supp. 2d 152, 154 (D.P.R.1998).
C. The Magistrate-Judge's Report and Recommendation
1. Plaintiffs' Motion for Summary Judgment
In their Motion, plaintiffs argue that there is no controversy as to the fact that Contreras denied them due process by revoking their license without a pre-deprivation hearing. Accordingly, they request the Court to enter summary judgment finding Contreras liable for the due process violation, leaving only the damages to be determined by the jury. The Magistrate-Judge found that no controversy indeed existed as to the lack of a pre-deprivation hearing given that the defendants had admitted as much in their response. The Magistrate-Judge, however, then went on to find that a factual debate does exist as to whether an emergency situation was perceived by the defendants at the time of the order which could justify their actions. The Court disagrees.
At the preliminary injunction stage, the Court found that plaintiffs' due process rights had been violated by the defendants' failure to provide them with a pre-deprivation hearing (Docket No. 31 at pp. 22-26). See Guillemard Gionorio v. Contreras Gomez, 301 F. Supp. 2d 122, 132-33 (D.P.R. 2004) ("Guillemard I"). The Court also found that defendants had not raised any indication that an emergency situation existed which required the immediate revocation of plaintiffs' license and that would provide justification for a post-deprivations hearing. Id. The Court later reaffirmed this finding when disposing of defendants' motion to dismiss (Docket No. 57 at 13-15). See Guillemard Gionorio v. Contreras Gomez, 322 F. Supp. 2d 153, 159-60 (D.P.R.2004) ("Guillemard II").
Although the Court made these findings at earlier stages of the case in which the evidentiary standard is less stringent and most facts must be accepted as pled, the Court finds that the defendants have not controverted the facts supporting such findings. See Lewis v. Casey, 518 U.S. 343, 358, 116 S. Ct. 2174, 135 L. Ed. 2d 606 (1996)("At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice . . . In response to a summary judgment motion, however, the plaintiff can no longer rest on such mere allegations, but must set forth by affidavit or other evidence specific facts"). At the summary judgment stage, it remains uncontroverted that defendants did not provide plaintiffs with a pre-deprivation hearing. Furthermore, defendants have failed to establish that an emergency situation existed, or that they at least believed that to be the case, in order to justify the need for immediate action. If the defendants had submitted evidence to show this, then a trial-worthy controversy would exist. On the record as it stands, however, summary judgment is warranted in favor of plaintiffs on their due process claims.
*108 Moreover, defendant's argument that the due process claim is moot because they eventually did provide plaintiffs with a hearing is without merit. The hearing may have rendered the need for a preliminary injunction moot, however, defendants must still answer for any damages they may have caused with their attempt to revoke plaintiffs' license without due process.
Therefore, the Court rejects this part of the Magistrate-Judge's Report and Recommendation, and grants plaintiffs' motion for partial summary judgment.
2. Defendants' Motion for Summary Judgment
a. First Amendment Claim
Defendants object to the Magistrate-Judge's finding that the plaintiffs proffered sufficient evidence to establish a prima facie case of political discrimination. They argue that the statements proffered by the plaintiffs are insufficient to show that defendants' actions were motivated by a discriminatory animus. The Court, however, disagrees.
In order to establish a prima facie case of political discrimination, plaintiffs must produce sufficient evidence to allow a rational jury to find that their political affiliation was a substantial or motivating factor behind the adverse action. See, e.g., Baez-Cruz v. Municipality of Comerio, 140 F.3d 24, 28 (1st Cir.1998). To meet this burden, plaintiffs need not produce direct evidence of a politically-based discriminatory animus. See Acosta-Orozco v. Rodriguez-de-Rivera, 132 F.3d 97, 101-02 (1st Cir.1997). Plaintiffs may establish a discriminatory animus with circumstantial evidence alone. Id. Plaintiffs must show that there is a causal connection linking defendants' conduct to their political beliefs. See LaRou v. Ridlon, 98 F.3d 659, 662 (1st Cir.1996).
Plaintiffs have proffered evidence, mostly through deposition testimony, that they were subjected to an investigation by the OIC and that the investigation was motivated by their political affiliation to the NPP. Furthermore, they have proffered evidence that the order of December 23, 2005 issued in retaliation for their filing of this complaint only a few days before. The evidence, the Court finds, is certainly sufficient to establish a prima facie case.
The burden then shifts to defendants, who must articulate a nondiscriminatory reason for the challenged conduct and who must establish by a preponderance of the evidence that they would have taken the same action. See Rodriguez-Rios v. Cordero, 138 F.3d 22, 24 (1st Cir.1998)(citing Mount Healthy City Sch. Dist. v. Doyle, 429 U.S. 274, 97 S. Ct. 568, 50 L. Ed. 2d 471 (1977)). Here, defendants' arguments founder.
Defendants argue that the investigation into plaintiffs' affairs was the result of a communication from the Puerto Rico Treasury Department indicating that UVI may have benefitted inappropriately in the performance of its contract with the Commonwealth Government. It was then that the OIC learned of the commission-sharing arrangement with the plaintiffs and began its investigation. Thus, it was because of this violation to the Insurance Code, and not because of their political affiliation, that the investigation commenced, and defendants would have investigated the plaintiffs regardless of their political affiliation.[4]
*109 Plaintiffs' proffered evidence, however, is sufficient to overcome defendants' Mount Healthy defense. See Padilla-Garcia v. Rodriguez, 212 F.3d 69, 74 (1st Cir.2000)("The evidence by which the plaintiff established her prima facie case may suffice for a fact finder to infer that the defendant's reason is pretextual and to effectively check summary judgment.") More prominently, the Court finds that the comment Contreras made to OIC investigator Melvin Rosario ("Rosario") creates an issue of fact which must be submitted to a jury. Rosario states in his deposition (Docket No. 236, Exh. 14 at 33-34) that when Contreras ordered him to investigate the plaintiffs for the sharing of commissions, he told Contreras that it was a common practice in the industry, "everybody does it". Contreras replied that he would investigate "those NPP's". A reasonable jury could infer that by his referring to the plaintiffs by their political affiliation, Contreras very well could have revealed an improper motive behind the investigation. Thus, a triable issue of fact exists which precludes the entry of summary judgment.
As to the retaliation claim, defendants try to argue that Contreras was justified in issuing the order when he did because the plaintiffs had delayed the investigation by challenging the disclosure of certain documents. Thus, only when he possessed all the relative information could Contreras issue the order, and this complaint could not be a bar to his fulfilling his obligations as Insurance Commissioner. The Court, however, finds that a triable issue exists as to Contreras' motivation for issuing the order when he did. The timing of the order only days after Contreras was served, together with the evidence that he was investigating the plaintiffs motivated by a discriminatory animus, could lead a reasonable jury to find that the order issued in retaliation for the filing of this complaint. Accordingly, summary judgment is inappropriate on plaintiffs' retaliation claims.
Finally, defendants argue that the Magistrate-Judge erred in not recommending that the Court dismiss the claims against Juarbe in her individual capacity inasmuch as there is no evidence to establish that she discriminated against the plaintiffs. The evidence on record shows, however, that Juarbe was part of the meetings where the defendants discussed the drafting of the December 23, 2003 order. Furthermore, once she took over the office of Insurance Commissioner, she continued to enforce the order and to oppose plaintiffs' efforts to appeal it and seek relief in this Court. Thus, a trial-worthy issue exists as to the motivation behind her decision to adopt and continue with Contreras' course of action. Accordingly, the entry of summary judgment in favor of Juarbe is precluded at this time.
b. Equal Protection Claim
The Magistrate-Judge recommended that the Court dismiss plaintiffs' equal protection claims because she found that they had failed to establish that the statute regulating the insurance industry is not rationally related to a legitimate governmental purpose. See U.S. Fire Ins. Co. v. Corporacion Insular De Seguros, 853 F. Supp. 47, 49 (D.P.R.1994)("Whether an economic or social regulation violates the Equal Protection Clause is decided by determining whether the government classification is rationally related to a legitimate government interest."). Plaintiffs object, and the Court agrees, however, that the Magistrate-Judge erred in her recommendation because she applied an erroneous standard in her analysis. Mainly, the Magistrate-Judge applied the standard for an equal protection challenge of legislation *110 when plaintiffs' claims are rather predicated upon the theories of a "class of one" and selective enforcement.
A plaintiff may successfully raise a claim as a "class of one", "where the plaintiff alleges that she has been intentionally treated differently from others similarly situated and that there is no rational basis for the difference in treatment." Village of Willowbrook v. Olech, 528 U.S. 562, 564, 120 S. Ct. 1073, 145 L. Ed. 2d 1060 (2000) (citing Sioux City Bridge Co. v. Dakota County, 260 U.S. 441, 43 S. Ct. 190, 67 L. Ed. 340 (1923); Allegheny Pittsburgh Coal Co. v. Commission of Webster Cty., 488 U.S. 336, 109 S. Ct. 633, 102 L. Ed. 2d 688 (1989)). "Different treatment of a class of even one individual may be sufficient to state a claim under the Equal Protection Clause." Lopez Rosario v. Police Dept., 126 F. Supp. 2d 167, 174 (D.P.R.2000) (citing Id.). In like manner, to establish a claim of selective enforcement, plaintiffs must show that (1) they, "compared with others similarly situated, [were] selectively treated; and (2) that such selective treatment was based on impermissible considerations such as race, religion, intent to inhibit or punish the exercise of constitutional rights, or malicious or bad faith intent to injure a person." Rubinovitz v. Rogato, 60 F.3d 906, 909-10 (1st Cir.1995) (citing Yerardi's Moody St. Restaurant & Lounge, Inc. v. Board of Selectmen, 878 F.2d 16, 21 (1st Cir.1989)).
Plaintiffs claim that the defendants treated them differently than the rest of the insurance agents who were engaged in commission-sharing agreements. Plaintiffs have proffered evidence that the sharing of commissions was widespread among the insurance industry in Puerto Rico and that no other agent was subjected to such an intrusive investigation and punitive order as they were. Defendants argue that they did not treat the defendants differently than other similarly situated individuals because the sums of money shared between Lone Star and UVI were of such magnitude that no other broker or agent was "similarly situated". Thus, for the defendants the similarly situated individuals would not be insurance agents who share commissions, but rather insurance agents who share commissions in the amounts involved in plaintiffs' case.
The Court disagrees, however, with defendants' characterization of the class of similarly situated individuals. Insofar as the Insurance Code prohibits the sharing of commissions, it does so without any reference to the amount of commissions involved. Thus, the class of individuals subject to its provisions are those engaged in the insurance industry who enter into commission-sharing agreements. If the defendants are allowed to choose at will the amount of commissions that would constitute a violation of the statute, it could lead to an arbitrary, capricious, and constitutionally impermissible application of the statute. See, e.g., Sunday Lake Iron Co. v. Township of Wakefield, 247 U.S. 350, 352-53, 38 S. Ct. 495, 62 L. Ed. 1154 (1918) ("The purpose of the equal protection clause of the Fourteenth Amendment is to secure every person within the State's jurisdiction against intentional and arbitrary discrimination, whether occasioned by express terms of a statute or by its improper execution through duly constituted agents."(emphasis added)).
Accordingly, the Court rejects this part of the Report and Recommendation and finds that plaintiffs' equal protection claims can survive summary judgment and may be presented to a jury.
c. Qualified Immunity
In their motion, the defendants argue that they are entitled to qualified *111 immunity in relation to plaintiffs' due process claims. The Magistrate-Judge recommended that the Court deny defendants' assertion of the qualified immunity defense because there is an issue of material fact as to the motivation behind defendants' conduct. In their objections, the defendants now attempt to argue that they are in fact entitled to qualified immunity as to all of plaintiffs' claims. Because the defendants did not properly raise these arguments before the Magistrate-Judge, the Court will consider their assertion of qualified immunity in relation only to the due process claim. See Paterson-Leitch Company, Inc. v. Massachusetts Municipal Wholesale Electric Company, 840 F.2d 985, 990-91 (1st Cir.1988)("The rule [Fed. R.Civ.P. 72(b)] does not permit a litigant to present new initiatives to the district judge. We hold categorically that an unsuccessful party is not entitled as of right to de novo review by the judge of an argument never seasonably raised before the magistrate.")[5]
In order to determine whether a government official is entitled to qualified immunity, the Court must consider "(1) whether plaintiffs allegations, if true, establish a constitutional violation; (2) whether that right was clearly established at the time of the alleged violation; and (3) whether a similarly situated reasonable official would have understood that the challenged action violated the constitutional right at issue." Mihos v. Swift, 358 F.3d 91, 102 (1st Cir.2004).
As to the first prong of the qualified immunity inquiry, the facts of the case show that the December 23, 2003 order issued without notice and a hearing and purported to revoke plaintiffs' license without affording them an opportunity to be heard. This fact, if true, and it is undisputed that it is, constitutes a violation of plaintiffs' due process rights. Thus, plaintiffs easily meet the first prong.
Second, there can be no doubt that plaintiffs' due process rights to a pre-revocation hearing were clearly established when the violation occurred. See Cleveland Board of Education v. Loudermill, 470 U.S. 532, 542, 105 S. Ct. 1487, 84 L. Ed. 2d 494 (1985)("An essential principle of due process is that a deprivation of life, liberty, or property `be preceded by notice and opportunity for hearing appropriate to the nature of the case.'"); Fuentes v. Shevin, 407 U.S. 67, 81-82, 92 S. Ct. 1983, 32 L. Ed. 2d 556 (1972)("If the right to notice and a hearing is to serve its full purpose, then, it is clear that it must be granted at a time when the deprivation can still be prevented. . . . The right to a prior hearing has long been recognized by this Court under the Fourteenth and Fifth Amendments."); Boddie v. Connecticut, 401 U.S. 371, 379, 91 S. Ct. 780, 28 L. Ed. 2d 113 (1971)(The "root requirement" is "that an individual be given an opportunity for a hearing before he is deprived of any significant property interest."); Bell v. Burson, 402 U.S. 535, 539, 91 S. Ct. 1586, 29 L. Ed. 2d 90 (1971)("due process requires that when a State seeks to terminate an interest such as that here involved, it must afford `notice and opportunity for hearing appropriate to the nature of the case' before the termination becomes effective."); Opp Cotton Mills v. Administrator, 312 U.S. 126, 152-53, 61 S. Ct. 524, 85 L. Ed. 624 (1941)(Due process demands "the requisite hearing is held before the final order becomes effective."); Beauchamp v. De *112 Abadia, 779 F.2d 773, 775 (1st Cir. 1985)("The district court's holding that [plaintiff] had a right to a hearing before his [medical] license could be revoked was correct."). Thus, the second prong is satisfied.
At the third prong, defendants argue that a reasonable official in Contreras' position would have been justified in revoking plaintiffs' license without prior hearing because a state statute authorized such action and the statute's constitutional validity had not been controverted at the time. Defendants' reliance on the state statute, however, is irrelevant. Even if the Court were to find, which it does not, that the state statute could effectively authorize the defendant to act in violation of plaintiffs' constitutional due process rights, a material issue of fact remains as to whether Contreras acted in a retaliatory or discriminatory manner when he issued the order. In other words, if it is decided that Contreras issued the order to revoke the license without prior notice and hearing in retaliation for the filing of this complaint and/or motivated by a discriminatory animus for plaintiffs' political affiliation, he would not be entitled to qualified immunity even if he acted in accordance with valid state law. See Mihos, 358 F.3d at 104-05 ("While the Supreme Court has removed from the qualified immunity analysis inquiries into whether a defendant knew that he was violating plaintiffs constitutional rights or acted maliciously to that end, this jurisprudence has not suggested that the `objectification' of the qualified immunity inquiry somehow removes the intent element in the `subset of constitutional torts [in which] motivation or intent is an element of the cause of action.'"). The ultimate determination as to his motivation, however, must be made by a jury.
Furthermore, defendants have been unable to establish by any evidence now on the record that an emergency situation existed, or that at least they reasonably believed it existed, at the time of the order that could justify a pre-hearing deprivation. Without such a showing, the Court must find that, at this stage in the proceedings, defendants are not entitled to qualified immunity.[6]
CONCLUSION
For the foregoing reasons, the Court ADOPTS in part and REJECTS in part the Magistrate-Judge's Report and Recommendation. Accordingly, the Court GRANTS plaintiffs' motion for summary judgment and DENIES the defendants' motion.
IT IS SO ORDERED.
NOTES
[1] This Amended Opinion and Order supersedes the Opinion and Order issued on January 3, 2006 (Docket No. 303).
[2] The facts are taken from the Report and Recommendation (Docket No. 287).
[3] This hearing mooted a Temporary Restraining Order and Preliminary Injunction issued by the Court ordering the Insurance Commissioner not to revoke plaintiffs' license without first affording them procedural due process. See Guillemard-Ginorio v. Contreras Gomez, 2005 WL 3382638 (1st Cir. December 13, 2005) (unpublished opinion).
[4] The Court notes that UVI also filed a similar complaint against defendants which the Court consolidated with this one (See Docket No. 11). UVI has since settled its claims with the defendants (Docket Nos. 99-101).
[5] Even if the Court were to consider defendants' arguments as to plaintiffs' First Amendment claims (political discrimination and retaliation), there are material issues of fact as to their motivation that would preclude the Court from granting them qualified immunity at this stage in the proceedings. These issues must be decided by a jury.
[6] In this sense, the record has not been significantly factually developed to justify a pretrial defense of qualified immunity and the law of the case remains set by the denial of qualified immunity in this Court's prior decision. See Guillemard II, 322 F.Supp.2d at 160-64, affirmed Guillemard-Ginorio v. Contreras Gomez, 2005 WL 3382638 (1st Cir. December 13, 2005)(unpublished opinion). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2428126/ | 434 F. Supp. 2d 957 (2006)
NORTHWEST ENVIRONMENTAL DEFENSE CENTER, et al., Plaintiffs,
v.
OWENS CORNING CORPORATION, Defendant.
Civil No. 04-1727-JE.
United States District Court, D. Oregon.
June 8, 2006.
*958 *959 Melissa Ann Powers, Allison Michelle LaPlante, Pacific Environmental Advocacy Center, Portland, OR, Attorneys for Plaintiffs.
Lynne M. Paretchan, Thomas E. Lindley, Jeffrey C. Dobbins, Perkins Coie, LLP, Portland, OR, Paul S. Lewandowski, Owens Corning Corporation, Toledo, OH, Attorneys for Defendant.
OPINION AND ORDER[*]
JELDERKS, United States Magistrate Judge.
Plaintiffs Northwest Environmental Defense Center, Oregon Center for Environmental Health, and Sierra Club bring this action against defendant Owens Corning Corporation.
Plaintiffs contend that Owens Corning is constructing a polystyrene foam insulation manufacturing facility in Gresham, Oregon, with the potential to emit more than 250 tons per year of various harmful gases, without having obtained a required preconstruction permit, in violation of Section 165(a) of the Clean Air Act, 42 U.S.C. *960 § 7475(a). Plaintiffs contend further that "this unpermitted construction has violated and is violating Part C of Title I of the Act, 42 U.S.C. §§ 7470-7479, and implementing regulations, 40 C.F.R. § 52.21[and] § 51.166" and the Major New Source Review provisions of the Oregon State Implementation Plan, codified in the Oregon Administrative Code at OAR XXX-XXX-XXXX to XXX-XXX-XXXX.
Plaintiffs also "allege that Owens Corning's unpermitted construction has violated and is violating provisions of the Oregon" [State Implementation Plan] which require any facility that will emit more than 100 tons per year of a regulated air pollutant to obtain an Air Contaminant Discharge Permit . . . prior to construction[,] OAR XXX-XXX-XXXX, along with "the written notice and approval provisions of the Oregon SIP, OAR XXX-XXX-XXXX and OAR XXX-XXX-XXXX." First Amended Compl., ¶ 3.
Plaintiffs seek declaratory and injunctive relief, civil penalties, plus their costs and attorney fees.
Defendant moves to dismiss the entire complaint on the ground that Plaintiffs lack standing. In the alternative, Defendant moves to strike those portions of each claim that seek more than one day's civil penalties. Finally, Defendant moves to dismiss Plaintiffs' First Claim on the ground that Plaintiffs can state a claim, if any, only under state rather than federal law. Each of the foregoing motions is denied.
Background
Gresham is a suburb of Portland, Oregon. The principal gas at issue is 1-chloro-1, 1-difluoroethane, a hydrochlorofluorocarbon also known as HCFC-142b. Plaintiffs contend HCFC-142b is "a potent greenhouse gas and ozone-depleting substance." They fear emissions from Defendant's new facility in Gresham will heighten the risk that members of the Plaintiff organizations will contract certain diseases associated with elevated levels of ultraviolet radiation subsequent to ozone depletion, and that other diseases afflicting their members will be exacerbated, and that the environmental resources used and enjoyed by Plaintiffs will be harmed by ozone depletion.
Plaintiffs cite lupus as an example of a chronic condition that often results in heightened photosensitivity, and assert that "[a]t least one member of the Plaintiff organizations" presently has that condition. Plaintiffs also allege that depletion of stratospheric ozone will result in greater amounts of radiation reaching the earth's surface in Oregon. They represent that such increases in radiation have "been linked to a higher incidence of certain skin cancers, ailments such as lupus, cataracts, suppression of the human immune system, damage to crops and aquatic organisms, and increased formation of ground-level ozone." First Amended Compl., ¶ 47.
Plaintiffs further allege that emissions from Defendant's Gresham facility will contribute to global warming, which in turn will harm environmental resources in Oregon used or enjoyed by members of the Plaintiff organizations.[1] Plaintiffs additionally *961 allege that the facility under construction in Gresham will emit particulate matter, carbon monoxide, and volatile organic compounds that Plaintiffs fear will harm the health of their members and the local environment that they utilize.[2]
After this action was commenced, the parties entered into a stipulation. Plaintiffs agreed not to seek a preliminary injunction, and Defendant agreed to halt construction pending issuance of a state Air Contaminant Discharge Permit for the facility. The case is not moot, however. At a minimum, the parties still dispute whether construction was undertaken without one or more required permits, whether Defendant's facility is subject to those permit requirements, whether civil penalties should be imposed, and, if so, the amount and disposition of those penalties.
Discussion
The Clean Air Act has been described as "without a doubt the most complex environmental regulatory scheme," one "that is bewildering at times to even the most experienced environmental lawyers." Susan Mandiberg & Susan Smith, CRIMES AGAINST THE ENVIRONMENT § 4-2(a) (1997). The present case focuses upon one narrow corner of the Act, the preconstruction review process mandated by Part C of Title I of the Clean Air Act.
Two general principles furnish the backdrop for the present action. First, Congress has enlisted the states as partners in the national effort to curb air pollution. Each state is responsible for developing and periodically updating a State Implementation Plan ("SIP"), which is subject to approval by the federal Environmental Protection Agency. The states play a major role in enforcing SIPs.
Second, given the high cost of retrofitting existing emissions sources with state-of-the-art control technologies, Congress has focused its efforts upon curbing emissions from new sources. The latter have more flexibility as to location and design of control equipment than do existing sources. Consequently, construction of new sources of emissions usually triggers application of more stringent levels of control under the Act. ENVIRONMENTAL LAW HANDBOOK, p. 243 (18th ed.2005).
42 U.S.C. § 7475 mandates preconstruction review and approval of major new stationary sources of air pollution, such as factories. A major stationary source is "any stationary facility or source of air pollutants which directly emits, or has the potential to emit, one hundred tons per year or more of any air pollutant. . . ." 42 U.S.C. § 7602(j).
The extent of the preconstruction review, and the substantive requirements that must be met, depend in part on the nature of the substance being emitted and whether the proposed new source is located in an "attainment area," i.e., a region that is in compliance with certain air quality standards, or is situated in a "non-attainment area."
New stationary sources located in attainment areas are subject to the prevention of significant deterioration ("PSD") permit program if the source has the potential to emit at least 250 tons per year ("tpy") of a regulated pollutant, or at least 100 tpy of certain specified pollutants. 40 C.F.R. § 52.21(b)(1).
To receive a permit, the owner or operator of the proposed new source must show, inter alia, that the source (1) will comply with ambient air quality levels designed to prevent deterioration of air quality (the PSD increments), and (2) will employ best available control technology ("BACT") for *962 each pollutant regulated under the Act that it will emit in significant amounts. 42 U.S.C. § 7475(a).
Plaintiffs allege that Defendant originally represented to the Oregon Department of Environmental Quality that the proposed Gresham facility had the potential to emit 283 tpy of HCFC-142b. Plaintiffs contend this quantity is sufficient to invoke the preconstruction review process, and that Defendant unlawfully commenced construction without first obtaining the necessary permit. After this action was filed, Defendant allegedly sought to retract its earlier statements, claiming the facility actually had the potential to emit less than 250 tpy of HCFC-142b. Plaintiffs dispute the accuracy of that lower figure.
Defendant's Motion to Dismiss for Lack of Standing
Defendant contends this action must be dismissed because the Plaintiff organizations lack standing to prosecute the claims alleged in the Complaint.
An association has standing to bring suit on behalf of its members when the members would otherwise have standing to sue in their own right, the interests at stake are germane to the organization's purpose, and neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. Friends of the Earth, Inc. v. Laidlaw Environmental Services, Inc., 528 U.S. 167, 181, 120 S. Ct. 693, 145 L. Ed. 2d 610 (2000), citing Hunt v. Washington State Apple Advertising Comm'n, 432 U.S. 333, 343, 97 S. Ct. 2434, 53 L. Ed. 2d 383 (1977).
The interests asserted in this action are germane to the purposes of the Plaintiff organizations. Neither the claims asserted nor the relief requested requires participation by the individual members of these organizations. Accordingly, whether Plaintiffs have standing to prosecute the present action turns on whether the members of the Plaintiff organizations would have standing to sue in their own right.
The question of standing "involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise." Warth v. Seldin, 422 U.S. 490, 498, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975). The "constitutional limitations" are those that are necessary to satisfy Article III's requirement of a "case" or "controversy," without which this court lacks jurisdiction. By contrast, "prudential limitations" are "judicially self-imposed limits on the exercise of federal jurisdiction," Allen v. Wright, 468 U.S. 737, 751, 104 S. Ct. 3315, 82 L. Ed. 2d 556 (1984), that are "founded in concern about the properand properly limitedrole of the courts in a democratic society." Warth, 422 U.S. at 498.
A. Constitutional Limitations
To satisfy the "case" or "controversy" requirement of Article III, a plaintiff must, generally speaking, demonstrate that:
(1) he or she has suffered (or is about to suffer) an "injury in fact": an invasion of a legally protected interest that is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical;
(2) there must be a causal connection between the injury and the conduct complained of; and
(3) it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992).
Plaintiffs, as the party invoking federal jurisdiction, bear the burden of establishing standing. Defenders of Wildlife, 504 U.S. at 561, 112 S. Ct. 2130. Because this is a motion to dismiss, the court must assume the truth of any well-pleaded *963 facts alleged in the First Amended Complaint. Id. At this stage, general factual allegations of injury resulting from the defendant's conduct may suffice, for on a motion to dismiss we "presum[e] that general allegations embrace those specific facts that are necessary to support the claim." Id., quoting Lujan v. National Wildlife Federation, 497 U.S. 871, 889, 110 S. Ct. 3177, 111 L. Ed. 2d 695 (1990).
1. Injury in Fact
The phrase "injury in fact" notwithstanding, a plaintiff need not wait until after he has been harmed before seeking relief, particularly when the injuries are of a kind not readily redressed by damages. Instead, a plaintiff may petition the court for injunctive relief to prevent the threatened harm. A "concrete risk of harm" to the plaintiff is sufficient to satisfy the injury-in-fact requirement. Covington v. Jefferson County, 358 F.3d 626, 638 (9th Cir. 2004) (risk of harm if landfill not properly operated was sufficient to confer standing, and citing additional authorities); Hall v. Norton, 266 F.3d 969, 976 (9th Cir.2001) ("evidence of a credible threat to the plaintiff's physical well being from airborne pollutants" sufficient to satisfy injury requirement).
The allegations that Plaintiffs "fear" or are "concerned" they will be harmed if Defendant's facility discharges pollutantsrather than affirmatively alleging that Plaintiffs "will" sustain such harm (or are "informed and believe they will") do give some pause. However, in environmental litigation, such allegations can be enough to satisfy the injury-in-fact requirement. See Covington, 358 F.3d at 639 (sufficient to allege that defendant's actions "caused `reasonable concern' of injury to" the plaintiff) and at 641 (evidence that plaintiffs observed leaks from landfill and "fear that this liquid will contaminate their property" was sufficient to show injury-in-fact). See also Laidlaw, 528 U.S. at 182-84, 120 S. Ct. 693 (plaintiffs allegedly altered their behavior because they were "concerned" about harmful effects from Laidlaw's discharges); Central Delta Water Agency v. United States, 306 F.3d 938, 948 (9th Cir.2002) ("`to require actual evidence of environmental harm, rather than an increased risk based on a violation of the statute, misunderstands the nature of environmental harm'. . . . a credible threat of harm is sufficient to constitute actual injury for standing purposes"); Natural Resources Defense Council v. Southwest Marine, Inc., 236 F.3d 985, 994 (9th Cir.2000) (plaintiffs curtailed their use of bay due to concerns about discharges); Sierra Club, Lone Star Chapter v. Cedar Point Oil Co. Inc., 73 F.3d 546, 556 (5th Cir.1996) (affiants' "concern" that discharges would impair water quality is sufficient; "[w]hether the affiants were `concerned' or `believed' or `knew to a moral certainty' that produced water would adversely affect their activities on the bay is a semantic distinction that makes little difference in the standing analysis"); City of Davis v. Coleman, 521 F.2d 661, 670-71 (9th Cir.1975) (plaintiff need not prove a specific adverse environmental impact, when the very purpose of bringing the action was to compel the defendant agency to investigate the environmental impacts of the project as required by statute).
Of course, the harm must be more than imaginary. See Societe de Conditionnement en Aluminium v. Hunter Engineering Co., Inc., 655 F.2d 938, 944 (9th Cir. 1981) (a "real and reasonable apprehension" is sufficient). Defendant does not suggest, however, that the harm described in the complaint is entirely without any credible scientific basis norat this stage of the proceedingsare Plaintiffs required to prove their contentions. The enactment by Congress of laws governing these emissions, and the participation by the United *964 States in related international agreements, also weigh against any suggestion that the threatened harm is entirely chimerical.[3]
Moreover, when a claim is premised upon procedural irregularityhere, the failure to obtain a required permit and allow the public to scrutinize and comment on the application"the redressability and imminence of injury requirements are relaxed." Covington, 358 F.3d at 641. "The person who has been accorded a procedural right to protect his concrete interests can assert that right without meeting all the normal standards for redressability and immediacy." Defenders of Wildlife, 504 U.S. at 573 n. 7, 112 S. Ct. 2130.
"To satisfy the injury in fact requirement, a plaintiff asserting a procedural injury must show that the procedures in question are designed to protect some threatened concrete interest of his that is the ultimate basis of his standing." Citizens for Better Forestry v. United States Dep't of Agriculture, 341 F.3d 961, 969 (9th Cir.2003); Public Citizen v. Dep't of Transp., 316 F.3d 1002, 1015 (9th Cir. 2003), reversed on other grounds, 541 U.S. 752, 124 S. Ct. 2204, 159 L. Ed. 2d 60 (2004); Cantrell v. City of Long Beach, 241 F.3d 674, 679 (9th Cir.2001). The plaintiff must also establish it is reasonably probable that the challenged action will threaten his concrete interests. Citizens for Better Forestry, 341 F.3d at 969-70.
Congress established the Clean Air Act preconstruction review and permit requirements to protect the very kinds of interests asserted here by Plaintiffs. The challenged action allegedly will threaten those interests, releasing a significant quantity of pollutants into the atmosphere in a densely populated metropolitan region where many members of the Plaintiff organizations live, work, commute, or recreate.
I conclude that Plaintiffs have satisfied this element of the standing inquiry. Cf. Citizens for Better Forestry, 341 F.3d at 970-71 (deprivation of opportunity to comment on decision whether to prepare an environmental impact statement was sufficient injury to confer standing); Salmon River Concerned Citizens v. Robertson, 32 F.3d 1346, 1355 (9th Cir.1994) (injury to plaintiff results not from the agency's decision, but from the agency's uninformed decisionmaking); Douglas Cty. v. Babbitt, 48 F.3d 1495, 1499-1501 (9th Cir.1995). See also Federal Election Commission v. Akins, 524 U.S. 11, 21, 118 S. Ct. 1777, 141 L. Ed. 2d 10 (1998) (a plaintiff suffers an "injury in fact" when he fails to obtain information that must be publicly disclosed pursuant to a statute).
Defendant relies heavily on Defenders of Wildlife, but that case is easily distinguished on its facts. In Defenders of Wildlife, the plaintiffs sought a declaration that the Endangered Species Act requires *965 federal agencies to consult with the U.S. Fish and Wildlife Service regarding any activities outside of the United States that those agencies fund or otherwise assist that may adversely impact endangered species. However, the plaintiffs were unable to establish that they personally had been (or were about to be) injured by the government's failure to conduct such consultations. The challenged projects were in Egypt and Sri Lanka. The affiants did not reside in those countries, nor have more than a vague intent to "some day" travel to those countries to interact with these species. Id. at 563-64, 112 S. Ct. 2130. Thus, even if the injuries alleged in Defenders of Wildlife might otherwise suffice to establish standing, the affiants had made no showing of imminent injury to themselves as opposed to injury to the species.[4]
Ultimately, in attempting to establish standing, the plaintiffs in Defenders of Wildlife could point to little more than a general concern about global environmental issues, and a belief that loss of any species, even on the other side of the world, diminishes the planet as a whole. Perhaps it is true that "[a]ny man's death diminishes me, because I am involved in Mankind,"[5] but something more is required to establish standing in a federal court.
The Complaint at issue here avoids those defects. The challenged emissions source is local, not halfway around the globe. Members of the Plaintiff organizations reside, work, and recreate near the partially-completed Gresham facility. Assuming the truth of the allegations in the Complaint, as I must on a motion to dismiss, those individuals would suffer some direct impact from emissions entering into the atmosphere from Defendant's facility, as would the local ecosystem with which these individuals constantly interact.
Other forecasted impacts from these emissions would operate less directly. For instance, ozone-depleting emissions from Defendant's facility must first ascend to the stratosphere before impacting persons on the ground in Oregon. Global warming likewise operates indirectly. Higher sea levels in Oregon will supposedly result from melting ice in the earth's polar regions. Changes in weather patterns, winds, ocean currents, and rainfall do not occur in isolation. Nevertheless, the adverse effects alleged in Plaintiffs' Complaint would be felt by them here in Oregon, and the source of Defendant's emissions would be in Oregon.
Adverse effects from the emissions will not necessarily be limited to Oregon, yet Plaintiffs' injuries are not diminished by the mere fact that other persons may also be injured by the Defendant's conduct. Standing has never required proof that the plaintiff is the only person injured by the defendant's conduct. A class action may be prosecuted on behalf of a class of millions of similarly situated persons, all claiming to have been injured by the same conduct. As Judge Gould's concurrence in Covington ably illustrates, the notion that "injury to all is injury to none" does not correctly reflect the current doctrine of *966 standing. Covington, 358 F.3d at 651-55. If Defendant's theory of standing were correct, no person could have standing to maintain an action aimed at averting harm to the Grand Canyon or Yellowstone National Park, or threats to the giant sequoias and blue whales, as the loss of those treasures would be felt by everyone. For that matter, if the proposed action threatened the very survival of our species, no person would have standing to contest it. The greater the threatened harm, the less power the courts would have to intercede. That is an illogical proposition.
The cases cited by Defendant do not support the contention that a widely shared injury is not justiciable. Properly analyzed, the claims in such cases did not fail because too many persons were injured by the defendant's conduct, but rather because the plaintiffs in those cases failed to articulate a concrete injury that would be redressed by a favorable decision. The injury-in-fact requirement helps assure that courts will not pass upon abstract intellectual problems, but will adjudicate concrete, living contests between adversaries. Akins, 524 U.S. at 20, 118 S. Ct. 1777. Thus, a litigant must articulate how he has been or will be harmed by the defendant's conduct, and how he will benefit from a favorable decision.
For instance, in Schlesinger v. Reservists Committee to Stop the War, 418 U.S. 208, 94 S. Ct. 2925, 41 L. Ed. 2d 706 (1974), the Court dismissed, for want of standing, a claim that the Constitution prohibits members of Congress from simultaneously serving as members of the armed forces reserve. The plaintiffs failed to articulate how they personally were harmed by the alleged constitutional violation. The only interests articulated were abstract ones, and entirely hypothetical: a desire to have all laws enforced, or a general fear that members of Congress might be subject to "undue influence by the Executive Branch," or otherwise subjected to "possible inconsistent obligations which might cause them to violate their duty. . . ." Id. at 212, 94 S. Ct. 2925. As the Court succinctly stated, "Abstract injury is not enough." Id. at 219, 94 S. Ct. 2925, quoting O'Shea v. Littleton, 414 U.S. 488, 494, 94 S. Ct. 669, 38 L. Ed. 2d 674 (1974). "Concrete injury, whether actual or threatened, is that indispensable element of a dispute which serves in part to cast it in a form traditionally capable of judicial resolution. . . . Moreover, when a court is asked to undertake constitutional adjudication, the most important and delicate of its responsibilities, the requirement of concrete injury further serves the function of insuring that such adjudication does not take place unnecessarily." Reservists Committee, 418 U.S. at 220-21, 94 S. Ct. 2925.
Likewise, in Valley Forge Christian College v. Americans United for Separation of Church & State, Inc., 454 U.S. 464, 102 S. Ct. 752, 70 L. Ed. 2d 700 (1982), the plaintiffs were upset that surplus government land had been given to a religious institution, yet failed to articulate any injury they sustained as a result, apart from their indignation at what they perceived to be an illegal act. The majority concluded that the plaintiffs lacked standing:
The complaint in this case shares a common deficiency with those in Schlesinger and Richardson. Although respondents claim that the Constitution has been violated, they claim nothing else. They fail to identify any personal injury suffered by them as a consequence of the alleged constitutional error, other than the psychological consequence presumably produced by observation of conduct with which one disagrees. That is not an injury sufficient to confer standing under Art. III, even though the disagreement is phrased in constitutional terms. It is evident that respondents are firmly committed to the constitutional principle *967 of separation of church and State, but standing is not measured by the intensity of the litigant's interest or the fervor of his advocacy.
Valley Forge, 454 U.S. at 485-86, 102 S. Ct. 752 (emphasis in original).
Were the federal courts merely publicly funded forums for the ventilation of public grievances or the refinement of jurisprudential understanding, the concept of "standing" would be quite unnecessary. But the "cases and controversies" language of Art. III forecloses the conversion of courts of the United States into judicial versions of college debating forums.
Id. at 473, 102 S. Ct. 752.
Most recently, in DaimlerChrysler Corp. v. Cuno, ___ U.S. ___, 126 S. Ct. 1854, 164 L. Ed. 2d 589 (2006), the Supreme Court held that several residents of Toledo, Ohio, lacked standing to challenge decisions by the City and State to grant tax credits and tax exemptions to an automobile company. The plaintiffs failed to show how they were injured by the challenged actions or would benefit from a favorable court ruling. At best, the plaintiffs could only hope that rescission of the tax credits might someday result in more taxes being collected, and perhaps result in an unspecified reduction in the tax bills for all residents of the city or state, though there was little assurance this would result. Id. at 1862-64. The Court also was loathe to "interpose the federal courts as `virtually continuing monitors of the wisdom and soundness' of state fiscal administration," second-guessing state and local decisions regarding taxation and spending. Id. at 1864.
The present case is easily distinguishable. Plaintiffs have identified concrete injuries flowing from the challenged conduct, and explained how they would benefit from a favorable decision.[6]
2. Fairly Traceable
The "fairly traceable" element of standing requires the plaintiff to articulate a "causal connection between the injury and the conduct complained ofthe injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court." Defenders of Wildlife, 504 U.S. at 560-61, 112 S. Ct. 2130 (internal citations and quotations omitted). Defendant is the entity that commenced construction of the Gresham facility and intends to operate it, and is also the entity answerable for any violations of the Clean Air Act arising from such activities.
While Defendant is not the sole entity allegedly discharging pollutants into the atmosphere that may adversely impact the Plaintiffs, the "fairly traceable" element does not require that a plaintiff show to a scientific certainty that the defendant's emissions, and only the defendant's emissions, are the source of the threatened harm. See Sierra Club, Lone Star Chapter, 73 F.3d at 558; Public Interest Research Group of New Jersey, Inc. v. Powell Duffryn Terminals Inc., 913 F.2d 64, 72 (3d Cir.1990) (observing that the "fairly traceable" requirement "is not equivalent to a requirement of tort causation"). It is sufficient for Plaintiffs to assert that emissions from Defendant's facility will contribute to the pollution that threatens Plaintiffs' interests. Id.[7]See also Southwest *968 Marine, 236 F.3d at 995 (requirement of traceability does not mean plaintiff must show to a scientific certainty that defendant's effluent caused the precise harm suffered by the plaintiff; rather, the plaintiff must show that a defendant discharges a pollutant that causes or contributes to the kinds of injuries alleged in the specific geographic area of concern).
I also reject Defendant's contention that Plaintiffs lack standing because the challenged conduct is the commencement of construction without the required permit, while the ultimate harm can result only from operation of the plant once construction is completed. That argument improperly compartmentalizes the challenged conduct and the injury.
3. Redressability
The redressability element is satisfied. If Plaintiffs prevail in this action, Defendant's plant cannot open unless and until Defendant complies with all applicable legal requirements. Those requirements are intended to protect the public health and the public's right to participate in the review process. Plaintiffs are not obligated to also show that the permit request would be denied, or that the design of the plant or its emissions will be altered as a consequence of this litigation. Cf. Akins, 524 U.S. at 25, 118 S. Ct. 1777 (standing requirements satisfied even though the FEC might reach the same result once it reheard the matter and exercised its discretionary powers lawfully); Utah v. Babbitt, 137 F.3d 1193, 1216 n. 37 (10th Cir. 1998) (a plaintiff need not establish with certainty that adherence to the procedures would necessarily change the agency's ultimate decision); Parker v. Scrap Metal Processors, Inc., 386 F.3d 993, 1004 (11th Cir.2004) ("A favorable decision on the merits would adequately redress Mrs. Parker's injury because such a decision would require the defendants to obtain and comply with the required permit").
Imposition of civil penalties also would redress, to an extent, the injury caused by Defendant's alleged failure to comply with the law, by deterring future violations. See Friends of the Earth, 528 U.S. at 185-86, 120 S. Ct. 693; Covington, 358 F.3d at 641.
Plaintiffs need not show that the entire problem (for instance, global warming) will be cured if the Plaintiffs prevail in this action, or that the challenged action is the exclusive source of that harm. Particularly in environmental and land use cases, the challenged harm often results from the cumulative effects of many separate actions that, taken together, threaten the plaintiff's interests. The relief sought in the Complaint need not promise to solve the entire problem, any more than a legislative body is forbidden to enact a law addressing a discrete part of a problem rather than the entire problem. Cf. Railway Express Agency, Inc. v. New York, 336 U.S. 106, 110, 69 S. Ct. 463, 93 L. Ed. 533 (1949) ("It is no requirement of equal protection that all evils of the same genus be eradicated or none at all").
B. Prudential Limitations
The "prudential limitations" upon standing include (1) a "plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interest of third parties," (2) the federal courts "refrain[ ] from adjudicating `abstract questions of wide public significance' which amount to `generalized grievances,' pervasively shared and most appropriately addressed in the representative branches," and (3) the complaint must "fall within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question.'" Valley Forge, 454 U.S. at 474-75, 102 S. Ct. 752 (citations omitted).
*969 Two of the three prudential limitations are not seriously in dispute. The interests represented by Plaintiffs are their own rights, notwithstanding that other similarly situated persons may benefit collaterally from the outcome.
Assuming the "zone of interest" requirement applies here, it is plainly satisfied. The Clean Air Act was intended to protect the interests advanced by Plaintiffs here, and Congress expressly provided for citizen suits to enforce its provisions.
Defendant suggests that if Plaintiffs have standing to prosecute this action, then so would "a woman with lupus in Perth, Australia, and a man living in Ulan Bataar, Mongolia. . . ." Reply at 9. I express no opinion concerning the rights of such hypothetical litigants. The actual Plaintiffs in this case have a strong geographical nexus to Defendant's Gresham facility.[8]
Congress recognized that federal authorities lack the resources to monitor emission sources throughout the nation, and that local citizens have a strong interest in the quality of the air they breathe and often are well-situated to observe potential threats to air quality. Congress effectively deputized the public by expressly authorizing citizens to bring actions to enforce the Clean Air Act. 42 U.S.C. § 7604(a). Far from being an aberrational claim, or an abuse of the statute, the claims and the claimants in this action are of a kind that Congress contemplated when it enacted this legislation.
As for the remaining prudential limitation, issues such as global warming and ozone depletion may be of "wide public significance" but they are neither "abstract questions" nor mere "generalized grievances." An injury is not beyond the reach of the courts simply because it is widespread. As the Court explained in Akins:
Whether styled as a constitutional or prudential limit on standing, the Court has sometimes determined that where large numbers of Americans suffer alike, the political process, rather than the judicial process, may provide the more appropriate remedy for a widely shared grievance. . . .
The kind of judicial language to which the FEC points, however, invariably appears in cases where the harm at issue is not only widely shared, but is also of an abstract and indefinite naturefor example, harm to the "common concern for obedience to law." * * * * The abstract nature of the harmfor example, injury to the interest in seeing that the law is obeyeddeprives the case of the concrete specificity that characterized those controversies which were "the traditional concern of the courts at Westminster," and which today prevents a plaintiff from obtaining what would, in effect, amount to an advisory opinion. Often the fact that an interest is abstract and the fact that it is widely shared go hand in hand. But their association is not invariable, and where a harm is concrete, though widely shared, *970 the Court has found "injury in fact." See Public Citizen, 491 U.S. at 449-450, 109 S. Ct. 2558 ("The fact that other citizens or groups of citizens might make the same complaint after unsuccessfully demanding disclosure . . . does not lessen [their] asserted injury"). Thus the fact that a political forum may be more readily available where an injury is widely shared (while counseling against, say, interpreting a statute as conferring standing) does not, by itself, automatically disqualify an interest for Article III purposes. Such an interest, where sufficiently concrete, may count as an "injury in fact." This conclusion seems particularly obvious where (to use a hypothetical example) large numbers of individuals suffer the same common-law injury (say, a widespread mass tort), or where large numbers of voters suffer interference with voting rights conferred by law. We conclude that, similarly, the informational injury at issue here, directly related to voting, the most basic of political rights, is sufficiently concrete and specific such that the fact that it is widely shared does not deprive Congress of constitutional power to authorize its vindication in the federal courts.
Akins, 524 U.S. at 23-25, 118 S. Ct. 1777 (internal citations and parentheticals omitted).
In addition, Defendant's argument presumes that all persons on the planet will suffer the identical injury from global warming. According to some theories, global warming may well alter the lives of every person on the planet, but all will not be affected in the same way. Rising oceans may inundate coastal communities, to the detriment of local residents and property owners, yet the rising waters may benefit some formerly inland property owners who discover they now own oceanfront property. More frequent hurricanes may harm residents of Florida and the Gulf Coast, yet increase business and profits for roofing contractors. Warm temperatures in Alaska may harm indigenous subsistence hunters, yet benefit local air conditioning salesmen. Some farmers will be hurt by warmer temperatures and changing rainfall patterns, yet other farmers may benefit from longer growing seasons or higher commodity prices. Oregonians could be deprived of their traditional summertime skiing on Mount Hood, an injury distinct from the harms likely to be sustained by residents of other states. In short, it is unlikely that all persons will be similarly impacted by global warming. This conclusion further undermines Defendant's shared injury argument.
Lastly, Defendant ignores the final clause of this prudential limitation: that the grievance is one "most appropriately addressed in the representative branches." Congress has already considered the threat posed by emissions into the atmosphere, and enacted procedural and substantive requirements intended to address those ills.
At issue here is nothing more than whether the courts will enforce the Congressional mandate set forth in the Clean Air Act and its enabling regulations. This court is not being asked to make a freewheeling policy choice and decide whether global warming is, or is not, a serious threat or what measures should be taken to remedy that problem. Cf. Connecticut v. American Electric Power Co., 406 F. Supp. 2d 265 (S.D.N.Y.2005) (declining to confront such issues on a "public nuisance" theory).
Enjoining violations of an Act of Congress, and imposing civil penalties on the wrongdoer at the behest of an injured plaintiff, lie not at the outer margin of the judicial authority but squarely within the judicial power to adjudicate cases and controversies.
*971 Plaintiffs have standing to prosecute the claims set forth in the First Amendment Complaint. Defendant's motion to dismiss for lack of standing is denied.
Defendant's Motion to Limit Civil Penalties to One Day
Defendant next moves to strike Plaintiffs' demand for more than one day's civil penalties. Defendant acknowledges that, under the Clean Air Act, civil penalties ordinarily may be imposed for each day on which a violation occurs. See, e.g., 42 U.S.C. § 7413(e)(2) ("A penalty may be assessed for each day of violation") and § 7413(b) (authorizing civil penalties on a per day basis). However, Defendant argues, it can commence construction without a permit only once, hence it can be subject to only a single day's civil penalties for building the Gresham facility without a valid permit. Plaintiff counters that each day that Defendant chose to continue building the facility without obtaining a permit, and dispatched a construction crew to the Gresham site, subjects Defendant to additional civil penalties.
Defendant points to no statute or regulation confining the offense to the isolated act of "commencing" construction without a permit. On the contrary, 42 U.S.C. § 7475(a) provides that "[n]o major emitting facility on which construction is commenced after August 7, 1977, may be constructed in any area to which this part applies unless . . . a permit has been issued for such proposed facility in accordance with this part. . . ." (emphasis added). The word "commenced" is used only to establish a safe harbor for facilities already under construction by the date specified in the law.
Commencing construction of a major new stationary emissions source without a valid preconstruction permit is a violation of the Clean Air Act, but so is continuing to construct such facility without a valid permit. Each day that construction continues without a permit subjects the violator to additional penalties.
Were the rule otherwise, a court might have difficulty enjoining the completion of construction. Under Defendant's interpretation, the violation would have been complete when the first spade of earth was turned. Further construction activities would be beyond the reach of the law, hence there would be no legal basis for halting construction.
Under Defendant's interpretation of the law, a violator also would have little incentive to cease construction and obtain the necessary permit once the violation was discovered. From the violator's perspective, the damage would already be done. Even if the violator flaunted the law and completed construction, the maximum penalty to which it was subject would be a single day's civil penalties, i.e., just $32,500 (or $27,500 for violations prior to March 15, 2004). Such a sum is dwarfed by the construction budget for major new stationary source facilities, which can cost millions or even hundreds of millions of dollars.
A single day's penalty also is dwarfed by the benefits that a company might hope to achieve by constructing a major stationary source without a pre-construction permit. Obtaining such a permit can be costly, both to navigate the sometimes treacherous waters of the permit process and to install pollution control equipment required to comply with the permit requirements. The permit application process also subjects the project to public scrutiny and comment. Finally, the permit process delays the start of construction and, by implication, the day the facility will become operational. Data must be gathered and submitted, and the application must be reviewed by the agency. There may be rounds of give-and-take before the permit conditions are finalized and the permit issuedor *972 perhaps even denied. A $32,500 civil penalty might seem a bargain, in comparison, if it meant avoiding the permit process.
To be sure, a permit would still be required to operate the facility. In theory, that operating permit might be denied, or major alterations in the facility could be mandated. As a practical matter, however, once the plant has been constructed, an agency might be hard-pressed to deny an operating permit or to require modifications that could readily have been accomplished before construction began but would be very costly afterwards. This reluctance could undermine a central purpose of the preconstruction review program.
In light of those considerations, I will not presume that Congress intended that $32,500 be the maximum penalty a court may impose on someone who illegally constructs a major new emission source without a valid preconstruction permit. Defendant has identified no language in the statute supporting its position, let alone a clear statement evidencing that this was the intent of Congress.
Defendant does cite New York v. Niagara Mohawk Power Corp., 263 F. Supp. 2d 650 (W.D.N.Y.2003), which Defendant contends "is directly on point." Defendant's Reply at 14. It is not. In Niagara Mohawk, the state brought an action alleging that a utility had undertaken various modifications, over the years, to a power plant without obtaining the required preconstruction permits. Some of those modifications dated back to 1982, 20 years before the action was commenced. The defendant moved to dismiss certain claims, citing the five year statute of limitations. The state argued that failure to obtain a pre-construction permit amounts to a "continuing violation" that persists so long as the plant is operating. "Under the State's theory, every day that a facility operates without a preconstruction permit, the limitations period begins anew." Id. at 661. The court was concerned that "[t]he State's position, taken to its logical end, suggests a de facto elimination of any statute of limitation, for the limitation period would never begin to accrue as long as the facility remained in operation." Id. The court rejected that argument, concluding that for purposes of the statute of limitations, "violations of the preconstruction permitting requirements occur at the time of construction, not on a continuing basis." Id.
Niagara Mohawk offers little support for Defendant's contention that it is subject to just a single day's civil penalties for constructing a new major stationary emission source without the required permit. The court in Niagara Mohawk was concerned with when the statute of limitation begins to run, not what penalties may be imposed upon the violator. Moreover, the decision contains language indicating that the violation does not end on the day that construction first commences, but continues to accrue until construction is complete. See, e.g., id. at 661 ("violations of the preconstruction permitting requirements occur at the time of construetion7D'. . . . Once the construction or modification is complete, the window in which to apply for and obtain a preconstruction permit is gone.") (Emphasis added). See also United States v. Illinois Power Co., 245 F. Supp. 2d 951, 956 (S.D.Ill. 2003) ("preconstruction permit violations do not constitute violations that continue past the completion of construction") (emphasis added); United States v. Southern Indiana Gas and Electric Co., 2002 WL 1760752 at *5 (S.D.Ind.2002) ("a violation of 42 U.S.C. § 7475 occurs when construction is commenced, but does not continue on past the date when construction is completed"); United States v. Westvaco Corp., 144 F. Supp. 2d 439, 444 (D.Md.2001) *973 ("the statute of limitations bars the Government from bringing claims based on preconstruction permit violations where the construction was completed more than five years prior [to] the commencement of the lawsuit"); United States v. Brotech Corp., 2000 WL 1368023 at *3 (E.D.Pa. 2000) (statute of limitations barred claims for equipment installation completed more than five years prior to commencement of the action).[9]
At oral argument, Owens Corning also argued that a rule subjecting it to penalties for each day of unlawful construction might encourage an environmental plaintiff to lie in the weeds and wait until the project is complete before commencing litigation. That is an improbable scenario, for several reasons. First, an environmental group that followed such a strategy might seriously jeopardize any chance it had of halting or significantly influencing the project. The best opportunity to influence the final design is before construction commences, not after it is completed. A private plaintiff would also have little incentive to pursue such a strategy, as such plaintiff does not receive the civil penalties imposed on a violator. In any event, the court already has ample power to address such concerns. Cf. Grand Canyon Trust v. Tucson Electric Power Co., 391 F.3d 979, 987-89 (9th Cir.2004) (discussing statute of limitations, laches, and court's equitable powers to determine amount of any civil penalty, in response to assertion that private citizen deliberately delayed bringing an action to enforce Clean Air Act).
In summary, if Defendant unlawfully constructed the Gresham facility without first obtaining a required preconstruction permit, then Defendant's liability for civil penalties is not capped at "one day." Consequently, Defendant's motion to strike Plaintiffs' demand for more than that amount is denied.[10]
Defendant's Motion to Strike First Claim
Defendant moves to dismiss the First Claim, on the ground that state substantive law, rather than federal, is controlling once a State Implementation Plan has been enacted. It is unclear why Defendant is asserting this motion. Federal law sets a floor, i.e., the minimum requirements that must be met. A State may voluntarily impose substantive requirements *974 that are more restrictive than what federal law would require, but not less restrictive. F. Grad, 1 TREATISE ON ENVIRONMENTAL LAW at 2-112.31 (1999). Consequently, it is difficult to see how Defendant will derive any benefit from insisting that the court apply State standards which, by definition, must be at least as restrictive as the federal standards. Plaintiffs already have a parallel claim invoking the state standards.
In its reply brief, and again at oral argument, Defendant hinted that although the State and federal laws contain similar language, the State has interpreted certain words in a manner more favorable to Defendant than the federal government's interpretation. I question how that can be possible when federal law establishes the minimum requirements that must be met.
My initial impression is that Plaintiff may sue to enforce either the state or federal standards. See Ashoff v. City of Ukiah, 130 F.3d 409, 411-13 (9th Cir.1997); Covington, 358 F.3d at 641-42; Weiler v. Chatham Forest Products, Inc., 392 F.3d 532, 536-39 (2d Cir.2004); Parker, 386 F.3d at 1005-08. However, I decline to decide this question in a vacuum, with no facts or context, and no reason to believe that the determination will materially affect the rights of the parties. Accordingly, this motion is denied for now, with leave to revisit the issue if events warrant.
Conclusion
Defendant's Motion to Dismiss (# 30) is denied in its entirety.
NOTES
[*] All parties have now consented to have this matter heard by a Magistrate Judge. This Opinion and Order replaces the Findings and Recommendation dated May 17, 2006.
[1] Plaintiffs cite a report predicting that "global warming will have the following impacts in the Pacific Northwest: increased regional temperatures leading to an increased elevation in the upper tree line, prolonged allergy season, earlier breeding by plants and animals, and an increased fire season; rising sea levels, leading to increased erosion and a loss of land along the coastline; a decline in snowpack, which will lead to an increase in spring runoff, followed by decreased water levels in streams in the summer and fall; and a change in ocean circulation which will cause increased stress on estuarine species." First Amended Compl., ¶ 48.
[2] Plaintiffs cite asthma as an example, and assert that "[a]t least one member of the Plaintiff organizations" presently has that condition.
[3] I am aware of the decision from another circuit asserting that the probability of a person being harmed by ozone depletion is so remote that it cannot support standing. Natural Resources Defense Council v. Environmental Protection Agency, 440 F.3d 476 (D.C.Cir.2006). I am not persuaded by that decision (nor, given the present procedural posture, could I even consider the evidence that court found persuasive). Moreover, since Congress has determined that emissions into the atmosphere can pose a threat to human health and warrant regulation, it does not seem appropriate for the court to second guess that Congressional determination under the cloak of a standing inquiry. In addition, it is likely that the evidence of harm to Oregon from ozone depletion and global warming would at least be sufficient to create a material factual dispute. Cf. Friends of the Earth, Inc. v. Watson, 2005 WL 2035596 at *3 (N.D.Calif.2005). Finally, in NRDC v. EPA, supra, the D.C. Circuit was confronting a novel claim which the panel was uncertain it had authority to decide. By contrast, Congress has expressly authorized actions such as this.
[4] A plurality of the Court also questioned whether a favorable ruling in that lawsuit would prevent or redress the alleged injury. The defendant in that action was the Secretary of Interior, who oversees the Fish and Wildlife Service, rather than the particular agency or foreign government actually funding or constructing the overseas projects. Those non-parties would not be bound by the court's decision. The foreign governments could also elect to continue the projects without American assistance. Id. at 568-71. Consequently, the plurality reasoned, any benefit to the plaintiffs was speculative at best.
[5] John Donne, Meditation XVII: "No Man Is an Island" (1623).
[6] A further distinction is that in the "taxpayer standing" cases, one branch of government was being asked to pass judgment upon the actions of a coordinate branch. Often, those cases present difficult or novel questions of constitutional law. Neither element is present here.
[7] Were the rule otherwise, a claim alleging harm to an endangered species could be defeated merely by pointing to other potential sources of harm to that species.
[8] Defendant also complains that Plaintiffs do not allege harm to just one particular location in Oregon. Consequently, Defendant reasons, a person in Burns, Oregon, and one in Gresham, Oregon, would each be entitled to seek relief, though those cities are hundreds of miles apart. Assuming, without deciding, that this is true, "alleging an injury-in-fact covering large areas within the state simply reflects the relatively broad nature of the potential harm." Defenders of Wildlife v. United States Environmental Protection Agency, 420 F.3d 946, 957 (9th Cir.2005). Ashley Creek Phosphate Co. v. Norton, 420 F.3d 934 (9th Cir.2005), is not to the contrary. The plaintiff in Ashley Creek was situated 250 miles from the project location, and the only interest articulated was an economic interest in preventing mining by prospective competitors.
[9] Some courts have accepted the continuing violation theory and held that claims for failure to obtain a preconstruction permit remain viable for as long as the facility remains in operation, and are not barred by the statute of limitations. See Niagara Mohawk, 263 F.Supp.2d at 662, n. 20 (collecting citations); United States v. Duke Energy Corp., 278 F. Supp. 2d 619, 649-53 (M.D.N.C.2003), affirmed on other grounds, 411 F.3d 539 (4th Cir.2005), cert. granted, ___ U.S. ___, 126 S. Ct. 2019, 164 L. Ed. 2d 778, 2006 WL 1310699 (May 15, 2006). I express no position as to which line of cases is correct, as that issue is not before me.
[10] Plaintiffs also argue that Defendant is liable for civil penalties not only for each day on which Defendant actively continued construction of the Gresham facility, but also for each day that the un-permitted facility remains in place until the defect is cured, or the partially-completed facility is removed, or the project formally abandoned. Plaintiffs' argument is somewhat weaker now that Defendant has halted construction pending resolution of the dispute. With some environmental laws, the mere presence of a construction site may cause further injury; scenic views may be impaired or silt laden runoff may impair water quality. That does not seem to be the case with the particular permit requirements at issue here. For purposes of the present motion, however, it is not necessary to predict any civil penalty that might be assessed against Defendant if Plaintiffs prevail. It is sufficient to state that it is not limited to the one day's penalty asserted in Defendant's motion, but could be significantly less than the sum that Plaintiffs are seeking. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1832197/ | 65 B.R. 29 (1986)
In re Kevin D. VENTURA, Anne M. Ventura, Debtors.
Bankruptcy No. 85-01134.
United States Bankruptcy Court, N.D. New York.
June 30, 1986.
*30 Scott, Sardano & Pomeranz, Syracuse, N.Y., for debtors; Richard J. Sardano, of counsel.
Melvin & Melvin, Syracuse, N.Y., for Merchants Nat. Bank & Trust Co.; Louis Levine, of counsel.
MEMORANDUM-DECISION AND ORDER
STEPHEN D. GERLING, Bankruptcy Judge.
Kevin D. and Anne M. Ventura ("Debtors") have requested an order of the Court authorizing them to avoid certain judicial liens, pursuant to 11 U.S.C. § 522(f) ("Code"), held by Merchants National Bank and Trust Company of Syracuse ("Merchants"). The judicial liens are held against real property the Debtors use for their homestead.
Debtors and Merchants entered into a series of three contracts; for purposes of this decision, only those entered into on December 2, 1976 and July 18, 1977 are relevant. Debtors defaulted on these contracts, with Merchants taking separate judgments thereon in principal amounts of $603.35 and $306.67, respectively. These are the judgment liens, together with interest thereon, which Debtors now seek to avoid, arguing impairment of their homestead exemption. While the liens do attach to Debtor's homestead, the Debtors are not entitled to the relief they seek.
Pursuant to Code § 522(b)(1), New York State chose to "opt out" of the exemption scheme provided in Code § 522(d)(1)-(11). See, N.Y.Debt. & Cred. §§ 282-4 (McKinney Supp.1986). By virtue of N.Y.Debt. & Cred. § 282 (McKinney Supp.1986), the real property exemptions of N.Y.Civ.Prac.Law § 5206 (McKinney 1978, Supp.1986) ("CPLR § 5206") take the place of Code § 522(d)(1).
CPLR § 5206 was amended by the New York Legislature on May 24, 1977. Act of May 24, 1977, Ch. 181, 1977 N.Y.Laws 235. By specific provision, the amended Act provided:
§ 2. This act shall take effect ninety days after it shall have become a law [August 22, 1977], but shall not affect the application of property to the satisfaction of a money judgment for a debt contracted before it takes effect. Id. at 237. (Emphasis added).
Thus, if judgment against a homestead owner is based upon a contractual obligation executed prior to August 22, 1977, the present provisions of CPLR § 5206 are not applicable and reference must be made to CPLR § 5206 as it existed prior to the 1977 amendments. In re Eipp, 66 B.R. 1 (Bankr.N.D.N.Y. 1984) (Marketos, B.J.); Perry v. Zarcone, 77 A.D.2d 881, 431 N.Y.S.2d 50 (1979); Michaels v. Chemical Bank, 110 Misc. 2d 74, 441 N.Y.S.2d 638 (N.Y.Sup.Ct.1981); Corbin v. Litke, 105 Misc. 2d 94, 431 N.Y.S.2d 800 (N.Y. Sup.Ct.1980).
Prior to August 22, 1977, CPLR § 5206 provided a $2,000.00 homestead exemption, and lacked a provision that this amount be above liens and encumbrances. Further, in order to qualify for the exemption, the owner claiming such had to "designate" the property as exempt by filing a notice with the county clerk in which the real property was located. CPLR § 5206(b) (amended 1977).
Debtors have failed to demonstrate they "designated" their claimed homestead in accord with former CPLR § 5206(b). As Merchants does not now contest the valuation *31 of Debtors' homestead, arguments concerning the same are irrelevant. Additionally, Debtor's reliance on Code § 522(f) is misplaced, as the applicability of the section necessarily depends upon the existence of a relevant New York exemption; as seen, the Debtors have not shown compliance with the New York exemption scheme as it existed prior to 1977. Finally, arguments concerning the date of Merchants' lien are of no consequence, as the date of the contractual debt is dispositive.
Based on the foregoing, it is
ORDERED:
1. Debtors' motion requesting an order voiding the judgment liens of Merchants National Bank and Trust Company of Syracuse in amounts of $603.35 and $306.67, together with interest thereon, is denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2138534/ | 593 F. Supp. 2d 812 (2009)
State of NORTH CAROLINA, ex rel. Roy COOPER, Attorney General, Plaintiff,
v.
TENNESSEE VALLEY AUTHORITY, Defendant.
Civil No. 1:06CV20.
United States District Court, W.D. North Carolina, Asheville Division.
January 13, 2009.
*814 Michael David Goodstein, Anne Elizabeth Lynch, Stacey Heather Myers, Resolution Law Group, Richard E. Ayres, Ayres Law Group, Washington, DC, James C. Gulick, Marc Bernstein, N.C. Department of Justice, Raleigh, NC, Robert L. Gonser, Resolution Law Group, P.C., Lafayette, CA, Sueanna Peeler Sumpter, N.C. Dept. of Justice, Asheville, NC, for Plaintiff.
Frank Hilton Lancaster, Albert Jackson Woodall, Thomas Fleming Fine, TVA Office of General Counsel, Harriet Andrea Cooper, Tennessee Valley Authority, Maria Victoria Gillen, William Thaddeus Terrell, Knoxville, TN, Michael Kent Stagg, Paul G. Summers, Robert J. Martineau, Jr., William Kenneth Koska, Waller, Lansden, Dortch & Davis LLP, Nashville, TN, for Defendant.
MEMORANDUM OF OPINION
LACY H. THORNBURG, District Judge.
THIS MATTER came on for trial before the Court without a jury. The Court now enters its findings of fact, conclusions of law, and final judgment in this matter.
*815 I. INTRODUCTION
Plaintiff North Carolina, on behalf of its citizens, filed the instant action in public nuisance against Defendant Tennessee Valley Authority (TVA) in January 2006. The complaint cites urgent environmental concerns in this state, allegedly caused by air pollution emitted by TVA's coal-fired power plants in other states. North Carolina contends, and TVA denies, that airborne particles from TVA's electricity generating plants enter North Carolina in unreasonable amounts, thereby threatening the health of millions of people, the financial viability of an entire region, and the beauty and purity of a vast natural ecosystem. North Carolina further alleges, and TVA denies, that TVA's air pollution costs the state government and its citizens billions of dollars every year in health care expenses, sick days, and lost tourism revenue; and that there are also less quantifiable costs to be considered, stemming from the loss of human, animal, and plant life and irreversible environmental damage in protected wilderness areas.
TVA does not deny that some of its emissions enter North Carolina, but disputes the amount of such emissions and suggests that the adverse environmental effects experienced by North Carolina are largely attributable to this state's own electric utilities and other industrial sources, or to private sources such as automobile and truck emissions. Further, as evidence that TVA is acting reasonably, TVA cites its millions of customers' undeniable need forand expectation ofreliable, inexpensive sources of energy, deployed to serve the homes and businesses of the rapidly growing population in the southeastern United States. Finally, TVA points to its own efforts to reduce its plants' emissions, as further evidence that those TVA emissions which do enter North Carolina do not do so in unreasonable amounts.
The parties do agree on one thing: the pollution controls that North Carolina contends are necessary to abate TVA's alleged public nuisance are very costly. North Carolina's experts contend the relief it seeks would cost $3 billion. TVA's experts put that figure at $5 billion. TVA's customers, spread throughout seven states (including North Carolina itself), would inevitably bear the vast majority of such costs.
The ancient common law of public nuisance is not ordinarily the means by which such major conflicts among governmental entities are resolved in modern American governance. Instead, the federal executive branch (through its arm, the Environmental Protection Agency, or EPA) has traditionally been the chief arbiter of interstate air pollution concerns. The executive branch's authority to govern in this arena dates to at least 1955, when Congress passed clean air legislation directing the Surgeon General and the Secretary of Health, Education, and Welfare to work with state and local authorities in mitigating "the dangers to public health and welfare, injury to agricultural crops and livestock, damage to and deterioration of property, and hazards to air and ground transportation from air pollution." Act of July 14, 1955, Pub. L. No. 360-159, 69 Stat. 322, (codified as amended at 42 U.S.C. § 7401 et seq.). This brief statute, the genesis of the modern Clean Air Act (CAA), has since evolved into an elaborate scheme of regulation and administrative review intended as "a lengthy, detailed, technical, complex, and comprehensive response to a major social issue." Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 848, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984).
*816 Indeed, even in the present dispute, North Carolina began its pursuit of relief by utilizing the normal administrative channels established by the CAA. See North Carolina v. Envtl. Prot. Agency, 531 F.3d 896, 905 (D.C.Cir.2008) (per curiam); Rulemaking on Section 126 Petition from North Carolina to Reduce Interstate Transport of Fine Particulate Matter and Ozone, 71 Fed.Reg. 25,328 (Envtl. Prot. Agency Apr. 28, 2006). Although the administrative route has certainly borne some interesting fruit,[1] it has not, thus far, resulted in the reduction of emissions from upwind, out-of-state sources that North Carolina is ultimately seeking.[2]
North Carolina now turns to the federal courts as the final source of relief in its efforts to curb the out-of-state air pollution which the state believes clouds its scenic vistas, poisons its wildlife, and sickens its people. The undersigned has previously held that the CAA's comprehensive scheme for the adjudication of interstate pollution disputes does not impair the inherent equitable powers of this Court to address North Carolina's concerns. See North Carolina v. Tenn. Valley Auth., 549 F. Supp. 2d 725, 729 (2008) (discussing CAA savings clause, 42 U.S.C. § 7604(e), which permits actions to abate air pollution pursuant to state law doctrines, such as public nuisance). Indeed, the judiciary has always played a significant role in the abatement of public nuisances, particularly when such lawsuits are brought by the United States or by sovereign states. See Alfred L. Snapp & Son, Inc. v. Puerto Rico, 458 U.S. 592, 603-05, 102 S. Ct. 3260, 73 L. Ed. 2d 995 (1982) (listing and discussing parens patriae cases involving suits to enjoin public nuisance). See generally Bradford Mank, Should States Have Greater Standing Rights Than Ordinary Citizens?: Massachusetts v. EPA's New Standing Test for States, 49 Wm. & Mary L.Rev. 1701, *817 1756-62 (2008) (discussing the relaxed standing requirements for parens patriae suits by states seeking to enjoin public nuisance). This is partly because of "the extraordinary weight courts of equity place upon the public interests in a suit involving more than a mere private dispute, and ... the deference courts afford the political branches in identifying and protecting the public interest." United States v. Marine Shale Processors, 81 F.3d 1329, 1359 (5th Cir.1996) (internal citation omitted); see also United Steelworkers of Am. v. United States, 361 U.S. 39, 60-61, 80 S. Ct. 177, 4 L. Ed. 2d 169 (1959) (Frankfurter, J., concurring) (discussing the judiciary's historic use of equity powers, at the request of a sovereign, to enjoin activity found to be a public nuisance).
For this reason, "unless Congress has narrowed an equity court's flexibility in the context of a particular statutory scheme, the issuance of an injunction remains an exercise of the district court's discretion." Marine Shale Processors, 81 F.3d at 1359; see also Georgia v. Tenn. Copper Co., 206 U.S. 230, 238, 27 S. Ct. 618, 51 L. Ed. 1038 (1907) (in the context of an environmental suit by a state to protect the public interest, refusing to abandon "the considerations that equity always takes into account"). Indeed, this Court is required to exercise such equitable discretion, provided it has the jurisdiction to do so. Cohens v. Virginia, 19 U.S. (6 Wheat.) 264, 404, 5 L. Ed. 257 (1821) ("We have no more right to decline the exercise of jurisdiction that is given, than to usurp that which is not given. The one or the other would be treason to the constitution.").
While it cannot be denied that the federal judiciary, including this Court, is a proper forum for the adjudication of North Carolina's claims, it is also true that the public nuisance principles which this Court is bound to apply are less well-adapted than administrative relief to the task of implementing the sweeping reforms that North Carolina desires. As explained further below, the elements of public nuisance include strict requirements as to both causation and unreasonableness of the harm. Both these elements have played a significant role in the Court's analysis of the facts presented by the parties in this case, and in the crafting of the injunctive remedies set forth herein. Although the parties have indicatedand the Court does not disagreethat a system-wide cap on TVA is both more efficient from a business standpoint and also more effective at diminishing overall pollution, the restrictive nature of public nuisance doctrines does not allow such a remedy, at least on the facts presented here. Consequently the Court, of necessity, adopted a plant-byplant analysis, as set forth below.
II. PROCEDURAL HISTORY
On January 30, 2006, North Carolina filed the instant complaint against TVA, alleging that TVA's coal-fired power plants were and are a public nuisance. The complaint seeks injunctive relief as well as attorney's fees and costs. Complaint, filed January 30, 2006, at 1.
On April 3, 2006, TVA filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1), on the grounds that this Court lacked subject matter jurisdiction over North Carolina's claim. Defendant's Motion to Dismiss, filed April 3, 2006, at 1. The Court denied TVA's motion to dismiss but certified the order for immediate appeal to the Fourth Circuit, pursuant to 28 U.S.C. § 1292(b). Memorandum and Order, 439 F. Supp. 2d 486, 497 (W.D.N.C.2006); Order Certifying for Immediate Appeal, filed September 7, 2006, at 7. On January 31, 2008, the *818 Fourth Circuit affirmed this Court's order denying TVA's motion to dismiss. North Carolina ex rel. Cooper v. Tenn. Valley Auth., 515 F.3d 344 (4th Cir.2008). The Fourth Circuit later denied TVA's petition for rehearing and rehearing en banc. Order of Fourth Circuit Court of Appeals, filed March 27, 2008.
Both parties moved for summary judgment, and this Court denied TVA's motion and granted in part and denied in part North Carolina's motion. Order, 549 F. Supp. 2d 725, 736 (W.D.N.C.2008).
The undersigned presided over a twelve-day bench trial in July 2008. In September 2008, following the trial, the parties submitted proposed findings of fact and conclusions of law, which the Court has considered. This Order constitutes the Court's own findings of fact and conclusions of law.
III. FINDINGS OF FACT
A. Parties
1. Plaintiff in this action is the State of North Carolina ("North Carolina"), acting by and through its Attorney General. Defendant is Tennessee Valley Authority ("TVA"), a federal entity governed by United States Code Title 16, Chapter 12A.
2. TVA's statutory mandate directs it to generate and sell electricity (among other functions). 16 U.S.C. § 831i. Pursuant to its mandate, TVA operates the nation's largest public electricity-producing system, serving a major geographic area. Trial Transcript (hereinafter, "Transcript") at 311-13. This system provides electricity to most of Tennessee; large portions of Kentucky, Mississippi, and Alabama; and small portions of northeastern Georgia, western North Carolina, and southwestern Virginia. TVA Trial Exhibit (hereinafter, "TVA Exh.") 1. In 2007, TVA's electricity generation resulted in sales revenue of more than $9.2 billion. Transcript at 1658.
3. Much of TVA's electricity generation takes place at its fleet of 11 coal-fired power plants ("plants"), seven of which are in Tennessee, two in Kentucky, and two in Alabama. Transcript at 311, 1818.
4. TVA's Tennessee plants are Bull Run, Kingston, John Sevier, Gallatin, Johnsonville, Cumberland, and Allen. Its Kentucky plants are Paradise and Shawnee. Its Alabama plants are Widows Creek and Colbert. TVA Exh. 1.
5. All told, these 11 plants contain 59 electrical generating units ("EGUs"), distributed as follows:
Bull Run: 1 EGU
Kingston: 9 EGUs
John Sevier: 4 EGUs
Gallatin: 4 EGUs
Johnsonville: 10 EGUs
Cumberland: 2 EGUs
Allen: 3 EGUs
Paradise: 3 EGUs
Shawnee: 10 EGUs
Widows Creek: 8 EGUs
Colbert: 5 EGUs
TVA Exh. 2. All of these 59 EGUs are at least 35 years old, and 40 of them are at least 50 years old. Transcript at 312.
B. Electrical Generating Units
6. A typical TVA EGU operates in the following manner. The EGU receives coal via conveyor belt and burns the coal in a boiler, producing very high heat. The heat generated in the coal combustion is used to convert water into high-pressure steam. The steam turns a turbine, which is connected to a generator. The generator then produces electricity, the final product. Transcript at 327-29; North Carolina Trial Exhibit (hereinafter, "NC Exh.") 59, 61.
*819 7. The coal that TVA uses in its EGUs containsamong other thingsnitrogen, sulfur, and mercury. Transcript at 331, 335. The process of combustion inside an EGU boiler causes the coal to undergo chemical changes, which release the nitrogen, sulfur, and mercury in their elemental form. Id. at 335-36.
8. During combustion, nitrogen released from the burning coal combines with ambient oxygen, forming nitrogen oxide (NOx). Additional NOx may also be formed by the oxidization of ambient nitrogen during combustion. Id. at 335, 1821. Once it is formed inside the EGU boiler, the NOx (if untreated) travels through an attached smokestack and is released into the atmosphere. NC Exh. 59.
9. Sulfur dioxide (SO2) is another byproduct of coal combustion inside an EGU. Like NOx, SO2 is formed inside an EGU boiler when sulfur released by the burning coal unites with ambient oxygen. Also like NOx, SO2 travels up the EGU smokestack and is released into the atmosphere unless it is treated first. Transcript at 333-35.
10. Although most of the coal fed into the EGU is consumed in the combustion process, a certain remnant is left over. This remnant, which takes the form of a tiny airborne solid, is commonly referred to as primary particulate matter (PM). Like NOx and SO2, primary PM (if untreated) goes up the smokestack. Id. at 332-33.
11. As discussed above, a third component of coal is mercury. Combustion in the EGU boiler releases the mercury from the coal. Afterwards, the mercury particles frequently attach themselves to the primary PM before the PM goes up the smokestack. Id. at 333, 336. Other mercury particles are converted into a gaseous form and pass up the smokestack on their own. Id. at 336-37.
12. A "primary pollutant" is a pollutant emitted directly from an emission source. As described above, the primary pollutants at issue in this lawsuit are SO2, NOx, and mercury (on its own and/or attached to primary PM). NC Exh. 1 at 3.2. A "secondary pollutant," on the other hand, forms by means of chemical changes in the atmosphere following emission. Id. The secondary pollutants at issue here are 03 and PM2.5, as explained below.
C. Atmospheric Science
13. NOx is the basic building block for the molecule commonly known as "ozone" or O3. Specifically, ozone is formed when NOx enters the atmosphere from an EGU smokestack or other source[3] and is exposed to sunlight. The sunlight chemically changes the NOx molecules, causing oxygen to break off and form O3. Transcript at 632-33; NC Exh. 1 at 3.2. Because of the necessary role of sunlight in this process, ozone formation is faster on hot, sunny days than on cool, cloudy days. NC Exh. 1 at 3.2. Along with abundant sun, the presence of volatile organic compounds ("VOCs") in the atmosphere can also accelerate ozone formation. Transcript at 633.
14. The CAA empowers the EPA to regulate air pollutant levels in the atmosphere. 42 U.S.C. §§ 7408-7809 (directing the EPA to compile a list of air pollutants and corresponding air quality criteria). 03 is among the pollutants so regulated. The EPA has set the national ambient air quality standard (NAAQS) for ozone at 0.075 parts per million (ppm) per 8-hour average. National Ambient Air Quality Standards for Ozone, 73 Fed. *820 Reg. 16,436 (Envtl. Prot. Agency Mar. 27, 2008). This NAAQS was set fairly recently in March 2008, and the EPA is still considering which of North Carolina's counties (if any) will be considered "nonattainment" for 8-hour ozone. Id.; Transcript at 2727.
15. In addition to forming ozone, NOx in the atmosphere can also form nitrate (NO3). Likewise, SO2 in the atmosphere tends to turn into sulfate (SO4) or a variation thereof, such as ammonium sulfate or sulfuric acid. Nitrate and sulfate are significant components of a group of tiny airborne solids that can be found in the atmosphere in varying concentrations nationwide. Collectively, these solids are commonly referred to as PM2.5, because they have a diameter of 2.5 microns or less. Transcript at 334, 633-34, 1380; NC Exh. 1 at 3.2, 4.2. By way of comparison, a human hair has a diameter of 50-70 microns. Dust, pollen, and mold are typically about 10 microns in diameter. NC Exh. 125.[4]
16. The EPA has set the current NAAQS for PM2.5 at 15 micrograms per cubic meter (µg/m 3) for the annual average concentration. National Ambient Air Quality Standards for Particulate Matter, 71 Fed.Reg. 61,144 (Envtl. Prot. Agency Oct. 17, 2006). In North Carolina, three counties are currently considered "non-attainment" for purposes of the PM2.5 NAAQS: Catawba, Davidson, and Guilford. Transcript at 2665-66.
17. Although small amounts of PM2.5 are emitted directly from the smokestacks of coal-fired EGUs, more than 90% of ambient PM2.5 is formed when NOx, SO2, and other airborne particles undergo chemical changes in the atmosphere itself, after they have been emitted. Transcript at 637; NC Exh. 1 at 2.19.
18. Compared to ozone, PM2.5 is chemically complex. In addition to nitrates and sulfates, it often contains carbon, ammonium, and/or soil dust. Transcript at 633-34, 637-38; NC Exh. 1 at 3.2. In the eastern United States, however, the atmospheric PM2.5 is predominantly made up of sulfate. Transcript at 638. Much, if not most, of this atmospheric sulfate is formed from SO2 emitted by coal-fired power plants. Id.; NC Exh. 1 at 2.17, 3.2.
19. Portions of atmospheric sulfate, nitrate, and other PM2.5 components remain in the air for long periods of time. Other portions travel to the earth's surface through a variety of processes known collectively as acid deposition. For example, wet acid deposition occurs when atmospheric PM2.5 unites with water precipitation in the form of rain, hail, or snow. (This phenomenon is often colloquially called "acid rain.") Dry deposition, by contrast, occurs when PM2.5 travels to earth without uniting with precipitation. Finally, a third kind of acid deposition is cloudwater deposition, which occurs most frequently in mountainous areas because they are prone to be foggy or immersed in clouds. In this process, PM2.5 unites with water droplets in clouds or fog, which then deposit on forest canopies and other surfaces. NC Exh. 1 at 6.1.
D. Available Air Pollution Control Technologies
20. Over the years, a variety of pollution control technologies have been developed to diminish coal-fired plants' emissions of primary pollutants, thereby decreasing the incidence of secondary pollutants in the atmosphere. For example, some types of coal naturally contain less sulfur and nitrogen than other *821 types, and consequently they release fewer pollutants during combustion. Transcript at 359.
21. As to SO2, the primary pollution control mechanism at issue in this litigation is the flue gas desulfurizer (commonly known as a scrubber). Id. 361-64. Scrubbers, which use chemical processes to remove SO2 from the flue gas, come in two varieties: wet and dry. Id.; NC Exh. 81 (providing an illustration of a wet scrubber). Dry scrubbers can be expected to remove over 90% of SO2 from the flue gas; wet scrubbers remove as much as 98% or more. Transcript at 362, 364. Scrubbers are typically very large; one witness stated, "you can think of [a scrubber] as almost adding a chemical plant to a coal-fired power plant. They're multiple buildings. They're several stories. They have very large footprints .... oftentimes even larger than the original plant itself." Transcript at 1822.
21. As to NOx, the primary pollution control mechanisms at issue in this lawsuit are selective catalytic reduction (SCRs) and selective non-catalytic reduction (SNCRs). SCRs work by converting NOx in the flue gas into molecular nitrogen and water, which have no air pollution impact. Id. at 341; NC Exh. 71 (providing an illustration of SCR operation). Like scrubbers, they are typically very large and often require custom engineering when they are retrofit onto aging EGUs. Transcript at 346, 357. SCRs can remove about 90% of the NOx in the flue gas. Id. at 357.
23. Like SCRs, SNCRs work by converting a portion of the NOx in the flue gas into molecular nitrogen. Id. at 357-58; TV A Exh. 241 at 13 (providing an illustrated description of SNCR operation). SNCRs, however, remove only 20%-40% of the NOx from the flue gas. They do have an advantage over SCRs in that they are not as large, and their installation costs are about one-tenth of the costs of an SCR. Transcript at 358-59.
24. Although SCRs and scrubbers are primarily geared toward NOx and SO2 reductions, they also have a side benefit, in that they remove significant amounts of mercury from the smokestack plume. Id. at 336-37, 1824. In particular, the combined use of a wet scrubber and an SCR achieves very high mercury reductions, generally 85-90%. Id. at 336-37, 1824-25.
E. Effects of PM2.5 on Human Health
25. PM2.5 exposure has significant negative impacts on human health, even when the exposure occurs at levels at or below the NAAQS. Transcript at 1076-77; NC Exh. 467 at 1, 3.
1. Premature Mortality
26. Exposure toand inhalation of air containing PM2.5 is 90-100% certain to cause premature mortality in humans. Transcript at 1037-38,1130-31; NC Exh. 242 at viii, 3-23, 3-24.[5]
27. Specifically, PM exposure and inhalation can have the following effects on human health, any or all of which can lead to premature death:
(a) Systemic inflammatory response. PM inhalation causes pulmonary inflammation, which in turn tends to cause a more general system-wide inflammation in the body. This inflammation impacts platelet function, which contributes to the development *822 of blood clotsa common cause of heart attacks and strokes. NC Exh. 468 at 3; Transcript at 916-18.
(b) Vascular reactivity. Systemic inflammation can also cause changes in vascular activity that decrease the amount of blood flow to important organs, including the heart and brain. Specifically, it affects the ability of blood vessels to remain sufficiently dilated for adequate blood flow to tissues. Such blood vessels also become less responsive to drugs designed to increase blood flowincluding coronary blood flow. NC Exh. 468 at 3-4; Transcript at 915-16.
(c) Cardiac rhythms. PM inhalation also causes neurological changes affecting reflexes and autonomic control of cardiac rhythms. This can result in heart rate variability and ultimately arrhythmia, the immediate cause of death in most fatal heart attacks. NC Exh. 468 at 3; Transcript at 911-15.
(d) Infant mortality. There is a growing body of evidence that infant deaths can be linked to changes in ambient PM. Such infant deaths are attributable to respiratory problems and sudden infant death syndrome (SIDS). NC Exh. 467 at 1.
28. North Carolina presented evidence that TVA's adoption of the emission controls requested by North Carolina would eliminate enough PM2.5 from the air to save an estimated 98 lives in North Carolina per year. NC Exh. 231-33; Transcript at 1071. The Court believes that this precise estimate is fraught with uncertainty, due to disagreement among leading experts about the percentage decreases in premature mortality likely to result from incremental decreases in PM2.5. NC Exh. 242 at viii.
29. Nonetheless, based on the totality of the evidence, the Court finds that, at a minimum, there is an increased risk of incidences of premature mortality in the general public associated with PM2.5 exposure, even for levels at or below the NAAQS standard of 15 µg/m3.
2. Other Negative Health Impacts
30. There is also a causal relationship between PM2.5 (at NAAQS levels and below) and increased incidence of asthma, chronic bronchitis, and other cardiopulmonary illness. Transcript at 909, 929-30; NC Exh. 467 at 1, 3; NC Exh. 468 at 8-9. Although the underlying mechanisms for these effects are not entirely understood, it is likely that they have their root in the inflammation and changes in immune function that result from PM exposure. NC Exh. 467 at 2.
31. TVA's expert epidemiologist expressed skepticism about whether exposure to PM2.5 at or below NAAQS levels results in adverse cardiopulmonary effects, claiming that, although such a causal relationship could not be ruled out, it was by no means certain. Transcript at 2363. As evidence of the extreme uncertainty of this science, the expert cited one study which purported to prove that NO2 exposure actually protects human healthan absurd conclusion which even the TVA expert himself did not endorse. Transcript at 2357.
32. After reviewing the totality of this evidence, the Court is convinced that exposure to PM2.5even at or below the NAAQS of 15 µg/m3results in adverse cardiopulmonary effects, including increased or exacerbated asthma and chronic bronchitis.[6] The Court believes that *823 TVA's experts' suspicion of this conclusion is unwarranted; indeed, their skepticism runs counter to the vast majority of scientific studies. NC Exh. 468 at 2-9 (describing these studies in great detail).
33. These negative but non-fatal health effects result in numerous social and economic harms to North Carolinians, including lost school and work days, increased pressure on the health industry due to extra emergency room and doctor visits, and the general loss of well-being that results from chronic health problems. It is fatuous, at best, to suggest that the previously discussed pollutants protect or promote good personal or environmental health in North Carolina.
F. Effects of PM2.5 on the Environment
34. As previously noted, PM2.5 contributes significantly to the phenomenon of acid deposition, including wet, dry, and cloudwater deposition. Finding of Fact 19, supra.
35. Acid deposition in the form of sulfate, when deposited on the ground, lowers the pH of the soilthat is, it makes the soil more acidic. Transcript at 213; NC Exh. 1 at 6.4-6.8. Once the acidity of the soil reaches a certain threshold, aluminum occurring naturally in the earth's crust is mobilized. Transcript at 213. This aluminum is toxic to the ecosystem. Id. For example, it clogs (and eventually kills) the fine roots of local vegetation, including trees, making it more difficult for the overall root systems to absorb water and nutrients from the soil. Id. at 217. This process, in addition to inhibiting healthy growth, also exacerbates the damage caused by any droughts that may otherwise occur. Id.
36. Sulfate also removes magnesium, calcium, and potassium from the soil. Id. at 214-15. These nutrients are essential for healthy forest growth. Id. at 215. Calcium, for example, is the primary component of cell walls in vegetation; and magnesium is central to photosynthesis. Id.
37. High levels of acid deposition in the soil have been reported in important natural wilderness areas in North Carolina, especially western North Carolina. For example, soil in the Linville Gorge Wilderness Area, located in Pisgah National Forest, is well below the pH threshold at which toxic aluminum mobilization occurs. Id. at 218.
38. Acid deposition, if it occurs anywhere near the watershed of running water, also degrades water quality by lowering pH and increasing aluminum content. Id. at 218-19; NC Exh. 1 at 6.11-6.15.
39. These trends of water and soil damage from acid deposition are uniquely difficult to reverse in western North Carolina, because the area already has naturally low levels of magnesium, calcium, potassium, and other bases which could counteract the acid and balance out pH levels. Transcript at 220; NC Exh. 1 at 6.14.
G. Other Effects of PM2.5
40. PM2.5, especially SO2 has significant effects on visibility due to its efficient scattering of light. Transcript at 1380; NC Exh. 289. An observer of a scenic vista would experience this scattering of light as haze; the observer's perception of the haze changes depending on how much PM2.5 is present in the atmosphere. NC Exh. 295.
41. Western North Carolina is home to many cherished, pristine wilderness areas such as the Great Smoky Mountains National Park, Linville Gorge, Shining Rock, *824 Grandfather Mountain, and Chimney Rock State Park. Transcript at 192-93, 1300, 1339, 1761-62. Moreover, the region also features world-famous attractions such as the Appalachian Trail, the Blue Ridge Parkway, and the Biltmore Estate. Id. at 1244, 1271, 1323. These areas contain countless scenic vistas which are vulnerable to the effects of PM2.5 haze.
42. Regarding the Blue Ridge Parkway alone, a recent survey indicated that the average visitor would be willing to pay an extra $328.00 in federal income taxes per year in order to improve visibility in the North Carolina section of the Parkway. When aggregated for the total number of visitors to the Parkway in North Carolina, the value of increased visibility is $760 million per year. Id. at 1271-73.
43. It can be inferred from these facts that the visibility at scenic overlooks in the western North Carolina mountains is an extremely valuable resource to this state. PM2.5 haze and other air pollution impacting visibility at these vistas creates a difficult problem from both a social and economic perspective.
H. Effects of O3 on Human Health
44. Ozone, like PM, is associated with premature mortality in humans. Transcript at 1039-40.
45. In addition to premature death, ozone exposure has two primary health effects in humans. First, it induces an immediate sensation of pain and difficulty in taking a deep breath. Id. at 909-10. This sensation is often accompanied by a tight, painful feeling in the chest. Id. at 925. The feelings of pain and discomfort generally subside after a few hours after the exposure to ozone-polluted air is over. Id. at 925-26.
46. A second, more long-lasting effect of ozone exposure is increased airway inflammation. Id. at 910. The increase in inflammation exacerbates asthma symptoms and increases negative responses to pre-existing allergens. Id. at 921.
47. The asthma exacerbation caused by O3 has particularly serious consequences for individuals with undiagnosedand thus uncontrolledasthma. Id. at 974. If a person's asthma and accompanying lung inflammation remain uncontrolled for more than two or three years, the person can develop irreversible scarring on his or her lungs, to a point where 10% to 60% of lung capacity is irretrievably lost. Id. at 975.
48. It is well-established in the scientific literature that ozone contributes significantly to these bad health effects, even at or below NAAQS levels. Id. at 920.
49. Governmental organizations and businesses who operate in areas affected by ozone frequently must issue advisories to their guests, customers, and employees on high-ozone days. For example, the Biltmore Estate has a policy of giving its staff more frequent breaks on such days. Id. at 1323. The National Park Service also encourages its staff and visitors to refrain from prolonged outdoor activities in the Great Smoky Mountains National Park when ozone levels are high. Id. at 1361.
I. Effects of O3 on the Environment
50. Ozone in sufficiently high concentrations can damage plants, including commercial crops as well as natural-grown vegetation. NC Exh. 1 at 5.3. In particular, ozone causes plant leaves to develop black discoloration caused by damage to cell walls and chloroplasts (the primary engine for photosynthesis). Id.; NC Exh. 276 at 8 (pictures of leaf discoloration).
51. Examples of native North Carolina species that are especially sensitive to ozone are: Virginia creeper, sassafras, *825 sweetgum, Allegheny blackberry, mountain dandelion, milkweed, aster, ash, pine, American sycamore, American elder, and quaking aspen. NC Exh. 276 at 9 (listing over twenty-five ozone-sensitive species that grow along the Appalachian National Scenic Trail).
J. North CarolinaBased Impacts of Pollutants from TVA Plants
52. Emissions of primary pollutants have the greatest negative impacts in the areas closest to the source itself. Id. at 1777-78, 2210; NC Exh. 1 at vii. Unbiased studies show that emissions reductions in a particular state will generate the most benefit within that state. NC Exh. 1 at vii.
53. Nonetheless, emissions from a source located outside a state, particularly an upwind source, can still have significant impacts on that state's air quality. NC Exh. 1 at vii.
54. In the southeastern United States, high-pressure weather systems tend to move air pollution from west to east. Transcript at 784, 789-90, 2687. As a result, decreases in primary upwind emissions in the western part of the region result in relatively linear decreases in secondary air pollutants in the eastern part of the region. Id. at 2320.
55. The greatest negative impacts from pollution emitted by TVA power plants accrue close to those plants, with lesser impacts at greater distances. NC Exh. 148, 149, 155, 156; Transcript at 792-93. For example, visibility is impacted by plants as far as 200-300 miles away. Transcript at 1408-09.
56. There are four plants in the TVA system within 100 miles of North Carolina: John Sevier, Bull Run, and Kingston in Tennessee; and Widows Creek in Alabama (hereinafter, the "100Mile Plants"). TVA Exh. 1 (map with scale drawing).
57. In 2002, the 100Mile Plants caused annual average PM2.5 concentrations to climb by 0.4-0.5 µg/m3 in numerous counties in western North Carolina, and 0.3-0.4 µg/m3 in many other North Carolina counties. Transcript at 802; NC. Exh. 148, 149; TVA Exh. 345 at Fig. 5A. By way of context, North Carolina's annual average PM2.5 concentrations from 1999 and 2005 ranged between 12.6 and 15.2 µg/m3. NC Exh. 134.
58. Half of a microgram of impact is very significant amount of impact. Transcript at 806. As noted above, the NAAQS for PM2.5 is 15 µg/m3, and very negative effects on human health, visibility, and the environment can result at levels well below 15 µg/m3 Finding of Fact 16, 32, supra.
59. The 100Mile Plants also contribute very significantly to ozone levels within numerous North Carolina counties. Specifically, these plants contribute 4-8 parts per billion (ppb) to peak 8hour ozone concentrations in much of western North Carolina, and 2-4 ppb to other parts. NC Exh. 155. By way of comparison, the NAAQS for ozone is 75 ppb.[7] Finding of Fact 14, supra. North Carolina's average 8hour ozone concentrations from 1999 and 2005 ranged between 73 to 94 ppb. NC Exh. 133. Again, as noted, ozone has bad effects on human health and the environment even at concentrations well below the NAAQS. Finding of Fact 48, supra.
60. In addition to the four 100Mile Plants, TVA has seven other plants in its system. TVA Exh. 1. Data from both *826 parties show that emissions from these seven plants do not have nearly the same impact on North Carolina's air as the easternmost four.
61. For example, TVA's two Kentucky plants, together, contribute less than 0.1 µg/m3 to the annual average PM2.5 of any North Carolina county. TVA Exh. 345 at Fig. 5-A. Similarly, the conglomerate effect of the four TVA plants located in middle and western Tennessee is also less than 0.1 µg/m3 per county. Id. Although the Court has no doubt of these plants' negative impact on their more immediate environs, the record indicates that their impact on North Carolina is less significant.
62. As of trial, the state of pollution controls[8] at the four 100-Mile Plants was as follows:
Bull Run, which has one EGU, has an SCR in place and, at the time of trial, had a scrubber under construction. Transcript at 1830-32, 2008-12. The scrubber, as scheduled, went online prior to December 31, 2008.
Kingston, which has nine EGUs, has SCRs in place on all nine units. Two scrubbers are under construction: one scrubber for Units 1-5 and one scrubber for Units 6-9. One of the scrubbers is scheduled to go online in 2009, the other in 2010. Id. at 1832, 2012-18.
John Sevier, which has four EGUs, has no scrubbers and no SCRs. TVA claims that it has plans in the works to build scrubbers and SCRs sufficient to cover all four EGUs. One of the units already has a SNCR, and TVA claims it will build SNCRs for the other three units, which will operate while the necessary SCR equipment is being built. Id. at 1832, 2018-21.
Widows Creek, which has eight EGUs, has one unit with an SCR and a recently modernized scrubber; one unit with an SCR and an old scrubber which is scheduled to be modernized; and six units with no scrubbers and no SCRs. Id. at 1836, 2055-56.
63. With respect to the 100-Mile Plants, the following pollution controls are warranted:
Bull Run: Complete installation of the scrubber under construction at the time of trial.[9] NC Exh. 106 at 1.
Kingston: Complete installation of two scrubbers sufficient to cover all nine EGUs, at an estimated total cost of $359,251,000. Id. at 3.
John Sevier: Install scrubbers and SCRs sufficient to clean all four units. Installation of the four necessary SCRs has an estimated total cost of $132,792,000. Installation of one scrubber which will clean all four units is estimated to cost $175,326,000. Id. at 2.
Widows Creek: Install scrubbers and SCRs on Units 1-6. Installation of SCRs on each unit has an estimated total cost of $158,024,000. Installation of one scrubber which will clean all six units is estimated to cost $178,232,000. Id. at 5.
64. Continual, year-round operation of scrubbers and SCRs on these four plants will enable the plants to achieve *827 the following emissions, per EGU. NC Exh. 97.
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NOx average NOx emissions SO2 average SO2 emissions
emissions rate in tons per emissions rate in tons per
Plant Unit (lbs/MMBTU) year (TPY) (lbs/MMBTU) year (TPY)
-------------------------------------------------------------------------------------------
Bull Run 1 0.08 2,295 0.15 4,341
-------------------------------------------------------------------------------------------
John
Sevier 1 0.05 372 0.15 1,023
-------------------------------------------------------------------------------------------
John
Sevier 2 0.05 374 0.15 1,028
-------------------------------------------------------------------------------------------
John
Sevier 3 0.05 389 0.15 1,081
-------------------------------------------------------------------------------------------
John
Sevier 4 0.05 360 0.15 1,000
-------------------------------------------------------------------------------------------
Kingston 1 0.06 323 0.15 794
-------------------------------------------------------------------------------------------
Kingston 2 0.06 320 0.15 785
-------------------------------------------------------------------------------------------
Kingston 3 0.06 335 0.15 822
-------------------------------------------------------------------------------------------
Kingston 4 0.06 326 0.15 800
-------------------------------------------------------------------------------------------
Kingston 5 0.06 416 0.15 1,021
-------------------------------------------------------------------------------------------
Kingston 6 0.05 365 0.15 1,095
-------------------------------------------------------------------------------------------
Kingston 7 0.05 347 0.15 1,040
-------------------------------------------------------------------------------------------
Kingston 8 0.05 349 0.15 1,048
-------------------------------------------------------------------------------------------
Kingston 9 0.05 337 0.15 1,012
-------------------------------------------------------------------------------------------
Widows
Creek 1 0.06 246 0.15 569
-------------------------------------------------------------------------------------------
Widows
Creek 2 0.06 263 0.15 608
-------------------------------------------------------------------------------------------
Widows
Creek 3 0.06 287 0.15 663
-------------------------------------------------------------------------------------------
Widows
Creek 4 0.06 261 0.15 602
-------------------------------------------------------------------------------------------
Widows
Creek 5 0.06 277 0.15 640
-------------------------------------------------------------------------------------------
Widows
Creek 6 0.06 271 0.15 626
-------------------------------------------------------------------------------------------
Widows
Creek 7 0.06 892 0.56 8,950
-------------------------------------------------------------------------------------------
Widows
Creek 8 0.06 860 0.30 4,508
-------------------------------------------------------------------------------------------
65. North Carolina's expert estimated that TVA can retrofit a scrubber in, on average, 27 months. NC Exh. 83. Likewise, the expert estimated that TVA could retrofit an SCR in 21 months. NC Exh. 77. TVA's expert testified that more lengthy timelines for these projects were necessary. Transcript at 1997 (three years for an SCR); id. at 2000 (five years for a scrubber). The Court finds North Carolina's expert to be more credible in this respect, and accordingly finds that timelines of 21 months and 27 months for SCRs and scrubbers, respectively, are feasible.
66. The Court finds, moreover, that it is financially feasible for TVA to bear the costs of the installation, maintenance, and *828 year-round operation of the pollution control technology listed above.
IV. ADMISSIBILITY OF EVIDENCE AND CONCLUSIONS OF LAW
A. Admissibility of Evidence
1. Both before and during trial, the parties challenged the admissibility of most of the evidence, particularly evidence offered by expert witnesses.
2. The Court took into account the parties' pre-trial motions in limine, as well as their objections in open court, in adjudicating the admissibility of challenged exhibits, expert reports, and testimony.
3. Rule 702 of the Federal Rules of Evidence, which governs the admissibility of expert opinion testimony, states that "[i]f scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training or education, may testify thereto in the form of an opinion or otherwise." Fed.R.Evid. 702; see also Fed.R.Evid. 703 (governing the bases of opinion testimony by expert witnesses). Rule 702 "imposes a special obligation upon a trial judge `to ensure that any and all scientific testimony ... is not only relevant, but reliable.'" Kumho Tire Co. v. Carmichael, 526 U.S. 137, 147, 119 S. Ct. 1167, 143 L. Ed. 2d 238 (1999) (quoting Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 589, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993)) (alteration original).
4. "The touchstone of admissibility [of expert testimony] is whether the testimony will assist the trier of fact." Proctor v. Tsao, 164 F.3d 625, 1998 WL 708689 at *3, 1998 U.S.App. LEXIS 23905 at *7 (4th Cir.1998) (unpublished). The admissibility inquiry is no different when the Court sits without a jury. Friendship Heights Assoc. v. Koubek, 785 F.2d 1154, 1163 (4th Cir. 1986). Generally, the decision whether to admit or exclude evidencethe so-called "gatekeeping" functionis within the trial court's discretion. Gen. Elec. Co. v. Joiner, 522 U.S. 136, 142, 118 S. Ct. 512, 139 L. Ed. 2d 508 (1997).
5. In assessing the admissibility of expert testimony, federal judges must conduct a "preliminary assessment of whether the reasoning or methodology underlying the testimony is scientifically valid and of whether that reasoning or methodology properly can be applied to the facts in issue." Daubert, 509 U.S. at 592-93, 113 S. Ct. 2786. Key factors bearing on this inquiry include (1) whether a "theory or technique ... can be (and has been) tested"; (2) whether it "has been subjected to peer review and publication"; (3) whether, in respect to a particular technique, there is a high "known or potential rate of error" and whether there are "standards controlling the technique's operation"; and (4) whether the theory or technique enjoys "general acceptance" within a "relevant scientific community." Id. at 592-94, 113 S. Ct. 2786.
6. As to the admissibility of expert testimony concerning the causal link between a toxic source and a given undesirable health outcome, the Fourth Circuit has observed: "[W]hile precise information concerning the exposure necessary to cause specific harm to humans ... [is] beneficial, such evidence is not always available, or necessary, to demonstrate that a substance is toxic to humans given substantial exposure and need not invariably provide the basis for an expert's opinion on causation." Westberry v. Gislaved Gummi AB, 178 F.3d 257, 264 (4th Cir. 1999).
7. Guided by these principles, and following careful examination of the proffered experts' curriculum vitae, scientific techniques, *829 and the context of their testimony, the Court admitted the majority of the evidence submitted by the parties during trial. On the whole, the Court concludes that most of the parties' objections to each other's evidence pertained to credibility and weight, rather than to admissibility. See Woodson v. McGeorge Camping Ctr., Inc., 974 F.2d 1333, 1992 WL 225264 at *10, 1992 U.S.App. LEXIS 22747 at *30 (4th Cir.1992) (unpublished) (making a similar observation in a dispute over expert scientific testimony).
B. Source State Law
8. As the Court has noted in its Memorandum and Order on summary judgment, the controlling authority in this lawsuit is the law of the states in which TVA's plants are located: Alabama, Kentucky, and Tennessee. Memorandum and Order, 549 F. Supp. 2d at 729; see Int'l Paper Co. v. Ouellette, 479 U.S. 481, 487, 107 S. Ct. 805, 93 L. Ed. 2d 883 (1987). Specifically, whether Widows Creek and Colbert are public nuisances in North Carolina is a matter of Alabama law; whether Paradise and Shawnee are public nuisances in North Carolina is a matter of Kentucky law; and whether Bull Run, Kingston, John Sevier, Gallatin, Johnsonville, Cumberland, and Allen are public nuisances in North Carolina is a matter of Tennessee law.
1. Alabama
9. In Alabama, a nuisance "`is anything that works hurt, inconvenience or damage to another. The fact that the act done may otherwise be lawful does not keep it from being a nuisance.'" Russell Corp. v. Sullivan, 790 So. 2d 940, 951 (Ala. 2001) (quoting Ala.Code § 6-5-120). "`A public nuisance is one which damages all persons who come within the sphere of its operation, though it may vary in its effects on individuals.'" Id. (quoting Ala.Code § 6-5-121).
10. The Alabama statutes governing nuisance have been liberally interpreted by the Alabama courts. Tipler v. McKenzie Tank Lines, 547 So. 2d 438, 440 (Ala.1989) (collecting cases). A nuisance "may consist of conduct that is intentional, unintentional, or negligent. Indeed, it may even consist of activities that are conducted in an otherwise lawful and careful manner, as well as conduct that combines with the culpable act of another, so long as it works hurt, inconvenience, or damage to the complaining party." Id. (citing Restatement (Second) of Torts § 821B).
11. "That which works hurt to another, to satisfy the statutory definition of a nuisance, must comport with the classical tort concepts of duty and causation." Id.; see also E.S. Robbins Corp. v. Eastman Chem. Co., 912 F. Supp. 1476, 1494 (N.D.Ala.1995) ("[T]he elements of legal duty and causation between the conduct or activity complained of and the hurt, inconvenience, or damage sued for, must be met in order to establish a statutory nuisance claim in Alabama." (internal quotation marks omitted)). As to causation, courts "must look to the particular facts of each case to determine whether the party charged with creating and maintaining a nuisance has engaged in a course of conduct, or has permitted to exist a set of circumstances, that, in its natural and foreseeable consequences, proximately caused the hurt, inconvenience, or damage complained about." Tipler, 547 So.2d at 440-41.
12. The Alabama Legislature has also passed the Alabama Air Pollution Control Act (AAPCA), which regulates air pollution affecting life or property within Alabama. See Ala.Code § 22-28-2(1). As the Court noted in a previous order, this statutory scheme is inapplicable to this *830 case, because all of Plaintiffs alleged injuries are within North Carolina, not Alabama. Order, filed May 16, 2008, 2008 WL 2115159, at 5-7.
13. Based on these principles, the Court concludes that untreated air pollution from TVA's Widows Creek plant is a public nuisance to the citizens of North Carolina. As detailed in the findings of fact, the secondary pollutants of ozone and PM2.5 from Widows Creek "work[ ] significant hurt, inconvenience [and] damage" in North Carolina. Ala.Code §6-5-120. Furthermore, TVA's conduct in failing to install readily available pollution controls on Widows Creek constitutes "a course of conduct ... that, in its natural and foreseeable consequences, [is] proximately caus[ing] the hurt, inconvenience, [and] damage." Tipler, 547 So.2d at 440-41.
14. For these reasons, an injunction requiring prompt installation and year-round usage of appropriate pollution control technologies at Widows Creek is a necessary outcome of this litigation.
15. As to TVA's other Alabama plant, Colbert, the Court concludes that North Carolina has failed to present sufficient evidence to support a conclusion of public nuisance, as required under applicable Alabama law. Rather, the evidence showed that the effects in North Carolina from air pollution emitted from Colbert are not of measurable significance.
2. Kentucky
16. In Kentucky, a public nuisance is an unreasonable interference with a right common to the general public. Circumstances that may sustain a holding that an interference with a public right is unreasonable include whether the conduct involves a significant interference with the public health, the public safety, the public peace, the public comfort or the public convenience, whether the conduct is proscribed by a statute, ordinance or administrative regulation, or whether the conduct is of a continuing nature or has produced a permanent or long-lasting effect, and, as the actor knows or has reason to know, has a significant effect upon the public right. Roberie v. VonBokern, 2006 WL 2454647 at *3, 2006 Ky. LEXIS 186 at *9-10 (Ky. 2006) (adopting the test set forth in the Restatement (Second) of Torts § 821 B).
17. Here, the Court concludes North Carolina has not presented sufficient evidence to prove that TVA's two Kentucky plants, Paradise and Shawnee, emit air pollution that interferes with North Carolinians' health and safety in an unreasonable amount. Like the faraway Colbert plant in Alabama, the two Kentucky plants are too remote to significantly impact air quality in North Carolina to the extent necessary to prove public nuisance.
3. Tennessee
18. In Tennessee, a public nuisance is defined as "an act or omission that unreasonably interferes with or obstructs rights common to the public." Wayne County v. Tenn. Solid Waste Disposal Control Bd., 756 S.W.2d 274, 283 (Tenn.Ct. App.1988). "[A]nuisance extends to everything that endangers life or health, gives offense to the senses, violates the laws of decency, or obstructs the reasonable and comfortable use of property." Sherrod v. Dutton, 635 S.W.2d 117, 119 (Tenn.Ct.App. 1982).
20. "The key element of any nuisance is the reasonableness of the defendant's conduct under the circumstances." Sadler v. State, 56 S.W.3d 508, 511 (Tenn.Ct.App. 2001) (citing 58 AmJur.2d Nuisances § 76).
19. "`What is a reasonable use of one's property and whether a particular use is an unreasonable invasion of another's use *831 and enjoyment of his property cannot be determined by exact rules, but must necessarily depend upon the circumstances of each case, such as locality and the character of the surroundings, the nature, utility and social value of the use, the extent and nature of the harm involved, the nature, utility and social value of the use or enjoyment invaded, and the like.'" Sherrod, 635 S.W.2d at 119 (quoting Caldwell v. Knox Concrete Prods., Inc., 54 Tenn.App. 393, 402, 391 S.W.2d 5, 9 (Tenn.Ct.App. 1964)).
21. In this case, North Carolina has presented sufficient evidence that untreated air pollution from the three power plants in eastern Tennessee which are closest to North CarolinaKingston, Bull Run, and John Sevierunreasonably interferes with the rights of North Carolina citizens. The Court has carefully considered the factors listed in Sherrod, and concludes that TVA's generation of power at low cost to the consuming public has a high social utility. Nonetheless, the vast extent of the harms caused in North Carolina by the secondary pollutants emitted by these plants outweighs any utility that may exist from leaving their pollution untreated. As with the Widows Creek plant in Alabama, TVA's failure to speedily install readily available pollution control technology is not, and has not been, reasonable conduct under the circumstances.
22. For this reason, a judicially-imposed injunction requiring the installation and continual, year-round use of appropriate pollution control technology is appropriate with respect to Kingston, Bull Run, and John Sevier.
23. As to TVA's other Tennessee plantsAllen, Cumberland, Johnsonville, and Gallatinthe Court concludes that there is insufficient evidence that their emissions are having an unreasonable health, safety, or welfare impact on North Carolina, or that they are significantly interfering with or obstructing the North Carolina public's right to breathe clean air. Absent the necessary showing of causation, the Court declines to enjoin these plants' emissions or require them to install pollution control technology.
24. "The American rule that both sides of a civil controversy must pay their own attorney's fees remains the law in the absence of a statutory or contractual provision providing for recovery of attorney's fees or case law that carves out an exception." Am. Reliable Ins. Co. v. Stillwell, 336 F.3d 311, 320 (4th Cir.2003) (internal quotation marks omitted); Ex parte Horn, 718 So. 2d 694, 702 (Ala.1998); City of Louisville v. Slack, 39 S.W.3d 809, 815 (Ky.2001); John Kohl & Co. v. Dearborn & Ewing, 977 S.W.2d 528, 534 (Tenn. 1998). Here, no such statutory or contractual provision applies. Accordingly, North Carolina and TVA must bear their own attorneys' fees and costs.
V. ORDER
In light of the foregoing findings and conclusions,
IT IS, THEREFORE, ORDERED that North Carolina's requested injunctive relief is GRANTED IN PART AND DNIED IN PART. A Judgment incorporating these findings and conclusions and setting forth in detail the injunctive relief that will be imposed by the Court is filed contemporaneously herewith.
JUDGMENT
For the reasons set forth in the Memorandum of Opinion filed herewith,
IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that North Carolina's requested injunctive relief is DENIED as to the following TVA *832 plants: ALLEN, COLBERT, CUMBELAND, GALLATIN, JOHNSONVILLE, PARADISE, AND SHAWNEE.
IT IS FURTHER ORDERED, AJUDGED, AND DECREED that North Carolina's request for injunctive relief is GRANTED as to the following TVA plants: BULL RUN, KINGSTON, JOHN SEVIER, AND WIDOWS CREEK.
1. As to BULL RUN, TVA indicated at trial that its single EGU would have an operational scrubber and SCR online as of December 2008, prior to the date of this Judgment. TVA has confirmed that this equipment is now operational. IT IS, THEREFORE, ORDERED that the scrubber and SCR shall be properly maintained and operated year-round.
2. As to KINGSTON, TVA indicated at trial that two scrubbers are currently under construction, which are intended to scrub all nine EGUs. IT IS, THERFORE, ORDERED that these two scrubbers shall be completed as of DECEMBER 31, 2010, and these new scrubbers, along with the nine existing SCRs at Kingston, shall be properly maintained and operated year-round.
3. As to JOHN SEVIER, TVA indicated at trial that it plans to build scrubbers and SCRs sufficient to cover all four EGUs. Further, TVA has indicated that one of the EGUs already has a SNCR, and that three more SNCRs will be installed to clean a portion of the NOx in the interim period before the SCRs are operational. The Court will hold TVA responsible for proceeding according to this plan, including the prompt installation, proper maintenance, and year-round operation of the interim SNCRs until such time as the SCRs come online. IT IS, THERFORE, ORDERED that all scrubbers and SCRs must be installed and operational by DECEMBER 31, 2011, and shall thereafter be properly maintained and operated year-round.
4. As to WIDOWS CREEK, IT IS, THEREFORE, ORDERED that TVA shall install, properly maintain, and operate year-round both scrubbers and SCRs sufficient to clean all six of the EGUs which presently lack both SCRs and scrubbers. IT IS FURTHER ORDERED that, as to the two remaining EGUs which already have SCRs and scrubbers, those SCRs and scrubbers shall be properly maintained and operated year-round. TVA has indicated that one of the two scrubbers was recently modernized, and the other scrubber is scheduled to be modernized. IT IS FURTHER ORDERED that TVA is hereby responsible for following through with the planned modernization of the remaining scrubber as of DECEMBER 31, 2013, and all eight units at Widows Creek shall have operating SCRs and scrubbers as of DECEMBER 31, 2013.
IT IS FURTHER ORDERED, AJUDGED, AND DECREED that, consistent with these construction deadlines, TVA shall adhere to the following caps on emissions:
BULL RUN, as of TEN DAYS from entry of this judgment:
-------------------------------------------------------------------------------------------
NOx annual SO2 annual
average NOx emissions average SO2 emissions
emissions rate in tons per emissions rate in tons per
Plant Unit (lbs/MMBTU) year (TPY) (lbs/MMBTU) year (TPY)
-------------------------------------------------------------------------------------------
Bull Run 1 0.08 2,295 0.15 4,341
-------------------------------------------------------------------------------------------
KINGSTON, as of DECEMBER 31, 2010:
*833
-------------------------------------------------------------------------------------------
NOx annual SO2 annual
average NOx emissions average SO2 emissions
emissions rate in tons per emissions rate in tons per
Plant Unit (lbs/MMBTU) year (TPY) (lbs/MMBTU) year (TPY)
-------------------------------------------------------------------------------------------
Kingston 1 0.06 323 0.15 794
-------------------------------------------------------------------------------------------
Kingston 2 0.06 320 0.15 785
-------------------------------------------------------------------------------------------
Kingston 3 0.06 335 0.15 822
-------------------------------------------------------------------------------------------
Kingston 4 0.06 326 0.15 800
-------------------------------------------------------------------------------------------
Kingston 5 0.06 416 0.15 1,021
-------------------------------------------------------------------------------------------
Kingston 6 0.05 365 0.15 1,095
-------------------------------------------------------------------------------------------
Kingston 7 0.05 347 0.15 1,040
-------------------------------------------------------------------------------------------
Kingston 8 0.05 349 0.15 1,048
-------------------------------------------------------------------------------------------
Kingston 9 0.05 337 0.15 1,012
-------------------------------------------------------------------------------------------
JOHN SEVIER, as of DECEMBER 31, 2011:
-------------------------------------------------------------------------------------------
NOx annual SO2 annual
average NOx emissions average SO2 emissions
emissions rate in tons per emissions rate in tons per
Plant Unit (lbs/MMBTU) year (TPY) (lbs/MMBTU) year (TPY)
-------------------------------------------------------------------------------------------
John
Sevier 1 0.05 372 0.15 1,023
-------------------------------------------------------------------------------------------
John
Sevier 2 0.05 374 0.15 1,028
-------------------------------------------------------------------------------------------
John
Sevier 3 0.05 389 0.15 1,081
-------------------------------------------------------------------------------------------
John
Sevier 4 0.05 360 0.15 1,000
-------------------------------------------------------------------------------------------
WIDOWS CREEK, as of DECEMBER 31, 2013:
-------------------------------------------------------------------------------------------
NOx annual SO2 annual
average NOx emissions average SO2 emissions
emissions rate in tons per emissions rate in tons per
Plant Unit (lbs/MMBTU) year (TPY) (lbs/MMBTU) year (TPY)
-------------------------------------------------------------------------------------------
Widows
Creek 1 0.06 246 0.15 569
-------------------------------------------------------------------------------------------
Widows
Creek 2 0.06 263 0.15 608
-------------------------------------------------------------------------------------------
Widows
Creek 3 0.06 287 0.15 663
-------------------------------------------------------------------------------------------
Widows
Creek 4 0.06 261 0.15 602
-------------------------------------------------------------------------------------------
Widows
Creek 5 0.06 277 0.15 640
-------------------------------------------------------------------------------------------
Widows
Creek 6 0.06 271 0.15 626
-------------------------------------------------------------------------------------------
Widows
Creek 7 0.06 892 0.56 8,950
-------------------------------------------------------------------------------------------
Widows
Creek 8 0.06 860 0.30 4,508
-------------------------------------------------------------------------------------------
IT IS FURTHER ORDERED that the Office of TVA's Chief Executive Officer shall provide to the Court a semi-annual accounting of TVA's progress in complying *834 with this Order. The first such accounting shall be filed with the Court no later than JULY 1, 2009, with the second report due no later than JANUARY 1, 2010. Such reports shall continue to be filed each January 1 and July 1 until TVA has fully complied with the directives herein.
IT IS FURTHER ORDERED that each party bear their attorney fees and costs of this action.
NOTES
[1] The D.C. Circuit's July 2008 decision in North Carolina v. EPA to vacate the Clean Air Interstate Rule (CAIR) is undoubtedly farreaching, and the ruling's ultimate impact on North Carolina's air quality remains unclear. 531 F.3d at 929-30. CAIR and its associated federal implementation plan are currently on remand to the EPA. Id. at 930; see also North Carolina v. Envtl. Prot. Agency, 550 F.3d 1176, ___, 2008 WL 5335481 at *1 (D.C.Cir.2008) (per curiam) (amending the July 2008 decision to reflect that CAIR would be remanded to the EPA without vacatur, because "notwithstanding the relative flaws of CAIR, allowing CAIR to remain in effect until it is replaced by a rule consistent with our opinion would at least temporarily preserve the environmental values covered by CAIR").
[2] North Carolina lawmakers have determined that the air in this state should be cleaner than what the EPA's national ambient air quality standards currently permit. See An Act to Improve Air Quality in the State (Clean Smokestacks Act), 2002 N.C. Sess. Laws 4, codified at N.C. Gen.Stat. §§ 62-133.6, 143-215.107 to 143-215.114B. To this end, the state has enacted statutory emission controls for the pollution sources within its own borders. Clean Smokestacks Act § 1, N.C. Gen.Stat. § 143-215.107D (setting caps on NOx and SO2 emissions from pollution sources in North Carolina). Not content with in-state reductions in emissions, the same act provides:
It is the intent of the General Assembly that the State shall use all available resources and means, including negotiation, participation in interstate compacts and multistate and interagency agreements, petitions pursuant to 42 U.S.C. § 7426, and litigation to induce other states and entities, including Tennessee Valley Authority, to achieve reductions in emissions of oxides of nitrogen and sulfur dioxide comparable to those required [in this Act], on a comparable schedule. The State shall give particular attention to those states and other entities whose emissions negatively impact air quality in North Carolina or whose failure to achieve comparable reductions would place the economy of North Carolina at a competitive disadvantage.
Clean Smokestacks Act § 10.
[3] In addition to EGUs, highway vehicles are another major resource of NOx emissions.
NC Exh. 1 at 3.2.
[4] The Court notes that NC Exh. 125, a rendering explaining the scale of PM, was shown to the Court to illustrate testimony, but was never actually admitted into the evidence.
[5] NC Exh. 242 is a 2006 expert report commissioned by the EPA for reasons entirely unrelated to this lawsuit. In light of the resulting objectivity, the Court finds the report to be uniquely compelling in the area of premature mortality resulting from PM2.5 exposure.
[6] This finding is not inconsistent with EPA regulations, because EPA does not purport to set the NAAQS at a level which would entirely preclude negative health outcomes. Transcript at 1076-77.
[7] Even more tellingly, about 40 ppb of ozone occurs naturally in the air in western North Carolinaleaving only 35 ppb which may permissibly be caused by human sources under EPA's own guidelines. Transcript at 791.
[8] As explained above, SCRs and SNCRs control NOx, the primary pollutant from which ozone and PM2.5 are formed. Scrubbers control S02, another primary pollutant from which PM2.5 is formed. Findings of Fact 13, 15, 21-23, supra.
[9] According to a status update from TVA in January 2009, this scrubber is now installed and in operation. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2315808/ | 404 F. Supp. 2d 1112 (2005)
CITY OF WAUKESHA, Plaintiff,
v.
VIACOM INTERNATIONAL INC., and A.W. Holding Corp., Defendants.
No. 01-C-0872.
United States District Court, E.D. Wisconsin.
October 31, 2005.
*1113 Curt R. Meitz, Waukesha City Attorney's Office, Pamela H. Schaefer, Reinhart Boerner Van Deuren SC, Waukesha, WI, for Plaintiff.
David G. Walsh, Douglas B. Clark, Foley & Lardner LLP, Madison, WI, Paul Bargren, Foley & Lardner LLP, Milwaukee, WI, Richard G. Leland, Toni L. Finger, Kramer Levin Naftalis & Frankel LLP, New York, NY, William S. Roush, Jr., Law Offices of William S. Roush Jr., Brookfield, WI, for Defendants.
ORDER
STADTMUELLER, District Judge.
Plaintiff City of Waukesha ("City") moves for leave to file a proposed Sixth Amended Complaint to add a CERCLA contribution claim under § 113(f)(3)(B) and to add Geneve Corporation and insurance carriers as parties. Defendant Viacom International Inc. ("Viacom") moves for a stay of this action pending completion of a state process that the City has initiated under Wis. Stat. § 292.35. For the reasons stated below, the court grants in part and denies in part the City's motion for leave to file a proposed Sixth Amended Complaint and denies Viacom's motion for a stay.
BACKGROUND
The operative version of the City's complaint in this action is the "Revised Proposed *1114 Third Amended Complaint," which is attached to the City's August 8, 2002 reply memorandum [docket # 80]. The court granted the City's motion for leave to file a proposed Third Amended Complaint on September 24, 2002. (See Sept. 24, 2002 order at 9-14.)
On May 7, 2004, the City filed a motion for leave to file a proposed Fourth Amended Complaint to add two of A.W. Holding Corp.'s insurance carriers as parties. Shortly thereafter, on July 26, 2004, the City filed a motion for leave to file a proposed Fifth Amended Complaint to add a third insurance carrier as a party. The City also sought to add Geneve Corporation as a defendant:
Discovery recently received from Amron, L.L.C., including 1996 environmental documents and a stipulation of facts, have established a basis for a direct claim by the City against Geneve.
(City's July 26, 2004 motion, ¶ 8.) The City argued that adding Geneve as a defendant would not be futile because the court should pierce the corporate veil of Geneve, parent and sole shareholder of Amron Corporation (renamed A.W. Holding after the 1996 asset sale), to hold Geneve liable for damages the City may recover against A.W. Holding. (See City's July 26, 2004 motion at 6-11.) Geneve opposed the City's motion primarily because the proposed complaint allegedly does not state a proper piercing the corporate veil claim, but Geneve also argued that the City unduly delayed in asserting a direct claim against Geneve. (See Geneve's September 7, 2004 brief, 4-14.) During a September 17, 2004 hearing, the court ordered the City to file a supplemental memorandum in support of its motion for leave to file a Fifth Amended Complaint; specifically, the court directed the City to explain why it had not named Geneve as a defendant earlier in the litigation. In a November 17, 2004 order, the court directed the City to file the supplemental memorandum within 60 days from the date of the order. Again, the court noted that the City did not explain what information it received that caused it to name Geneve as a defendant. (See November 17, 2004 order at 2 n. 1.) The City filed an additional memorandum on January 18, 2005, but instead of describing the information and addressing the issue of undue delay, the City filed a "Proposed (Revised) Fifth Amended Complaint" that added CERCLA claims under sections 113(f)(3)(B) and 107(a).[1] On January 31, 2005, the City filed a formal motion for leave to file a "Proposed (Revised) Fifth Amended Complaint."
On March 23, 2005, the court denied the City's motion for leave to file a Proposed (Revised) Fifth Amended Complaint as well as the City's previous motions to amend its complaint. The court denied the City's motion for leave to amend because it determined that adding CERCLA claims under sections 113(f)(3)(B) and 107(a) would be futile. With respect to section 113(f)(3)(B), the court determined that the cost share pilot program contract that the City entered into with the Wisconsin Department of Natural Resources *1115 ("WDNR") is not an administratively or judicially approved settlement that resolves the City's CERCLA liability. The court also determined that a separate unsigned administrative settlement agreement between the City and the WDNR did not resolve the City's CERCLA liability. With respect to section 107(a), the court determined that adding the claim would be futile based upon the Seventh Circuit's decisions, Rumpke of Indiana, Inc. v. Cummins Engine Co., Inc., 107 F.3d 1235 (7th Cir.1997), and Akzo Coatings, Inc. v. Aigner Corp., 30 F.3d 761 (7th Cir.1994).
The court did not address the City's motion for leave to amend with respect to adding the insurance carriers and Geneve as defendants or with respect to various other minor corrections to the complaint. On May 17, 2005, the WDNR signed an environmental settlement agreement entered into by the City and the WDNR. Subsequently, the City filed a motion for leave to file a proposed Sixth Amended Complaint. The City seeks to add the insurance carriers and Geneve as defendants, add a CERCLA contribution claim under section 113(f)(3)(B) based upon the signed settlement agreement, and make other minor corrections to its complaint. Viacom also moves for a stay of this action pending completion of a state process that the City has initiated under Wis. Stat. § 292.35.
ANALYSIS
I. City's motion for leave to file a proposed Sixth Amended Complaint
A. Section 113(f)(3)(B) claim
The City seeks leave to add a CERCLA contribution claim under § 113(f)(3)(B) based upon the signed settlement agreement between the City and the WDNR. Under § 113(f)(3)(B), the City may only succeed on a claim for contribution if it "has resolved its liability to the United States or a State for some or all of a response action or for some or all of the costs of such action in an administrative or judicially approved settlement." 42 U.S.C. § 9613(f)(3)(B). The City argues that its signed environmental settlement agreement with the WDNR constitutes a section 113(f)(3)(B) administrative settlement and that it should be permitted to seek contribution from other potentially responsible parties under this provision.
"[S]ection 113(f)(3)(B) [creates] a contribution right only when liability for CERCLA claims, rather than some broader category of legal claims, is resolved." Consolidated Edison Company of New York, Inc. v. UGI Utilities, Inc., 423 F.3d 90, 95 (2d Cir.2005); W.R. Grace & Co. v. Zotos Int'l, Inc., 2005 WL 1076117, *7 (W.D.N.Y. May 3, 2005) ("Just as a party must be sued under CERCLA before it can maintain a section 113(f)(1) contribution claim, it must settle CERCLA liability before it can maintain a claim under section 113(f)(3).") The City argues that section 113(f)(3)(B) contains no requirement that the liability resolved be CERCLA liability. (City's July 1, 2005 reply memorandum to Viacom's brief at 4, 6, and 12.) But as the Second Circuit noted in UGI Utilities, "response action" is a CERCLA-specific term. 423 F.3d at 95-96. Therefore, because section 113(f)(3)(B) creates a CERCLA contribution right only where a party resolves some or all of its liability for a "response action," resolving liability with respect to non-CERCLA claims, such as claims arising under state environmental statutes, does not create a CERCLA contribution right under section 113(f)(3)(B). See id.
Applying this principle to the settlement agreement between the City and the WDNR, the court determines that the agreement does not resolve the City's CERCLA liability. The agreement states that in November 1990 the WDNR notified *1116 the City that the landfill was required to be in compliance with the provisions of Wisconsin Administrative Code ch. NR 506. (See July 1, 2005 Schaefer Aff., Ex. D at 1.) The WDNR did not review the City's work for compliance with the National Contingency Plan ("NCP"), but rather, for compliance with Wisconsin statutes and regulations. (Id. at 1-2.) The WDNR required the City to comply with the Wisconsin Administrative Code NR 700 series as well as the NR 500 series but did not specify compliance with any federal standards. (Id. at 2.)
Despite the focus on compliance with state statutes and regulations, the agreement also purports to resolve the City's CERCLA liability to Wisconsin:
The WDNR and the City have each consented to this Settlement Agreement, entered into pursuant to s. 292.11 and s. 292.31, Stats., to settle potential claims and to resolve the City's liability to the State under CERCLA and state law, except that the City may be required to do additional remedial work under Section III.C.5 of this Settlement Agreement.
(Id. at 4-5.) The agreement contains the following covenant not to sue:
Except as otherwise provided herein, from the effective date of this Settlement Agreement, for as long as the work that is required under this Settlement Agreement is satisfactorily performed in compliance with the terms of this Settlement Agreement and upon payment to WDNR of any amounts due as fees, and after termination of the Settlement Agreement pursuant to the provisions of Section XVI (Termination and Satisfaction), WDNR covenants not to sue the City under ch. 292, Wisconsin Statutes, CERCLA Section 106 or 107, 42 U.S.C. §§ 9606, 9607; or RCRA Section 7003, 42 U.S.C. § 6973; or to require additional investigative work or additional evaluation of remedial alternatives for the Landfill regarding the work satisfactorily performed by the City hereunder.
(Id. at 17.) The covenant not to sue should be read in conjunction with the following statement in the agreement's reservation of rights:
Except as otherwise provided in Section XVII ["Covenant Not To Sue and Waiver"] of this Settlement Agreement, nothing herein shall waive the right of the WDNR to enforce this Settlement Agreement as it applies to the work which is agreed to but has not yet been performed, or to take any action pursuant to CERCLA, ch. 292, Wis. Stats., or any other available legal authority. In addition, WDNR reserves the right, following ninety (90) calendar days written notice to the City, to undertake the work that is the responsibility of the City under this Settlement Agreement, to refer the Landfill to the U.S. EPA for action pursuant to CERCLA Section 104 or 106, and to enforce the terms of this Settlement Agreement where WDNR has not undertaken the work, if the City fails to satisfactorily perform the tasks required of it under this Settlement Agreement by the end of the ninety (90) calendar day notice period.
(Id. at 15.) According to these provisions, as long as the City satisfactorily performs the work specified in the agreement, (see id. at 7-9), including unspecified "additional remedial actions to protect human health and the environment," (id. at 9), the WDNR covenants not to sue the City under CERCLA. In the agreement, the parties state that they believe the agreement is an administrative settlement that resolves the City's liability to Wisconsin under CERCLA and thereby allows the City to seek contribution pursuant to section 113(f)(3)(B) from potentially responsible *1117 parties who have not settled with the City. (Id. at 15-16.) Finally, the agreement also contains an important clarification regarding the ability of the United States to sue the City under CERCLA or any other law:
The parties further expressly recognize that this Settlement Agreement does not represent a waiver of any claim of the United States or the U.S. EPA against the City relating to the Landfill.
(Id. at 16.)
The agreement does not resolve the City's CERCLA liability. Like the agreement in UGI Utilities, the agreement in this case "leaves open the possibility" that the WDNR may still seek to hold the City liable under CERCLA. 423 F.3d at 97. If, in the WDNR's estimation, the City has not "satisfactorily" performed the work specified under the agreement, WDNR has not waived its right to sue under CERCLA. The agreement in UGI Utilities permitted the State of New York "to take any investigatory or remedial action deemed necessary as a result of a significant threat resulting from the Existing Contamination or to exercise summary abatement powers." Id. at 96-97. Under both agreements, the state retains the right to sue under CERCLA if it deems it necessary. For the purposes of this order, however, the court assumes arguendo that the "satisfactorily performs" exception does not itself render the agreement insufficient under section 113(f)(3)(B).
Perhaps the best evidence of the fact that the City has not resolved its CERCLA liability under the agreement is the provision stating that the United States and the U.S. EPA have not waived any claim, including a CERCLA claim, against the City relating to the landfill. Because the United States may sue the City under CERCLA, the City cannot argue that it has resolved its CERCLA liability. Clearly, section 113(f)(3)(B) permits a party to resolve its CERCLA liability to the United States or a State. Although the United States Environmental Protection Agency ("EPA") is designated to implement and oversee CERCLA, section 104 provides that certain CERCLA authority may be delegated to the states. See Zotos, 2005 WL 1076117, *4; see 42 U.S.C. § 9604(d)(1)(A). The Zotos court explained,
[A] state that wishes to carry out actions authorized by CERCLA must make application to, and enter into a contract or cooperative agreement with, the EPA. Absent an express delegation by the EPA, a state has no CERCLA authority. However, where a state receives such delegation, its actions taken pursuant to the cooperative agreement are on behalf of the Federal government. [42 U.S.C.] § 9604(d)(3). Cooperative agreements and the delegation of CERCLA authority are specific to one or more facilities. [42 U.S.C.] § 9604(d)(1)(B).
Zotos, 2005 WL 1076117, *4. Furthermore, the EPA has full discretion to determine whether, and the extent to which, CERCLA authority will be delegated to a state. Id.; 42 U.S.C. § 9604(d)(1)(B).
In this case, the City has not shown that the EPA delegated authority to the State to enter into a settlement agreement that would resolve the City's CERCLA liability relating to the landfill. The City contends that there are specific and ongoing cooperative agreements between the EPA and the WDNR for the landfill, (City's July 1, 2005 reply memorandum to A.W. Holding's memorandum at 12-13, and note 17), but the only document that the City submits is the WDNR's 1992 Screening Site Inspection Report that references a 1990 cooperative agreement in which the EPA tasked the WDNR to conduct a screening site inspection of the landfill. (See July 1, 2005 Schaefer Aff., Ex. G.) The description of *1118 the 1990 cooperative agreement in no way indicates that the WDNR sought authorization from the EPA to enter into a settlement agreement with the City. The City does not submit the 1990 cooperative agreement or any other cooperative agreement between the EPA and the WDNR regarding the landfill, nor does the City suggest that the WDNR applied for and received authority from the EPA to enter into a settlement agreement with the City that would resolve the City's CERCLA liability.
To the contrary, the settlement agreement states that the EPA waives no claim against the City related to the landfill. This provision indicates that the WDNR did not enter into the agreement on behalf of the federal government or pursuant to any CERCLA authority delegated to it by the EPA. Zotos, 2005 WL 1076117, *4 ("However, where a state receives such delegation, its actions taken pursuant to the cooperative agreement are on behalf of the Federal government. [42 U.S.C.] § 9604(d)(3)."). "Where a state proceeds on its own authority to identify a remedy and settle with a [potentially responsible party], there is a risk that the EPA will take later actions or select different remedies that could expose the [potentially responsible party] to additional liabilities." Zotos, 2005 WL 1076117, *5. In this case, the WDNR entered into a settlement with the City based upon the authority granted to it pursuant to Wis. Stat. § 292.11(7) or 292.31(3), (see July 1, 2005 Schaefer Aff., Ex. D at 4), not under any authority delegated to it by the EPA, and the provision reserving the EPA's right to bring a claim against the City relating to the landfill makes that evidently clear.
The City notes that the court made a finding in its March 23, 2005 order that the settlement agreement "explicitly resolves the City's liability to the State under state law and CERCLA." (March 23, 2005 order at 4.) Indeed, the court described the agreement in those terms because that is what the agreement purported to do. The court, however, did not make any effort to determine whether the unsigned settlement agreement would have served as a basis for a contribution action under section 113(f)(3)(B); instead, the court merely stated the obvious: an unsigned agreement is no agreement at all.
Because the agreement does not resolve the City's CERCLA liability, the court finds that the City's claim under § 113(f)(3)(B) would be futile, and the court denies the City's motion for leave to amend in this respect. See Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 9 L. Ed. 2d 222 (1962) (noting that a court has discretion to deny a motion for leave to amend for undue delay, bad faith, dilatory motive, prejudice, or futility).
B. Geneve and insurance carrier defendants
The City seeks leave to add Geneve as a defendant.[2] The court analyzes whether the City has unduly delayed in adding Geneve as a defendant and whether any claim against Geneve would be futile. See Foman v. Davis, 371 U.S. at 182, 83 S. Ct. 227.
The court will not deny the City's motion for leave to amend on the basis of undue delay. Although the City may have been able to name Geneve as a defendant earlier in the action, Geneve's failure to respond to discovery requests may have contributed to the City's delay. (See March 26, 2004 order at 10-12) (describing *1119 Geneve's repeated failure to respond to discovery in this action).
Based upon the record before the court, the court does not find that the City's claims against Geneve would be futile. The City seeks to add Geneve as a party based upon Geneve's derivative liability for its subsidiary A.W. Holding.[3] The City alleges that Geneve is the parent and sole shareholder of A.W. Holding; Geneve, not A.W. Holding, controlled the 1996 sale of A.W. Holding's assets; Geneve received approximately $9 million in proceeds from the 1996 sale; following the sale, A.W. Holding no longer performs manufacturing and has few, if any, assets to respond to the landfill liability which was shifted to it as a result of the 1996 transaction; before and after the 1996 asset sale, some of the officers and directors of Geneve were officers and directors of Amron, L.L.C., and A.W. Holding; and Geneve controlled the sale of A.W. Holding to shift the "purposely undisclosed" liability for the West Avenue Landfill to the asset-less A.W. Holding. (See Proposed Sixth Amended Complaint, ¶¶ 27, 34-43.)
The corporate veil should be pierced when the subsidiary corporation is "organized, controlled and conducted" so that it is the "instrumentality" of its shareholder and where the corporate form is used "to evade an obligation, to gain an unjust advantage or to commit an injustice." Consumer's Co-op. of Walworth County v. Olsen, 142 Wis. 2d 465, 419 N.W.2d 211, 214 (1988) (quoting Wiebke v. Richardson & Sons, Inc., 83 Wis. 2d 359, 265 N.W.2d 571, 573 (1978)); see also United States v. Bestfoods, 524 U.S. 51, 118 S. Ct. 1876, 141 L. Ed. 2d 43 (1998). The City has alleged that Geneve structured the 1996 asset sale so that asset-poor A.W. Holding would retain liability for the landfill, and Geneve would receive the value of A.W. Holding's assets. Geneve argues that the plaintiff's allegations are insufficient to pierce the corporate veil because the plaintiff fails to allege a fraud or wrongdoing on the part of Geneve. (See A.W. Holding and Geneve's June 16, 2005 memorandum, Ex. A at 21.) Viewed in the light most favorable to the plaintiff, however, the allegations in the Proposed Sixth Amended Complaint are sufficient to pierce the corporate veil: the plaintiff alleges that Geneve exercised complete control over A.W. Holding so that A.W. Holding had no separate mind, will or existence of its own and that Geneve used such control to commit an injustice. See Consumer's Co-op., 419 N.W.2d at 217-18. The injustice, adequately alleged by the plaintiff, is that Geneve evaded its obligation to pay for its share of liability at the West Avenue Landfill by manipulating A.W. Holding during the 1996 asset sale. Naming Geneve as a defendant is not futile, and the court grants the plaintiff's motion for leave to amend in this respect. General Electric Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1085 (7th Cir.1997) (holding that an amendment is futile if "the complaint, as amended, would fail to state a claim upon which relief may be granted").
No party objects to the City adding the insurance carriers as defendants or to any of the other minor corrections to its complaint. The court, therefore, grants the City's motion for leave to amend its complaint in these respects. The City should file a Sixth Amended Complaint within twenty (20) days that is consistent with this order.
II. Viacom's motion for a stay
Viacom moves for a stay of this action pending completion of a state process that the City has initiated under Wis. *1120 Stat. § 292.35. Viacom's motion is based upon the doctrine of primary jurisdiction. See Arsberry v. Illinois, 244 F.3d 558, 563 (7th Cir.2001). Viacom argues that proceeding in two separate forums is unnecessarily costly to the parties and wasteful of the court's resources. In a letter that the court received on July 12, 2005, counsel for A.W. Holding and Geneve states that the entitles oppose the motion for a stay because they want to avoid any more delay in this action. The City does not object to a stay provided that all of the parties, including A.W. Holding and Geneve, agree to participate in the umpire process and abide by its outcome. (City's July 1, 2005 reply memorandum to Viacom's brief at 2 n. 3, 14.) The City also contemplated that it would return to federal court to resolve related matters, such as an award of attorney fees, costs and RCRA relief. (Id.)
Because this action has already been pending for some time and because the court doubts that it or the parties will realize any cost savings by staying this action, the court denies Viacom's motion for a stay. The court, however, will allow the parties some flexibility in setting the schedule that will govern the remainder of this action. The court directs counsel for the parties to confer and submit a proposed scheduling order for the court's signature. At a minimum, the scheduling order should contain dates for the close of discovery and a final deadline for any dispositive motions.
Accordingly,
IT IS ORDERED that Viacom's motion for a stay be and the same is hereby DENIED; the parties should confer and file a proposed scheduling order within twenty (20) days from the date of this order;
IT IS FURTHER ORDERED that the City's motion for leave to file a proposed Sixth Amended Complaint be and the same is hereby DENIED in part and GRANTED in part; the City shall file a Sixth Amended Complaint that is consistent with this order within twenty (20) days from the date of this order.
NOTES
[1] The City acknowledged the court's concern regarding the City's possible undue delay in adding Geneve as a defendant, (see City's January 18, 2005 brief at 6), but the City failed to describe the information that it received prior to July 26, 2004, the date that it filed its proposed Fifth Amended Complaint, that allowed it to add Geneve as a defendant. The City stated that it received documents on October 22, 2004, and deposed Steven Lapin on December 16, 2004, (id. at 6-7), but the City asserted a claim against Geneve prior to October 22, 2004. The City also stated that it received copies of insurance policies in June 2004, (id. at 4), but the insurance policies surely are not the "newly-discovered information regarding Geneve's relationship with Amron Corporation and role in the 1996 sale." (Id.)
[2] Aside from alleging a CERCLA contribution claim, the City asserts state law claims for nuisance, unjust enrichment, and negligence against Geneve and the insurer defendants. The court has supplemental jurisdiction over those claims pursuant to 28 U.S.C. § 1367(a).
[3] At the time of the 1996 asset purchase, A.W. Holding was named Amron Corporation. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1534870/ | 969 S.W.2d 945 (1998)
BAPTIST MEMORIAL HOSPITAL SYSTEM, Petitioner,
v.
Rhea SAMPSON, Respondent.
No. 97-0268.
Supreme Court of Texas.
Argued December 2, 1997.
Decided May 21, 1998.
Rehearing Overruled July 3, 1998.
*946 Ruth G. Malinas, George F. Evans, Jr., San Antonio, for Petitioner.
Oliver S. Heard, Jr., Luis R. Vera, Jr., Clifton F. Douglass, III, Karl E. Hays, San Antonio, for Respondent.
PHILLIPS, Chief Justice, delivered the opinion of the Court.
In this case, we decide whether the plaintiff raised a genuine issue of material fact that defendant Hospital was vicariously liable under the theory of ostensible agency for an emergency room physician's negligence. We granted Baptist Memorial Hospital System's application for writ of error to resolve a conflict in the holdings of our courts of appeals regarding the elements required to establish liability against a hospital for the acts of an independent contractor emergency room physician. We hold that the plaintiff has not met her burden to raise a fact issue on each element of this theory. Accordingly, we reverse the judgment of the court of appeals, 940 S.W.2d 128, and render judgment that the plaintiff take nothing.
I
On March 23, 1990, Rhea Sampson was bitten on the arm by an unidentified creature that was later identified as a brown recluse spider. By that evening, her arm was swollen and painful, and a friend took her to the Southeast Baptist Hospital emergency room. Dr. Susan Howle, an emergency room physician, examined Sampson, diagnosed an allergic reaction, administered Benadryl and a shot of painkiller, prescribed medication for pain and swelling, and sent her home. Her condition grew worse, and she returned to the Hospital's emergency room by ambulance a little over a day later. This time Dr. Mark Zakula, another emergency room physician, treated her. He administered additional pain medication and released her with instructions to continue the treatment Dr. Howle prescribed. About fourteen hours later, with her condition rapidly deteriorating, Sampson went to another hospital and was admitted to the intensive care ward in septic shock. There, her bite was diagnosed as that of a brown recluse spider, and the proper treatment was administered to save her life. Sampson allegedly continues to have recurrent pain and sensitivity where she was *947 bitten, respiratory difficulties, and extensive scarring.
Sampson sued Drs. Howle and Zakula for medical malpractice. She also sued Baptist Memorial Hospital System ("BMHS"), of which Southeast Baptist Hospital is a member, for negligence in failing to properly diagnose and treat her, failing to properly instruct medical personnel in the diagnosis and treatment of brown recluse spider bites, failing to maintain policies regarding review of diagnoses, and in credentialing Dr. Zakula. Sampson also alleged that the Hospital was vicariously liable for Dr. Zakula's alleged negligence under an ostensible agency theory. Sampson nonsuited Dr. Howle early in the discovery process. The trial court granted BMHS summary judgment on Sampson's claims of vicarious liability and negligent treatment. The trial court severed those claims from her negligent credentialing claim against BMHS and her malpractice claim against Dr. Zakula.[1] Sampson appealed only on the vicarious liability theory.
Both parties agree that BMHS established as a matter of law that Dr. Zakula was not its agent or employee. Thus the burden shifted to Sampson to raise a fact issue on each element of her ostensible agency theory, which Texas courts have held to be in the nature of an affirmative defense. See Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex.1984); Smith v. Baptist Mem'l Hosp. Sys., 720 S.W.2d 618, 622 (Tex.App.San Antonio 1986, writ ref'd n.r.e.), disapproved on other grounds by St. Luke's Episcopal Hosp. v. Agbor, 952 S.W.2d 503, 509 n. 1 (Tex.1997). Sampson contended that she raised a material fact issue on whether Dr. Zakula was BMHS's ostensible agent. The court of appeals, with one justice dissenting, agreed and reversed the summary judgment. 940 S.W.2d 128. In our review, we must first determine the proper elements of ostensible agency, then decide whether Sampson raised a genuine issue of material fact on each of these elements.
II
Under the doctrine of respondeat superior, an employer is vicariously liable for the negligence of an agent or employee acting within the scope of his or her agency or employment, although the principal or employer has not personally committed a wrong. See DeWitt v. Harris County, 904 S.W.2d 650, 654 (Tex.1995); Restatement (Second) of Agency § 219 (1958). The most frequently proffered justification for imposing such liability is that the principal or employer has the right to control the means and methods of the agent or employee's work. See Newspapers, Inc. v. Love, 380 S.W.2d 582, 585-86 (Tex.1964); Restatement (Second) of Agency § 220, cmt. d. Because an independent contractor has sole control over the means and methods of the work to be accomplished, however, the individual or entity that hires the independent contractor is generally not vicariously liable for the tort or negligence of that person. See Enserch Corp. v. Parker, 794 S.W.2d 2, 6 (Tex.1990); Redinger v. Living, Inc., 689 S.W.2d 415, 418 (Tex.1985). Nevertheless, an individual or entity may act in a manner that makes it liable for the conduct of one who is not its agent at all or who, although an agent, has acted outside the scope of his or her authority. Liability may be imposed in this manner under the doctrine of ostensible agency in circumstances when the principal's conduct should equitably prevent it from denying the existence of an agency.[2]*948 See, e.g., Marble Falls Hous. Auth. v. McKinley, 474 S.W.2d 292, 294 (Tex.Civ. App.Austin 1971, writ ref'd n.r.e.). Ostensible agency in Texas is based on the notion of estoppel, that is, a representation by the principal causing justifiable reliance and resulting harm. See Ames v. Great S. Bank, 672 S.W.2d 447, 450 (Tex.1984); RESTATEMENT (SECOND) OF AGENCY § 267; KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS § 105, at 733-34 (5th ed.1984).
Texas courts have applied these basic agency concepts to many kinds of principals, including hospitals. See Sparger v. Worley Hosp., Inc., 547 S.W.2d 582, 585 (Tex.1977) (explaining that "[h]ospitals are subject to the principles of agency law which apply to others"). A hospital is ordinarily not liable for the negligence of a physician who is an independent contractor. See, e.g., Berel v. HCA Health Servs., 881 S.W.2d 21, 23 (Tex.App.Houston [1st Dist.] 1994, writ denied); Jeffcoat v. Phillips, 534 S.W.2d 168, 172 (Tex.Civ.App.Houston [14 th Dist.] 1976, writ ref'd n.r.e.). On the other hand, a hospital may be vicariously liable for the medical malpractice of independent contractor physicians when plaintiffs can establish the elements of ostensible agency. See, e.g., Lopez v. Central Plains Reg'l Hosp., 859 S.W.2d 600, 605 (Tex.App.Amarillo 1993, no writ), disapproved on other grounds by Agbor, 952 S.W.2d at 509 n. 1; Nicholson v. Mem'l Hosp. Sys., 722 S.W.2d 746, 750 (Tex. App.Houston [14 th Dist.] 1986, writ ref'd n.r.e.).
III
In this case, the court of appeals held that two distinct theories of vicarious liability with different elements are available in Texas to impose liability on a hospital for emergency room physician negligence: agency by estoppel (referred to in this opinion as ostensible agency), based on the Restatement (Second) of Agency section 267, and apparent agency, based on the Restatement (Second) of Torts section 429. See 940 S.W.2d at 131. Under section 267, the party asserting ostensible agency must demonstrate that (1) the principal, by its conduct, (2) caused him or her to reasonably believe that the putative agent was an employee or agent of the principal, and (3) that he or she justifiably relied on the appearance of agency. Restatement (Second) of Agency § 267 (1958). Although neither party mentioned section 429 in the trial court or in their briefs to the court of appeals, the court of appeals then proceeded to adopt section 429 and hold that under that section, plaintiff had only to raise a fact issue on two elements: (1) the patient looked to the hospital, rather than the individual physician, for treatment; and (2) the hospital held out the physician as its employee. See 940 S.W.2d at 132. Holding that the plaintiff had established a genuine issue of material fact on each element of this latter affirmative defense, the court reversed and remanded to the trial court for trial on the merits. The court of appeals further suggested that a hospital could do nothing to avoid holding out a physician in its emergency room as its employee because notification to prospective patients in any form would be ineffectual:
[W]e take an additional step in our analysis to consider whether notice provided in consent forms and posted in emergency rooms can ever be sufficient to negate a hospital's "holding out"....
....
... Because we do not believe hospitals should be allowed to avoid such responsibility, we encourage the full leapimposing a nondelegable duty on hospitals for the negligence of emergency room physicians.
940 S.W.2d at 135-136. Thus, the court of appeals would create a nondelegable duty on *949 a hospital solely because it opens its doors for business.
We first reject the court of appeals' conclusion that there are two methods, one "more difficult to prove" than the other, to establish the liability of a hospital for the malpractice of an emergency room physician. 940 S.W.2d at 132. Our courts have uniformly required proof of all three elements of section 267 to invoke the fiction that one should be responsible for the acts of another who is not in fact an agent acting within his or her scope of authority. As we have explained:
Apparent authority in Texas is based on estoppel. It may arise either from a principal knowingly permitting an agent to hold herself out as having authority or by a principal's actions which lack such ordinary care as to clothe an agent with the indicia of authority, thus leading a reasonably prudent person to believe that the agent has the authority she purports to exercise....
A prerequisite to a proper finding of apparent authority is evidence of conduct by the principal relied upon by the party asserting the estoppel defense which would lead a reasonably prudent person to believe an agent had authority to so act.
Ames v. Great S. Bank, 672 S.W.2d at 450; see also, e.g., Douglass v. Panama, Inc., 504 S.W.2d 776, 778-79 (Tex.1974); Chastain v. Cooper & Reed, 152 Tex. 322, 257 S.W.2d 422, 427 (1953). Thus, to establish a hospital's liability for an independent contractor's medical malpractice based on ostensible agency, a plaintiff must show that (1) he or she had a reasonable belief that the physician was the agent or employee of the hospital, (2) such belief was generated by the hospital affirmatively holding out the physician as its agent or employee or knowingly permitting the physician to hold herself out as the hospital's agent or employee, and (3) he or she justifiably relied on the representation of authority. See, e.g., Drennan v. Community Health Inv. Corp., 905 S.W.2d 811, 820 (Tex. App.Amarillo 1995, writ denied); Lopez, 859 S.W.2d at 605; Nicholson, 722 S.W.2d at 750. While a few courts of appeals have referred to section 429, it has never before been adopted in this state by any appellate court. See Smith, 822 S.W.2d at 72-73 (mentioning Restatement (Second) of Torts section 429 as additional support, but recognizing that the applicable rule is provided by Restatement (Second) of Agency section 267); Byrd v. Skyline Equip. Co., 792 S.W.2d 195, 197 (Tex.App.Austin 1990), writ denied per curiam, 808 S.W.2d 463 (Tex.1991) (citing section 429 as an additional reason summary judgment in the case was improper); Brownsville Med. Ctr. v. Gracia, 704 S.W.2d 68, 74 (Tex.App.Corpus Christi 1985, writ ref'd n.r.e.) (after stating that section 267 provides the applicable rule, mentions section 429 as additional authority). To the extent that the Restatement (Second) of Torts section 429 proposes a conflicting standard for establishing liability, we expressly decline to adopt it in Texas.
Next, we reject the suggestion of the court of appeals quoted above that we disregard the traditional rules and take "the full leap" of imposing a nondelegable duty on Texas hospitals for the malpractice of emergency room physicians. 940 S.W.2d at 136. Imposing such a duty is not necessary to safeguard patients in hospital emergency rooms. A patient injured by a physician's malpractice is not without a remedy. The injured patient ordinarily has a cause of action against the negligent physician, and may retain a direct cause of action against the hospital if the hospital was negligent in the performance of a duty owed directly to the patient. See, e.g., Diaz v. Westphal, 941 S.W.2d 96, 98 (Tex.1997); Medical & Surgical Mem'l Hosp. v. Cauthorn, 229 S.W.2d 932, 934 (Tex.Civ.App.El Paso 1949, writ ref'd n.r.e.).
IV
We now examine the record below in light of the appropriate standard. The Hospital may be held liable for the negligence of Dr. Zakula if Sampson can demonstrate that (1) she held a reasonable belief that Dr. Zakula was an employee or agent of the Hospital, (2) her belief was generated by some conduct on the part of the Hospital, and (3) she justifiably relied on the appearance that Dr. Zakula was an agent or employee *950 of the Hospital. See, e.g., Drennan, 905 S.W.2d at 820.
As summary judgment evidence, BMHS offered the affidavit of Dr. Potyka, an emergency room physician, which established that the emergency room doctors are not the actual agents, servants, or employees of the Hospital, and are not subject to the supervision, management, direction, or control of the Hospital when treating patients. Dr. Potyka further stated that when Dr. Zakula treated Sampson, signs were posted in the emergency room notifying patients that the emergency room physicians were independent contractors. Dr. Potyka's affidavit also established that the Hospital did not collect any fees for emergency room physician services and that the physicians billed the patients directly. BMHS presented copies of signed consent forms as additional summary judgment evidence. During both of Sampson's visits to the Hospital emergency room, before being examined or treated, Sampson signed a "Consent for Diagnosis, Treatment and Hospital Care" form explaining that all physicians at the Hospital are independent contractors who exercise their own professional judgment without control by the Hospital. The consent forms read in part:
I acknowledge and agree that ..., Southeast Baptist Hospital, ... and any Hospital operated as a part of Baptist Memorial Hospital System, is not responsible for the judgment or conduct of any physician who treats or provides a professional service to me, but rather each physician is an independent contractor who is self-employed and is not the agent, servant or employee of the hospital.
To establish her claim of ostensible agency, Sampson offered her own affidavits. In her original affidavit, she stated that although the Hospital directed her to sign several pieces of paper before she was examined, she did not read them and no one explained their contents to her. Her supplemental affidavit stated that she did not recall signing the documents and that she did not, at any time during her visit to the emergency room, see any signs stating that the doctors who work in the emergency room are not employees of the Hospital. Both affidavits state that she did not choose which doctor would treat her and that, at all times, she believed that a physician employed by the hospital was treating her. Based on this record we must determine if Sampson produced sufficient summary judgment evidence to raise a genuine issue of material fact on each element of ostensible agency, thereby defeating BMHS's summary judgment motion.
Even if Sampson's belief that Dr. Zakula was a hospital employee were reasonable, that belief, as we have seen, must be based on or generated by some conduct on the part of the Hospital. "No one should be denied the right to set up the truth unless it is in plain contradiction of his former allegations or acts." Gulbenkian v. Penn, 151 Tex. 412, 252 S.W.2d 929, 932 (1952). The summary judgment proof establishes that the Hospital took no affirmative act to make actual or prospective patients think the emergency room physicians were its agents or employees, and did not fail to take reasonable efforts to disabuse them of such a notion. As a matter of law, on this record, no conduct by the Hospital would lead a reasonable patient to believe that the treating emergency room physicians were hospital employees.
Sampson has failed to raise a fact issue on at least one essential element of her claim. Accordingly, we reverse the judgment of the court of appeals and render judgment that Sampson take nothing.
NOTES
[1] Sampson subsequently nonsuited her negligent credentialing claim against BMHS.
[2] Many courts use the terms ostensible agency, apparent agency, apparent authority, and agency by estoppel interchangeably. As a practical matter, there is no distinction among them. See, e.g., Birmingham-Jefferson County Transit Auth. v. Arvan, 669 So. 2d 825, 830-31 (Ala.1995), (Cook, J., dissenting from overruling of application for rehearing); State of Fla. Dep't of Transp. v. Heckman, 644 So. 2d 527, 529 (Fla.Dist.Ct.App.1994); Kissun v. Humana, Inc., 267 Ga. 419, 479 S.E.2d 751, 752 (1997); O'Banner v. McDonald's Corp., 173 Ill. 2d 208, 218 Ill. Dec. 910, 670 N.E.2d 632, 634 (1996); Deal v. North Carolina State Univ., 114 N.C.App. 643, 442 S.E.2d 360, 362 (1994); Hill v. St. Claire's Hosp., 67 N.Y.2d 72, 499 N.Y.S.2d 904, 490 N.E.2d 823, 827 (1986); Evans v. Ohio State Univ., 112 Ohio App. 3d 724, 680 N.E.2d 161, 174 (Ohio Ct.App.1996); Luddington v. Bodenvest Ltd., 855 P.2d 204, 209 (Utah 1993); Hamilton v. Natrona County Educ. Ass'n, 901 P.2d 381, 386 (Wyo.1995). But see Guillot v. Blue Cross of La., 690 So. 2d 91, 99 (La.Ct.App.1997) (Saunders, J., concurring and dissenting) (stating apparent authority is based on contract law, whereas agency by estoppel is grounded in tort principles); Houghland v. Grant, 119 N.M. 422, 891 P.2d 563, 568 (1995)(recognizing that although ostensible agency and agency by estoppel are based on slightly different rationales, the theories have been used interchangeably). See also McWilliams & Russell, Hospital Liability for Torts of Independent Contractor Physicians, 47 S.C. L. REV. 431, 445-452 (1996). Regardless of the term used, the purpose of the doctrine is to prevent injustice and protect those who have been misled. See Roberts v. Haltom City, 543 S.W.2d 75, 80 (Tex. 1976). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1880742/ | 322 F. Supp. 260 (1971)
ESTATE of Haakon K. NILSSEN, Northwestern National Bank of Minneapolis, William E. Mudge and David B. Stark, Executors and Muriel F. Nilssen, Plaintiffs,
v.
UNITED STATES of America, Defendant.
No. 4-69 Civ. 268.
United States District Court, D. Minnesota, Fourth Division.
January 29, 1971.
*261 Dorsey, Marquart, Windhorst, West & Halladay, by Paul G. Zerby and William Hempel, Minneapolis, Minn., for plaintiffs.
R. C. Ackerman, Asst. Atty. Gen., Dept. of Justice, Washington, D. C., for defendant.
NEVILLE, District Judge.
The facts of this case are not in dispute. The question presented by cross motions for judgment is whether a surviving widow's right to receive monthly payments for life and while unmarried pursuant to an employment contract entered into with a corporate employer by her deceased husband providing continuing payments to his widow after his death should be treated as property acquired from a decedent within the meaning of 26 U.S.C. § 1014(b) or as income in respect of a decedent within the meaning of 26 U.S.C. § 691(a).
On January 28, 1959, Haakon K. Nilssen entered into an employment contract with George A. Clark and Son, Inc. (Clark) under the terms of which Clark agreed to pay Mr. Nilssen not less than $54,000 annually during the term of his active employment with the company. If he remained with the company until retirement and rendered certain services after retirement he was to be paid $4,500 a month for the remainder of his life. If his wife survived him, she was to receive monthly payments of $2,250 for the remainder of her life, provided *262 that in the event of her remarriage the payments would cease three months thereafter. The agreement to make these payments was stated to be an inducement for Mr. Nilssen to continue in Clark's employ in light of his past and potential value to the employing corporation.
Nilssen died on October 28, 1963, while still in the active employment of Clark. In the estate tax return filed for his estate, the executor included the right to receive income under his contract with Clark, at a valuation of $245,503 computed pursuant to the provisions and actuary tables found in Regs. #20.2031-7. Pursuant to the provisions in the decedent's contract, monthly payments were received totaling $4,500 in the year of the decedent's death and $27,000 in each of the following two years. In reporting this income, the widow treated her right to receive payments as "property acquired from a decedent", and sought to amortize its accepted Federal Estate Tax value ($245,503) as a basis over a period equal to her starting date unmarried life expectancy. Accordingly, in her joint return for 1963, and her individual returns for 1964 and 1965, she excluded 75.2499% of the payments she received under the contract. The defendant completely disallowed the widow any basis in or for the contract, and assessed additional federal income taxes together with interest on those portions of the contract payments excluded in her income tax returns. These assessments were paid, and the present action arises from a denial of timely filed claims for refund.
Plaintiffs contend that the widow's right under the employment contract, valued at its fair market value at the time of her husband's death, was taxable to his estate under section 26 U.S.C. § 2039, and accordingly falls within the definition of "property acquired from a decedent" set out in § 1014(b) (9). Plaintiffs in effect are attempting to treat the widow's right under the employment contract in some respects as though it were a capital asset, excluding from the widow's income the date of death fair market value thereof, though regarding the excess of payments received over such assumed stepped up basis as ordinary income rather than as capital gain.[1]
*263 The defendant contends that regardless of whether the contractual right to the payments was properly taxable under section 2039, the payments themselves are "income in respect of a decedent" within the meaning of 26 U.S.C. § 691; that by reason of the express exclusion contained in section 1014(c) the right to receive such payments is not properly considered "property acquired from a *264 decedent,"; and that the payments were properly treated as income in the hands of the widow, without any basis or stepped-up basis, and subject only to the deduction of the amount of estate tax paid attributable thereto as provided in section 691(c).[2]
The court concludes that the payments represent section 691 income to the surviving widow, and that by reason of section 1014(c), the plaintiff is precluded from recovering or using the claimed basis. Although section 691 does not provide a definition of "income in respect of a decedent" the scope of its coverage may fairly be delimited by reference to the purpose for which it was enacted. That purpose was, and is, to avoid the "bunching" effect on the incomes of cash basis taxpayers whose final returns were placed on an accrual basis pursuant to section 42 of the Revenue Act of 1934. 48 Stat. 680. Thus the essential inquiry here is whether the payments represent income which may be said to have accrued to the deceased husband prior to his death. See S.Rep. No.1631, 77th Cong., 2d. Sess., 100-05 (1942).[3] In finding section 691 applicable to post-death payments made pursuant to a substantially similar employment contract, the court in Bernard v. United States, 215 F. Supp. 256 (S.D.N. Y.1963), stated at page 260:
"The critical question that must be answered is, who did the work or performed the services that gives rise to the income. If it is the decedent then such payments fall within Section 691 and are taxed to the recipient in the way that they would have been taxed to the decedent."
Plaintiffs here do not suggest that the payments in question represent anything other than deferred compensation for services rendered by the deceased husband during his life. The payments are not gratuities, but rather are made in recognition of the decedent's services rendered either prior to or subsequent to the signing of the contract in 1959. The surviving widow did not do anything to earn the payments, nor was she or anyone else required to do anything subsequent to her husband's death in order to perfect his employer's obligation to make the payments or her right to receive them.
Plaintiffs however contend that although the payments were made in recognition of the deceased husband's "economic activities", the income may not be said to have accrued to him because he was not sufficiently "entitled" to the income prior to his death. This contention is based upon the fact that under the employment contract the deceased husband would never receive the payments in issue, such being conditioned upon the widow's surviving his death. The principle upon which plaintiffs rely is not disputed. It is clear that a taxpayer must be entitled to income prior to its accrual at date of death, free from contingencies. Keck v. Commissioner of Internal Revenue, 415 F.2d 531, 533 (6th Cir. 1969); Trust *265 Company of Georgia v. Ross, 392 F.2d 694, 695 (5th Cir. 1967); Lacomble v. United States, 177 F. Supp. 373 (N.D. Cal.1959). However, this is not to suggest that such taxpayer must at any time have an absolute contractual right to its physical receipt.[4] Rather, in the case of post-death payments solely attributable to the personal services of the decedent, the right to the income is fully created by the decedent during his life, and the right in someone surviving to receive the money has certainly matured without conditions precedent or contingencies at the time of his death. Under such circumstances the question of the decedent's "entitlement" to the payments in the sense of actually receiving them in hand prior to his death is simply not relevant to a determination of whether the income may be said to be income in respect of a decedent.
"* * * The decedent here bargained for these payments in return for his personal services and for his remaining employed up to the date of his death. The consideration for those payments flowed entirely from him. He could have directed the payments to any person or entity he chose. He directed that they be paid to his widow, the contract being in essence a third-party beneficiary contract. Under the circumstances, with the decedent having furnished all of the consideration and economic benefit, it would be unrealistic in the extreme to hold that the income in question is not income in respect of a decedent, because the decedent chose to have it payable to someone other than himself or his estate." Collins v. United States, 318 F. Supp. 382 (C.D.Cal., September 24, 1970).
Contrary to plaintiffs' contention the court finds no conflict in the authorities dealing with the issue presented here. The courts have uniformly held that post-death payments to an employee's widow are to be treated as "income in respect of a decedent" despite the fact that under the terms of the employment contract, the employee would never be entitled to actual receipt of the income. Miller v. United States, 389 F.2d 656 (5th Cir. 1968); Collins v. United States, 318 F. Supp. 382 (C.D.Cal., September 24, 1970); Hansberry v. United States, 68-1 U.S.T.C. Par. 9185 (N.D.Ill., November 30, 1967); Bernard v. United States, supra.[5] The court can find no compelling *266 reason in the scheme of taxation which would compel it to discard these precedents. On the contrary, the construction sought by the plaintiffs here would produce the anomalous result referred to by the court in Bernard v. United States, supra, 215 F.Supp. at 260:
"It is not necessary that the decedent would have been entitled to the money had he lived. Otherwise all payments that commenced upon death would escape income tax."
Plaintiff seeks to distinguish the cases referred to above on the grounds that the employment contracts involved therein did not contain the remarriage contingency to which her payments were subject. This appears to be a distinction without a difference. While the condition subsequent to plaintiff's right under the contract may reasonably affect its valuation,[6] the essential nature of the payments remains unchanged. The payments were purely the fruit of Nilssen's labors for Clark during his lifetime. At the time of his death the rights and obligations under his employment contract were fixed, the amount was reasonably capable of determination, and there was no substantial doubt as to collection or payment.
The income tax concept of a straight annuity, to take the simplest example, recognizes that during lifetime a person pays for a right to receive future payments after a stated number of years. He pays an annual deposit or premium with tax paid money, that is, money on which already he has paid his income tax. Years later, when the annuity matures, special rules under 26 U.S.C. § 72 permit the establishment of a basis, generally equivalent to the amount paid by the annuitant, and income tax is assessed against the receipt of only that portion of the matured payments as represent interest on the amounts paid over the years.[7] Quite the contrary in the case at bar where no basis of purchase or payment antedates death and the payments to the widow are new-sprung fresh income, so to speak. Were the income tax not to be assessed on such payments, the widow would receive money on which no income tax has been or would be paid. The payments received by the widow clearly are income with respect of a decedent and there simply is no basis, as there is with an annuity or a capital asset, to allocate to or to use against the receipt of the payments.
A separate order granting defendant's motion of dismissal has been entered and this memorandum opinion will serve in lieu of findings as required by Rule 52 of the Federal Rules of Civil Procedure.
NOTES
[1] The applicable provisions of the Internal Revenue Code are as follows:
SEC. 1014. Basis of property acquired from a decedent.
(a) In general.Except as otherwise provided in this section, the basis of property in the hands of a person acquiring the property from a decedent or to whom the property passed from a decedent shall, if not sold, exchanged, or otherwise disposed of before the decedent's death by such person, be the fair market value of the property at the date of the decedent's death, or, in the case of an election under either section 2032 or section 811(j) of the Internal Revenue Code of 1939 where the decedent died after October 21, 1942, its value at the applicable valuation date prescribed by those sections.
(b) Property acquired from the decedent. For purposes of subsection (a), the following property shall be considered to have been acquired from or to have passed from the decedent:
* * * * *
(9) In the case of decedents dying after December 31, 1953, property acquired from the decedent by reason of death, form of ownership, or other conditions (including property acquired through the exercise or non-exercise of a power of appointment), if by reason thereof the property is required to be included in determining the value of the decedent's gross estate under chapter 11 of subtitle B or under the Internal Revenue Code of 1939. In such case, if the property is acquired before the death of the decedent, the basis shall be the amount determined under subsection (a) reduced by the amount allowed to the taxpayer as deductions in computing taxable income under this subtitle or prior income tax laws for exhaustion, wear and tear, obsolescence, amortization, and depletion on such property before the death of the decedent. Such basis shall be applicable to the property commencing on the death of the decedent. This paragraph shall not apply to
(A) annuities described in section 72;
* * * * *
(c) Property representing income in respect of a decedent.This section shall not apply to property which constitutes a right to receive an item of income in respect of a decedent under section 691. SEC. 691. Recipients of income in respect of decedents.
(a) Inclusion in Gross Income.
(1) General rule.The amount of all items of gross income in respect of a decedent which are not properly includible in respect of the taxable period in which falls the date of his death or a prior period (including the amount of all items of gross income in respect of a prior decedent, if the right to receive such amount was acquired by reason of the death of the prior decedent or by bequest, devise, or inheritance from the prior decedent) shall be included in the gross income, for the taxable year when received, of:
(A) the estate of the decedent, if the right to receive the amount is acquired by the decedent's estate from the decedent;
(B) the person who, by reason of the death of the decedent, acquires the right to receive the amount, if the right to receive the amount is not acquired by the decedent's estate from the decedent; or
(C) the person who acquires from the decedent the right to receive the amount by bequest, devise, or inheritance, if the amount is received after a distribution by the decedent's estate of such right.
* * * * *
(3) Character of Income Determined by Reference to Decedent.The right, described in paragraph (1), to receive an amount shall be treated, in the hands of the estate of the decedent or any person who acquired such right by reason of the death of the decedent, or by bequest, devise, or inheritance from the decedent, as if it had been acquired by the estate or such person in the transaction in which the right to receive the income was originally derived and the amount includible in gross income under paragraph (1) or (2) shall be considered in the hands of the estate or such person to have the character which it would have had in the hands of the decedent if the decedent had lived and received such amount.
* * * * *
(c) Deduction for Estate Tax.
(1) Allowance of Deduction.
(A) General Rule.A person who includes an amount in gross income under subsection (a) shall be allowed, for the same taxable year, as a deduction an amount which bears the same ratio to the estate tax attributable to the net value for estate tax purposes of all the items described in subsection (a) (1) as the value for estate tax purposes of the items of gross income or portions thereof in respect of which such person included the amount in gross income (or the amount included in gross income, whichever is lower) bears to the value for estate tax purposes of all the items described in subsection (a) (1).
(B) Estates and Trusts.In the case of an estate or trust, the amount allowed as a deduction under subparagraph (A) shall be computed by excluding from the gross income of the estate or trust the portion (if any) of the items described in subsection (a) (1) which is properly paid, credited, or to be distributed to the beneficiaries during the taxable year. This subparagraph shall apply to the same taxable years, and to the same extent, as is provided in section 683.
(2) Method of Computing Deduction. For purposes of paragraph (1)
(A) The term "estate tax" means the tax imposed on the estate of the decedent or any prior decedent under section 2001 or 2101, reduced by the credits against such tax.
(B) The net value for estate tax purposes of all the items described in subsection (a) (1) shall be the excess of the value for estate tax purposes of all the items described in subsection (a) (1) over the deductions from the gross estate in respect of claims which represent the deductions and credit described in subsection (b). Such net value shall be determined with respect to the provisions of section 421(c) (2), relating to the deduction for estate tax with respect to stock options to which part II of subchapter D applies.
(C) The estate tax attributable to such net value shall be an amount equal to the excess of the estate tax over the estate tax computed without including in the gross estate such net value.
[2] Defendant alternatively contends that if the court determines that the payments in issue represent proceeds from an annuity purchased by the decedent, then plaintiff is precluded from claiming the desired basis by reason of the exclusion of annuities under section 1014(b) (9) (A). However, it is clear to the court, and actually conceded by both sides that the payments do not represent annuity proceeds.
[3] The Regulations, 26 C.F.R. 1.691(a)-1 (b), define "income in respect of a decedent" generally as "those amounts to which a decedent was entitled as gross income but which were not properly includible in computing his taxable income for the taxable year ending with his death or for a previous year under the method of accounting employed by the decedent." The term is said to include "(1) All accrued income of a decedent who reported his income by use of the cash receipts and disbursements method; (2) Income accrued solely by reason of the decedent's death in case of a decedent who reports his income by use of an accrual method of accounting; and (3) Income to which the decedent had a contingent claim at the time of his death."
[4] Plaintiffs place particular reliance on Lacomble v. United States, which held that proceeds from a pension or annuity purchased by a decedent are not to be treated as section 691 income in the hands of a post-death recipient. There is some language in the opinion at page 375 which might be interpreted as construing section 691(a) (3) to require actual receipt, or a contractual right to receipt in the decedent. While this court would take exception to any such construction, it should be noted that plaintiff's interpretation of the court's language is not necessary to the Lacomble decision.
The remainder of the Lacomble decision involves statutory construction with respect to annuities and without reference to either the entitlement of "economic activities" tests. Plaintiff, however, has vigorously denied that the payments here in issue are annuity proceeds. To the extent if at all that Lacomble is inconsistent with this decision, this court chooses not to follow it.
[5] None of the cases relied on by the plaintiff involved deferred compensation for personal services of a decedent. The decision in Lacomble v. United States rests upon the court's treatment of the payments as annuity proceeds. Both Keck v. Commissioner of Internal Revenue and Trust Company of Georgia v. Ross hold that proceeds from a sale of a decedent's property will not be treated as 691 income in the hands of his widow where decedent's right to the proceeds has not matured at the time of his death. It is submitted that had the decedent created a right to the proceeds prior to death, but contracted away the right to receipt, the results would have been different.
In Trust Company of Georgia, the court expressly stated that "[t]he entitlement test is in accord with the right to income test * * *." The court further noted that under the right to income test, "the right acquired during a decedent's lifetime need not be a legally enforceable one, `but merely any right derived through his services rendered while living'. [Emphasis added]" 392 F.2d 695, n. 2, citing O'Daniel's Estate v. Commissioner of Internal Revenue, 173 F.2d 966, 968 (2d Cir. 1966). Reference is made to Bernard v. United States, as a case involving "payments made after death pursuant to rights created by the decedent during his lifetime." 392 F.2d at 695. Subsequently, in Miller v. United States, the same court found that the "history and analysis of section 691, and cases interpreting it demonstrate the correctness of the trial court's judgment here," that post-death payments for services rendered during a decedent's lifetime are properly treated as 691 income.
[6] At the time of her husband's death, the value of the widow's right to receive the monthly payments for life would have been $252,240. That value was in fact reduced to $245,503 as a result of the remarriage contingency calculated pursuant to the American remarriage table.
[7] Special rules of course exist for Treasury approved pension and profit sharing plans, and it is not the purpose of this opinion to dismiss annuities, pensions, etc. | 01-03-2023 | 10-30-2013 |
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